How to Manage Your Entire Marketing Budget [Free Budget Planner Templates]

The words “marketing budget” might strike fear into the heart of any marketing leader, but it’s non-negotiable when creating a marketing strategy for your company. In fact, when budgeting season rolls around, I hunker down.

I know that the budget I set affects what my team can accomplish and our value to the company. Without the right funds, my team can’t capitalize on emerging trends or create high-quality content that our audience will love enough to eventually make a purchase.

In this post, I share tips on managing your marketing budget based on my experience. I’ll also share eight templates to help you get started.

Common marketing investments include advertising products to target customers, raising awareness of your brand, and building backed processes that support marketing at scale.

Advertising efforts may include paid online ads, email campaigns, and social media posts. Raising awareness centers around fostering customer connections by creating digital content that offers value, like informative blog posts or ebooks.

Finally, the backend marketing process may include business automation or software-as-a-service (SaaS) tools that help streamline operations and reduce manual efforts.

As a marketer, I need to account for all of these line items in my budget.

Marketing Budgets for Small Business

Marketing budgets are especially important for small businesses. Small business owners may lack experience in drawing up budgets. Moreover, it’s critical that these companies keep costs as low and lean as possible as they scale.

Ironically, you need marketing to scale. Without it, it‘s hard to sell your products and services. In addition to the budgeting templates provided below, check out some of our free offers and courses to mitigate your company’s marketing costs.

Yet, marketing budgets can be difficult to establish for companies of all sizes.

How much should a company spend on marketing?

Well, digital media makes up nearly 60% of both U.S. and global advertising spend. This includes initiatives that cater to audiences on desktop computers, search engines, video streaming platforms, social media, and mobile devices.

Given the success marketers have seen, you might consider planning to spend at least half of your marketing budget on some of these digital channels.

Let’s talk about other ways to allocate your marketing budget.

Marketing Cost Examples

As I build a budget, here are the items I make sure to remember.

1. Software

As a marketer, our tech stack is an essential part of getting my work done.

Even my friends who work in print media still leverage InDesign, Photoshop, and paid ad campaigns. That doesn’t even include those helpful tools like Grammarly and Getty Images, which are commonplace in marketing.

There’s a marketing tool for just about any task you can think of, but they are generally broken down into the following categories:

• Customer relationship management (CRM).
• Online advertising.
• Social media.
• Content creation and design.
• Event marketing.
• Lead capture and lead generation.
• Marketing automation.
• Data reporting and analytics.
• Digital asset management.
• Team collaboration.

Pro tip: The costs of these tools can quickly add up, so it’s worth it to try out the free options until you’re ready to commit to a tool your team loves.

2. Freelancers

When I’m in a pinch, I’ve often turned to freelancers for help. For example, I might want to film a video across the country from where I live. I can tap a freelance videographer to get the footage on my shot list.

If you have a temporary campaign or want to test out a new marketing strategy, you might want to hire a short-term freelancer before bringing on a full-timer.

Reach out to your network for recommendations or consider using a site like UpWork.

Freelancers typically charge an hourly rate, so be sure to examine your budget before hiring.

3. New Personnel

Not every role in marketing has to budget for new personnel.

I’ve made many budgets for projects and programs where staffing was handled by a separate department. However, your organization may need you to financially account for full-time employees.

When you do hire, you’ll want to include costs like the employee’s computer, technology, benefits, and onboarding-related needs. According to Zippia, the average cost of hiring a new employee is $4,425.

4. Advertising

When I make a budget, I don’t just need to account for making content. I also need to set aside money to promote what my team makes.

That’s where your ad budget comes in. Plan for how much money you’ll spend on paid opportunities such as physical ads, native ads, sponsored content, search engine ads, and social media promotions.

Most businesses will benefit from some form of online advertising whether via social media platforms, search engines, or native ads.

Statista estimates there are more than 5.4 billion internet users worldwide as of 2024. If you’re not advertising online, you’re missing out.

