Let’s be honest, figuring out your marketing budget can feel like trying to hit a moving target, especially when it comes to online advertising. You know the potential is huge, but the worry of wasting money or simply not seeing results is very real. Perhaps you’ve already tried DIY-ing your paid ads, only to feel overwhelmed by conflicting advice and the pressure to “just spend more.” That was me, too, early in my solopreneur career managing my B2C business, trying to navigate the choppy waters of online marketing. We’re all here because we want our businesses to thrive, to connect with the right people, and to see a real return on our efforts. And when it comes to online ads, the question of “how much should I spend?” often feels like the biggest puzzle.
It’s easy to get caught up in the big stories of huge budgets and instant wins. But what often gets overlooked, especially for small and medium-sized businesses, is the smart way to budget – the kind that leads to steady growth, not just a quick burst of traffic. This isn’t about chasing the latest trends or just throwing money out there hoping something sticks. It’s about building a strong foundation for your online advertising success, so you can focus on what you do best.
Why your ad budget needs a plan, not just guessing what might work
Think of your online ad budget not as an expense, but as an investment in your business’s future. Just like you wouldn’t build a house without a blueprint, you shouldn’t launch an advertising campaign without a clear financial plan.
Without a realistic budget, you risk:
- wasting precious money – ad platforms are designed to spend your money. Without clear limits and goals, you can burn through cash quickly with very little to show for it.
- missing out on big chances – not having enough budget can stop your campaigns from really taking off, meaning you miss out on valuable customers and sales.
- feeling totally frustrated – when results are unclear because of poor budgeting, it’s easy to get discouraged and just give up on a super powerful way to find new customers.
- not being able to grow – a messy budget makes it impossible to make your successful ads even bigger, or to really understand what’s actually bringing in customers.
We believe there’s a better way – a smart, understanding approach that helps you make great decisions about where your ad money goes.
It all starts with your goals
Before we even talk about numbers, let’s talk about what you really want to achieve with your ads. This is the absolute core of any good ad budget. What do you truly hope to get from your advertising?
- Are you looking to get more potential customers (leads)? How many leads do you need each month to hit your sales targets? What’s one new customer worth to your business over time?
- Do you want to make direct sales? What’s the average amount people spend when they buy from you? What’s your profit on those sales?
- Is getting your brand seen by more people your main goal? How will you know if more people are aware of your business?
Once you have a clear idea of your goals, we can work backward to figure out a sensible budget. This means looking at a few key things:
1. How much is a customer worth to you?
This is probably the most important number. Your Customer Lifetime Value (CLTV) is the total money you expect to get from a single customer over the entire time they do business with you. If you know how much a customer is truly worth, you can then figure out how much it makes sense to spend to get a new one.
For example, if one customer is worth $500 to your business, you definitely don’t want to be spending $100 for every click if only a tiny percentage of those clicks turn into customers. Understanding this relationship is fundamental. HINT: this is why, the subscription model is so popular, one purchase is rarely just one purchase, new subscribers are paying more if the stuff is good and worth staying.
2. How many people turn into customers?
Your conversion rate is the percentage of people who do what you want them to do (buying something or filling out a form) after they click on your ad. This depends on many things, like how good your website page is, what you’re offering, and how relevant your ad message is.
For example, if usually 2% of people who click your ad buy something, and you want to get 10 sales, you’ll need about 500 clicks (10 sales divided by 0.02 conversion rate). This helps estimate how much traffic you’ll need to hit your sales goals.
3. How much does each click cost?
This changes a lot depending on your industry, the keywords you’re targeting, the ad platform you’re using (like Google Ads, Reddit Ads, Pinterest Ads, LinkedIn Ads), and even the time of day. Looking into what others in your industry are paying and using tools to estimate click costs for your specific keywords is really important.
For example, if the average cost for one click on a certain keyword is $2, and you need 500 clicks, your estimated ad spend for that keyword would be $1,000 (500 clicks multiplied by $2 per click).
When is your budget too small?
This is a really common question, and it’s a smart one to ask! If your budget is too small, your ads might not even get seen enough to gather proper data, or they’ll run out of money too quickly to make a real impact. It’s like trying to fill a swimming pool with a teacup – you’ll barely make a splash.
Here are some signs your budget might be too small:
- you’re barely getting any clicks → if your ads are active but not getting much traffic, it could be that your daily budget is so low it’s running out before the day is half over, or it’s not enough to compete.
- no meaningful data → with a tiny budget, you won’t get enough clicks and conversions to understand what’s working and what’s not. You need a certain volume of activity to make informed decisions.
- your ads keep stopping → if your ads are constantly pausing because the daily budget is spent, you’re not getting consistent visibility.
- you can’t compete → in competitive industries, a very small budget simply won’t allow your ads to show up often enough against bigger players.
