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How Much Money Should You Spend on Paid Advertising?

Illustration of a young woman putting coins into a large jar labeled "ADS," symbolising budget allocation for paid advertising.
Key factors to consider when setting a budget for PPC advertising.

Figuring out how much budget to spend on paid advertising is a crucial step for startups and small to medium businesses. Effective spending on ads can fuel business growth, attract new customers, and enhance brand visibility.

This guide aims to provide insights on setting a budget for paid ads, helping you lay a solid foundation for effective advertising strategies.

What You Need to Know About Paid Advertising Budget

Paid advertising means you pay to get your ads shown, unlike organic methods such as SEO or social media posts. You can place ads on platforms like Google Ads, Facebook, Instagram, LinkedIn, and so much more. Each with unique pricing and benefits for your business.

Set Your Objective

Before deciding on your budget, you need to know what you want to achieve:

There are 3 primary goals to consider.

Brand Awareness: You want as many people as possible to learn about your brand.

Lead Generation: You want to gather contact details from potential customers.

Sales Conversion: You want people to buy your products directly from the ads.

What you want to achieve will help you decide how much money to spend and where to spend it.

Start Small: The Test Budget

It’s smart for startups and SMEs to start with a small budget. You could start testing different ad platforms with a little money, like $500 to $1,000 per month.

This lets you see which ads work best without spending a lot of money right away.

Understanding Cost Structures

The cost of paid ads can vary a lot.

Here’s a breakdown of the common pricing models you’ll encounter.

Cost-Per-Click (CPC): You pay the moment someone clicks on your ad.

Cost-Per-Impression (CPM): You pay for every thousand times your ad is shown.

Cost-Per-Action (CPA): You pay when someone takes a specific action, like buying something or signing up.

Each ad platform will have different costs. For example, ads on Facebook might cost just a few cents per click, depending on how many other businesses are also advertising.

Plan Your Budget

How you plan your budget depends on the market you’re in, the ad platforms you choose, and what you want to achieve.

Here’s a simple way to think about it.

Experimenting (20-30%): Use this part of your budget to try new things.

What Works (70-80%): Spend most of your money on the ad platforms that have already worked well.

Scale Up When Ready

Once you know which ads work well, you can start spending more money. If you’re making $3 for every $1 you spend, it might be a good idea to increase your budget.


There’s no one answer to how much money you need for paid advertising. The right budget depends on what kind of business you have, where you’re advertising, your business goals, and how well your first tests go. Start with a small budget, keep track of how well your ads are doing, and adjust how much you spend based on what you find out. Even a small budget can give you great results if you use it wisely.

If you are not sure whether you are on the right track with paid advertising. We can assist you from scratch. Check out our blog about 6 Advantages of Working with a Digital Marketing Agency.

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