5. Content Creation

Content creation requires both resources (cameras, actors, software, etc. all cost money) and time (which, as the adage goes, is also money).

When I create content, including videos, photos, or even blog posts, I need to put paid time into it.

Content marketing brings in three times as many leads as traditional options, so it’s worth dedicating funds to this area.

Budget how much money will go into creating this content so you can adjust accordingly based on its return on investment.

Now that you know more about what to include in your budget, let’s look at how those funds are spent.

If you’re not sure where to start with budget allocation, a good guideline to follow is the 70-20-10 rule. Using this as a benchmark:

• 70% of your budget is allocated toward strategies you know work well.
• 20% of your budget is allocated toward new strategies aimed at helping you grow.
• 10% of your budget is allocated toward experimental strategies.

Marketing Cost Example

Let’s say your business has a marketing budget of $10,000. The budget allocation may look like this:

• $7,000 towards a CRM or other software you love, successful paid search campaigns, social media marketing.
• $2,000 towards marketing a new product, feature, or service you’re testing.
• $1,000 towards testing sponsored content.

Allocation by Channel

How you allocate your budget per channel depends on your company’s particular goals, so there is no hard and fast rule.

However, the chart below from Statista can give you a ballpark idea as it illustrates the share of marketing budgets from large companies across North America, the U.K., Germany, and France.

Image Source

Organized by channel, you can see that the top spots belong to social marketing, digital advertising, and search engine optimization (SEO).

Marketers are expected to spend more than $740 billion on ads in 2024. Let’s look at some examples of how these digital marketing costs apply to your budget.

Paid Search Advertising

You’re probably familiar with the ads at the top of a Google results page that show up above the list of search results. Those are forms of paid advertising called pay-per-click (PPC).

You can create and run ads on Google, and each time someone clicks, you pay. The cost-per-click (CPC) can range anywhere from a few cents to a few dollars. You can use Google’s keyword planner to help estimate costs.

With this method, you only pay for clicks you receive. So, even if you’ve set aside a budget of $2,000, your campaign may only generate $1,500 worth of clicks.

Social Media

Like Google Ads, social media platforms have advertising programs based on the PPC model but also charge by impressions.

The CPC of running a paid social campaign varies depending on the platform of choice. Prices range from a few cents to several dollars.

Some companies may opt to hire an agency to run their campaigns and to create a social media strategy. Outsourcing this function is more expensive and can cost anywhere from $2,000 to $20,000 per month.

Content Marketing

Having a brand blog is a great way to get into content marketing, especially if you have in-house staff tasked with keeping it updated.

Instead of a blog, you may be more interested in creating case studies, ebooks, videos, or guides. They’re all designed to promote your brand and attract new customers.

Content marketing costs vary widely based on your goals and area of focus. Hiring outside consultants or agencies to handle content marketing for you can range from $2,000 to $10,000 per month for small to medium-sized businesses.

While it isn’t cheap, paying an agency to handle this task will free up your team’s time to work on other projects and may yield better results than going solo.

Email Marketing

Email marketing is a must-have for businesses, especially online retailers.

With a customer acquisition rate 40X more effective than Facebook and Twitter combined, it’s no surprise why this tried and true method is a staple in most marketing budgets.

Email marketing also provides higher ROI as you’re connecting with people already interested in your brand.

Email marketing costs depend on the size of your business, your goals, and your chosen software or platform. Hiring an outside firm to handle these efforts will cost significantly more than doing it yourself.

Search Engine Optimization

SEO aids marketing efforts by improving your web pages so that they show up in search engines like Google. The more often your website comes up in search, the more potential customers will see it and hopefully visit your website.

If you don’t have staff to handle your SEO needs in-house you may need to work with an agency. Depending on what your business needs are, this can cost thousands per month.

While the marketing channel choices can seem endless, don’t feel pressured to use all of them. Every business is different, and you should prioritize putting funds toward the methods that best suit your needs.

Spreadsheet knowledge alone won‘t help you understand how you’ll spend your marketing money this year.

