How much should a startup company spend on digital advertising is the big question in the digital marketing industry for most of the startups, especially the ones which are new to online advertising. In this article, I am going to show how much an advertiser or a brand should spend on paid advertising.
There is a perfect ratio of Topline revenue to paid amplification and the ratio is 10-30% which means brands must be spending 10% to 30% of their revenue should be invested back in paid advertising. Ex: If your store generates $1000 sales a day, you should be spending at least $100 unto $300 on the paid advertising.
One of the most important things startup companies forget when it comes to business is that there will be a Year on the year Halo effect where all the energy you have built up in the year 1 supports you in the year 2. When you are spending money on advertising in any channel, for example, Google or Facebook advertising, You are not only spending money to buy customers but you are also buying data and additional brand assets that are not customers thing like audiences, people who visited a particular product page on your website, watched a video on your youtube channel or Facebook page, clicks on your email links, or email addresses your customers would have dropped on your website, etc. It is one of those things where you are going to consistently spend over time, to achieve results in the longterm.
It is like a diet plan, it is not going to work if you diet for a couple of days and then eat for another 3 days and then follow the diet for another 5 days. It is not going to work at all even in digital marketing, You have to pick a budget, whatever it is is okay. Even if you are stating with ten dollars a day, it is fine and commits to spending that money constantly for long term like 3 months, 6 months, 1 year, etc. Digital Advertising going to take a while for you to understand the audience’s behavior, which creative is working and which is not, build the audience, and then optimize your sales process. You want to have that fuel constantly so that you always got movement.
One of the things most people do is not spending enough when they see it is working from them. As an advertiser you need to get more sales, to get more sales, you need to re-invest some % of the revenue you are getting from your advertising campaigns to give your advertising campaigns to have continuous data to understand what is working under various circumstances. Make you are spending at least 10% of your revenue by making sure you are not crossing 30% until unless you see huge profit margins even if you send more than 30%. The most important thing is to spend consistently learn from the data to improve performance.