Generally speaking, for a small business just starting with paid ads, a minimum of a few hundred dollars per platform per month is often a starting point, but this can vary greatly. It’s better to start with a realistic minimum that allows for proper testing and data collection than to spread a tiny budget too thin. I can help you figure out if your current budget is enough to actually make a difference. Sometimes we can play with campaign length and timing which makes a small budget feel less small.
Preparing for ads AKA saving op and reinvesting your wins
So, you know you want to do online advertising, but maybe the budget isn’t quite there yet, or you want to make sure you can keep it going. This is where smart planning comes in!
Before you start: The 4-6 month prep
Think of this as your “ad savings plan.” For 4-6 months before you even launch your first campaign, start setting aside a specific amount of money each month. This initial “nest egg” will give you the starting capital to launch a strong first campaign, allowing us to gather good data and make informed decisions without the pressure of running out of funds too quickly.
- How much? This depends on your business, but aim for enough to cover at least 2-3 months of your estimated minimum ad spend. So if we think you need about $500/month, try to save $1000-$1500 before you start. This gives us breathing room for testing and learning.
- Where to put it? Keep this money in a separate, dedicated savings account. This makes it untouchable for other business expenses and keeps you focused on your ad goals.
Smart saving tips for financing your ads
Getting your ad budget ready doesn’t have to be a huge headache. Here are a few easy ways small businesses can start building that dedicated ad fund:
automate your savings → set up a weekly or monthly transfer of a small percentage (say, 10-20%) of your income directly into your separate ad savings account. Out of sight, out of mind!
dedicate a product/service → pick one specific product or service you sell, and commit to putting all the profit from it (or a set portion) directly into your ad budget for a few months.
the “found money” rule → did you get an unexpected refund, a small bonus, or save money on an expense? Put that “found money” straight into your ad fund instead of spending it.
“one less latte” habit: → look for small, recurring expenses you can cut back on. Even saving $5-$10 a day can add up significantly over a few months! Check if you need all the subscriptions you have, if you can change for a smaller package somewhere, or saving up for ad spend from your personal money, taking it literally and saving on eating out, coffee, chocolate, etc.
After you start getting results from your ads: reinvesting your success
This is the really exciting part! Once your ads start bringing in new customers and sales, you’ll have extra income. The key is to strategically reinvest a portion of that new income back into your advertising.
- the “Ad Reinvestment Fund” → I think it’s the easiest if you set up a system where a certain percentage of the profit from sales generated by ads is automatically put back into your ad budget. For example, you might decide that 20% or 30% of the profit from every sale that came from an ad goes straight back into your ad fund.
- why this works → this creates a powerful cycle. Ads bring in sales, a portion of that profit goes back into ads, allowing you to scale successful campaigns and reach even more people. It makes your advertising self-sustaining and helps you grow without constantly dipping into your core business funds.
- be patient, be smart → it takes a little time to see this cycle really get going. That’s why the initial savings are so important. But once it starts, it’s a fantastic way to fuel consistent growth.
Beyond the numbers: smart ways to manage your ad money
A good ad budget isn’t just about the dollar amount; it’s about how you use and manage that money.
- start small, grow smart: you don’t need a huge budget to start. We can begin with a smaller, manageable amount, collect data, and then increase the budget as your ads start performing well. This lowers your risk and helps us learn what works best.
- think about different platforms (when ready): while Google Ads is often a great place to start, don’t forget about the power of Reddit Ads, Pinterest Ads, and LinkedIn Ads. Each platform can reach different parts of your audience. Once we get one platform humming, we can strategically explore others.
- your website page matters: your ad might be perfect, but if the page people land on after clicking your ad isn’t good, you’re just wasting money. You must make sure your landing pages are set up to encourage people to take action, are easy to understand, and work well on phones.
- it’s an ongoing process: online advertising isn’t something you “set and forget.” Regularly looking at the results, analyzing what’s happening, and making adjustments are super important to get the most out of your budget. This includes things like refining keywords, testing different ads, adjusting bids, fine-tuning who we target. And of course, optimizing the budget according to seasonal interest.
I’m here to help you
Budgeting for online ads can feel like a lot to handle, especially when you’re running a small business and juggling so many things. But it doesn’t have to be a source of stress. I’ve spent years working with creators and entrepreneurs (and still managing my own B2C small business as a hobby and test project), understanding their unique challenges, and helping them figure out the world of online advertising.
My goal isn’t to convince you to spend more, but to help you spend smarter. You’re no longer just trying to keep up with what everyone else is doing; you’re building a steady, effective advertising strategy that truly fits your business goals. If you’re ready to move beyond the guesswork and put in place an online ad strategy that genuinely works for your budget and helps your business grow, let’s chat. We’ll help you create a plan that’s not just realistic, but truly impactful.