What Is a Reasonable Digital Advertising Budget for a Small Business?


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Francesca M. Nichols

Best Tech Writer Award Winner

Have you started a small business, or are you planning to do it? You’ve probably started wondering exactly how much you should be spending on advertising. Advertising is a critical component in selling. So how much is the right amount? The truth is there is a lot of debate about this.

Some say you should spend 20-25% of your income on advertising. Others say you should spend 15-20%.

If you are starting, 7-8% is a good baseline. It is right in the middle of the 5-10% range. As you make more money, you can increase your advertising budget.

Creating and Maintaining Your Advertising Budget

Seven or eight percent of your profit is all well and good, but what if you want a more tailored advertising budget? If you are looking to optimize your business budget, there are a few steps you need to follow. 

  1. Research – You need to research your target demographic and ways to reach them.
  2. Set Goals – You need to set lead generation goals (how many new clients or customers is ideal per month?)
  3. Determine Potential Costs – You need to make a list of any unforeseen costs.
  4. Track –Track your advertising spending and if it is worth it. This is referred to as customer acquisition costs.
  5. Adjust – Adjust your budget based on your tracking.

With these five steps, you can create and maintain a budget for advertising your small business to help you be the most profitable.

1. Research

First, you will need to do some research. There are many things to research when you are planning a budget. Here are some salient points to get you started

– What are other companies that sell similar products spending?
And where are they spending their money? Social media? Google?

– You will want to research all advertising options – read more on this at Common Mind.

– Compare and chart different prices for different advertising options.
You will want to research reviews and perhaps even interview other small
business owners to see what is and isn’t working for them.

Not only is researching at the outset essential, but you want to stay on top of things as you continue. So, at least once a year, check-in and see if anything has changed.

  • Is there a new way to advertise? 
  • How new is it?
  • What are people and small business owners saying about it?
  • Do you have enough spare cash to try it out?

2. Goal Setting

Setting goals is an essential step in any area of your life. However, it is imperative when it comes to owning and running a small business.

Before you start coming up with goals, do some research. Look at what companies like yours are doing. You may need to call and interview someone at the business. 

Look for articles like this one that talk about small business goals. You may even want to take some business classes at your local college or university. Also, check your local library for any books they might have on small businesses. Once you have a general idea of what is possible, you can begin your goal planning. First, you must create goals that are Specific, Testable, Attainable, Realistic.

Specific Goals: are important because if they are not detailed enough, you cannot test them. For instance, you need to know when an advertising avenue is or is not working.

Testable: Your goals need to be testable so you can check to see if they are being met. You also want to test what is working and what is not working to get you to your goal.

Attainable: It’s nice to dream big, but you need to know what you can achieve in a year.

Realistic: Similarly, you want goals that are realistic, meaning they are within reason, not shooting for the stars.

3. Potential Costs

Part of the research you do will be looking into are different advertising options and the potential costs related to advertising. Therefore, you will want to keep this information on hand anytime you review spending and make changes. There are many components to marketing that need to be considered. Each of them has its costs.

Company Website

In today’s age, most companies need a website. The costs of a website include creating the website, the price of the URL or unique name, and maintaining the website.  You can do most of the creation of
the website yourself if you want. However, keep in mind that while you are
not paying anyone to do it, you are using your time to get it done.
So ask yourself whether your time is best spent on the website or something else. 

If you can afford someone else to create the website, great, that will give you more time to be a small business owner. If you can’t afford to have someone else make the website, create it yourself. Once your business is up and running, you can train an employee to run the website.


E-Newsletters, or Electronic Newsletters, have taken the place of most physical, paper newsletters. You can still use physical newsletters if you want; however, they will cost more since they require more materials. The good news is that the costs in money for an e-newsletter are low. If you own a small business, you will most likely be the writer and sender of the e-newsletter. You don’t have to pay for materials, it is all digital, and you don’t have to pay someone to do it for you.

If, however, you find you are busy with other business things, you can train an employee to do the newsletters. This route will cost more as you will not only have to pay the employee for hours spent on training, but you will also have to pay for the time they spend on your e-newsletter each week or month. 
One final thought on e-newsletters, you can send one out weekly, biweekly, monthly, bimonthly, quarterly, twice a year, or once a year. You will want to research and find out what other companies like yours are doing. There is no sense in sending it out more often if it isn’t helping bring in more profits. Instead, find what works for you and remember to reevaluate it occasionally, to see if it is still working.


Whatever forms of advertising you use, any done in-house will require that someone in the business knows how to do them. That can be you, the owner, or it can be a designated employee. Training requires to pay for the hours spent in the courses and pay for any hours in the future that employees work on their advertising job. So whether their job is social media, website maintenance, newsletters, or videos, they need training and pay for the work they do.

The nice thing about training is that you, the owner, will have one less thing to worry about once your employee or employees are trained.


Videos are becoming increasingly popular as a form of advertisement. Videos on websites, Facebook or other social media sites, YouTube, and more are a great way to advertise your business. There are two ways to go about using videos for advertising. First, there is a professional way to pay someone to make a video for your business.


The other way is to make the videos yourself. Like a vlog or video blog, you can create short videos advertising new stuff and general “what’s happening” videos to update your customers. 

Videos done in-house will require videographer training to some extent. The good news is that most twenty to forty-somethings know how to make videos using phones. In addition, people often enjoy a video that is less polished because it seems more natural. Of course, you still want your videos to look professional, but you don’t want them to look like you
spent hours filming and re-filming until the scene was perfect.

Social Media


Social Media is one of the most prominent places to advertise in the modern world. But whether you are paying for Facebook ads or making your business posts, unfortunately, the costs with social media will put a dent in your budget. This is especially true if you are posting on all social media sites.

Do some research and see which social media sites are top-rated for advertising. Then, ask around and see where other businesses in your area advertise. Then, look at companies like yours; where do they advertise?  Once you’ve done your research, you can decide which social media sites are best for your business. Always remember to review things at least once or twice a year and see if anything has changed.

Traditional Advertising

Traditional advertising is still an option. If you want, you can pay to have ads on TV or in the newspaper. This form of advertising is often more expensive and less valuable than the modern internet and online advertising.

Online Advertising

Online advertising is a growing industry with many different options. Therefore, it is critical to research what companies like yours are doing for online advertising. Once you do that, research how much such advertising costs. Then, use that information to decide if it is worth it.

4. Track Costs

It is important to keep meticulous records and track your costs. You also want to track where your customers are coming from. A good question is: What advertising is working and what is not working?

5. Adjust

You want to take all the information you’ve been tracking and take a deep dive at least once or twice a year. Look at the numbers and adjust as needed. If something is not working, stop doing it. If it works but not as well, see if you can cut costs and maybe advertise less often using that form of advertising. If something is working well, consider upping the amount and effort into that form of advertising. On the other hand, if you decide the extra money and effort are not worth it, you can always decrease it. The key is to adjust.

Final Thoughts

Always keep adjusting. It is essential as a small business owner that you are flexible. When you need to change your advertising budget, do it.