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How To Start Budgeting for Paid Ads

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How To Start Budgeting for Paid Ads

“Paid ads help any promo business owner have an elevated presence online, and get in front of a targeted audience,” says Keshia Butler-Thomas, CEO of LCK Consulting Services (@keshiabutlerthomas). “For businesses that offer a custom service, making space for a paid ads campaign will ultimately help qualify buyers quicker, leading to increased sales.”

If you’ve decided this is the year to take your shop to the next level and blow past your competition, you’ll need to put together a budget for paid advertising. For those that may have thought about about it, but are still a little hesitant, here are some stats showing the impact paid ads can have on your business: 

  1. 49% of online shoppers say they’re likely to buy from brands they see advertised on social media.
  2. 72% of B2B marketers, who use paid marketing channels online, use social media as a core marketing medium.
  3. The average Facebook user clicked at least 12 ads per month in 2020.

If you’ve never paid for advertising or used an agency to help you before, it can seem overwhelming to dive in. Today, we’re breaking down the steps we’ve gathered from the experts, that’ll help you allocate money towards your paid advertising budget.

Why Do I Need to Budget for Paid Advertising?

“Paid ads – or simply boosting relevant social media posts – are an effective way to drive traffic to your site, while getting eyes on your shop and offer,” says Lee Romano Sequeira, owner of OfftheVinePr.com. “The good news? Paid ads don’t need to cost a fortune. However, you need to use your dollars wisely to get the most bang for your buck.”

Many of Romano Sequeira’s social media clients are small businesses with limited budgets. When she writes and boosts social posts for clients, many people will “like” the post – a win, even if they don’t immediately buy.  “Once they interact with your message, invite them to like the business page on Facebook or send a quick ‘hello’ on Instagram,” she says. “Then, you’ve made a new connection! So, with just a few dollars, you can add a prospect and market to them by consistently posting relevant content and adding them to your email list.”

The most important part of budgeting for paid ads is knowing how much you’ll need to spend for them to be effective. If you dive into paid advertising with unrealistic expectations for what you can afford, it’s easy to end up believing that paid ads don’t work. That’s why it’s critical to figure out how much your company can spend, what channels you want to  invest in and how you’ll divide your overall budget. This way, you’ll know what you’re getting for your money and if the ads don’t help you reach your marketing goals, then you can adjust and rebound. 

How Do I Figure Out What I Can Afford?

A general rule of thumb is to start with your profit margin for your average decorated-apparel order. Take the cost of your average order and subtract the ad costs associated with acquiring a new customer. If you’re new, don’t worry! Industry averages clock in between $100 and $150 per new client. If your average order profit margin is $150, you’ll probably want to spend less than $100 per new customer to stay profitable.

Next, how many new customers do you want to attract to define your budget? If it costs you about $100 to attract a new customer – and you want to bring in five new customers in a month – you need to spend $500 to come close to that goal.

How Do I Find Money for Paid Advertising?

If you already have a line item or section of your budget dedicated to marketing, start there. Determine what portion of the overall marketing pie you want to spend on paid advertising. We gave you a general formula above, but you can start anywhere. For example, if you want to start small and dip your toe in the water, start with 15% to 25% of your marketing budget.

“Even $5 will help if you’ve chosen a highly targeted audience on Facebook and can pinpoint it,” Romano Sequeira says. “Test the waters by experimenting with a few dollars here and there. Sometimes, besides an ad about your product or service, a relevant niche meme, photo or handy tip can bring in new fans.”

Remember, paid ads are branding and sales activities you were likely doing in other forms. So, you’re moving money around to achieve a goal of your choosing – for example, generating sales or increasing brand awareness. You can adjust a bit after you see the number you have from taking your total marketing budget and taking the percentage you determined from the total. That’s the dollar amount you should be spending on your paid ads. 

Do I Have Enough Money Allocated for Paid Ads?

You’re going to allocate your money based on your marketing goals. If you’ve never tried paid advertising before, you need to put in a little work before you can begin allocating funds to a budget. We suggest setting SMART goals to stay on track. Start by deciding on your ultimate goals for running paid ads.

“Do you want more awareness about your business?” Butler-Thomas says. “Reach more qualified buyers? Land more sales? Understanding your ultimate-goal will help in establishing milestones along the way. For example, if it’s awareness, then seeing an increase in followers is amazing! If it’s reach, having your ad be shared to a new audience by onlookers is the best. And, of course, if it’s revenue, adding to the cart and clicking pay or booking that consultation is your win!”

Here’s how your SMART paid ads goal could look:


Start with a “specific” goal for your advertising. Will you set a goal for the number of visitors you want to visit a landing page on your website? Or will you set a specific goal such as improving your sales conversion rate by 10%? 


Make your goal “measurable.” If you can’t measure the effectiveness of your advertising, how will you know if it’s money well spent? For instance, if your goal is improved brand recognition, you might want your social media posts to be shared by 25% of your followers with each post you make. That’s something you can measure. 


Create “achievable” goals. It’s not realistic to think that within a couple of months, you’ll go from a startup to a company working with the top 10 rock bands in the world. Make your goal realistic or you’ll be in for disappointment.


Your goal should also be “relevant.” That’s why it’s necessary to have a list of overarching goals you want to achieve and make sure your SMART goals represent pieces of that puzzle. 


Determine a specific “timeframe” to achieve your goal. Don’t leave it so open-ended that you can’t measure any progress with your marketing plan.

Once you create your SMART goals, you’ll get a better idea of how to best spend your budget to reach them. 

Getting Started With Paid Ads

If you’re new to paid advertising and not sure what copy or images to use, then check out your competitors. “Research other companies in your niche to see how they’re presenting ads,” Butler-Thomas says. “Dig into what’s working well and what isn’t, so you can make informed decisions about ad placement, length and even the tone of the ads that seem to be performing well. Next, speak to your current client community. Ask them what would interest them if they had encountered your services in ad form.”

When you’re just starting out, hiring a freelance a copywriter and/or someone who’s experienced in creating high-performing digital ads, could be a great investment. “Consider a social media manager to take that work off of your plate,” Romano Sequeira says.  

Planning Helps Your Ad Budget Go Further

“Implementing paid ads into your digital marketing strategy can feel scary because there are a lot of unknowns in the first phases,” Butler-Thomas says. If you spend the money and don’t see immediate results, you might think you’ve made a mistake with your plan. “Take advantage of tools like A/B testing, in the Meta Business Suite, to give you the space to experiment with different types of Facebook and Instagram ads before you fully commit,” she says. By having realistic expectations and following through with your plan, you’ll have a greater chance of paid ad success. 

Sep 11, 2022