How to Set a Paid-Ads Budget That Works for Your Small Business

When setting your goals, we recommend you be as specific as possible, such as:

• I want to increase my online sales by 20%
• I want to generate 40 new leads this month

Quantifying your goals is important to set an effective paid ads budget.

Know Your Key Metrics

There are three key metrics you need to know and understand before creating a paid ads budget, these include:

1. Cost Per Click (CPC) – how much you pay every time someone clicks on your ad
2. Cost Per Acquisition (CPA) – how much it costs to generate a new lead or customer
3. Conversion Rate (CR) – the percentage of people who took the desired action ( desired action can be buying, signing up for your newsletter or completing a contact form, or subscribing to a service)

When you track these key metrics, you will know where you are spending money, along with whether it is generating a profit or not.

Start Small

One of the biggest mistakes small businesses make when it comes to their paid ad spending is diving in with a large budget before testing. We recommend spending a smaller amount and monitoring your progress for a while, before increasing, 

This initial phase helps you:

• Identify your audience that responds best to your ad
• Identify which paid advertising platform is best performing for your goals
• Refine your ad copy, visuals, and call to action

When you have data on what is working and what is not, you can gradually increase your budget for your well-performing ads, reducing your risk, while ensuring a good return on investment.

Allocate Your Budget Based on Platform and Funnel Stages

You have a choice of paid advertising platforms to choose on, each serving a difference purpose. When you allocate your budget effectively, you can take advantage of each stage of your customer's journey, this includes:

• Awareness Stage – top of the funnel where social media ads and video content are effective at attracting attention
• Consideration Stage – middle of the funnel where retargeting ads and lead magnets are important to build interest 
• Conversion Stage – bottom of the funnel where direct offers and search ads are effective in closing the sale

As a result, as a small business, you may allocate 60% of your budget to Google Ads to drive leads, 30% of your budget to social media ads to boost awareness and engagement, and 10% of your budget to retarget warm leads.

Set a Monthly Budget, But Review Weekly

It's important to be realistic when setting your paid ads budget. Start with a small monthly budget per month, across all platforms. Of course, the number of platforms is determined by your market size and goals.

We recommend reviewing your performance weekly, identifying what campaigns are not working, redirecting those funds to those that are achieving results. Paid advertising requires constant testing and tweaking to achieve the best end results.

Hidden Costs

Your paid advertising budget doesn't only cover clicks, you may also have some additional costs, such as:

• Professional ad design and copy writing
• Landing page creation and optimising
• Email follow ups

Focus on ROI

Your paid ads budget isn't only how much money you spend per month, it's also how much you earn in return. We cannot stress enough how important it is to track the results of your campaign.

Conclusion

Setting an effective paid ads budget as a small business is about strategy. Starting small, having clear goals, tracking your metrics, and investing in what delivers is essential to success. Genie Crawl is a reputable digital marketing agency, rated Number 1 SEO and Google Ads marketing agency, backed by over ten years of experience. We are here to help your small business gain traction online. Contact us today to find out more.