Creating a sound marketing budget starts with knowing what purpose this budget will serve and which marketing teams it will represent.

Here’s how I approach creating a marketing budget.

1. Know your buyer’s journey.

Your buyer‘s journey is the steps your audience takes as they “journey” from prospect to paying customer.

Knowing my buyer’s journey allows me to understand how my audience interacts with my marketing. I can then better set my goals and budget to reach my customers.

I always ask myself these questions as I define my buyer’s journey:

• How do leads and customers typically discover my products?
• What do they need to know before they make a purchase?
• How many site visits do I see per month?
• How many leads are we generating per month, and how many of these convert to paying customers?
• What is the cost of generating new leads and then converting them to customers?
• What’s the typical value/revenue of each lead?

This process should point out what marketing tactics are (and aren’t working), where I should alter my marketing goals, and where I can focus my marketing budget.

2. Align your budget with your marketing goals.

What you spend and where you spend it will depend on what you’re trying to accomplish.

So, when starting to create your marketing budget, make sure you’re only spending money on the things required by your current marketing goals — goals set based on your audience and their journey from prospect to customer.

These could include:

• Display ads to promote a new product you’re launching this year.
• Sponsored social media posts to generate followers on your new Facebook page.
• Paid search engine ads to drive traffic (and purchases) to a specific product page.
• Contract bloggers to get more organic search traffic to your company’s website.

Former Demand Generation Marketer at HubSpot and current Head of Marketing at Hummingbirds Jessica Webb Kennedy, says this about how your costs can change when focusing on lead generation vs. lead conversion.

“The majority of the money you spend on paid efforts is usually calculated based on the volume of clicks or impressions. Because of this, you’ll often want to put more budget toward campaigns with higher-volume offers and audiences,” Kennedy says.

For example, a tweet or Facebook ad promoting a lead generation offer that leans more top of the funnel will likely receive more clicks than something that falls more toward the middle or bottom of the funnel, she explains.

Your paid advertising costs will also change depending on how wide of an audience you are attempting to reach.

“You can look at Twitter advertising as an example,” Webb says. “You have the option to target your campaigns based on users’ interests or keywords searched for.”

She continues, “Interests are a much broader category, whereas smaller pockets of users are searching for any given keyword, therefore your interests-based audience is going to be much larger and require a larger budget.”

3. Beware of hidden marketing costs.

One of the great advantages to having and maintaining a budget spreadsheet is that it helps you avoid those end-of-the-quarter or end-of-the-year freak-outs when you realize, “Whoa … what did I spend all that money on?”

In many cases, unanticipated costs can force marketers to fork over cash that they didn’t plan on spending. Product marketing offers a perfect example.

According to Meghan Keaney Anderson, former HubSpot vice president of marketing and current head of product marketing and communications at Watershed, it’s easy to forget that successfully marketing your products and services requires more than just promotion.

“When people allocate a budget for product marketing, they tend to think in terms of product launches and promotional activities,” Anderson explains.

Anderson notes that teams should remember to set aside resources to conduct research and message testing long before the product ever goes to market.

“Having conversations with customers about the pain points your product will ultimately address is critical to shaping the messaging and having a successful launch,” Anderson says.

4. Remember where your priorities lie.

Marketing is overflowing with add-ons and extras, upsells, and “premium” versions. One of the best ways to assess what‘s nice to have versus what’s absolutely necessary is to (you guessed it) organize all of your expenses.

I keep tabs on where my budget is being allocated and cross-check that spending with the results I’m getting. This makes it much easier to figure out what should keep getting budget and what should get kicked to the curb.

For example, let‘s look at the world of public relations. In PR, there are countless tools to which you can allocate budget, which could leave you overspending where it doesn’t matter — and underspending where it does.

“Tools abound to help PR practitioners not only create and distribute great content and find and target key stakeholders, but to ultimately measure reach and effectiveness,” says Nathaniel Eberle, HubSpot’s former director of PR and brand and GoTo’s current vice president of global brand and creative management.

Eberle says teams need to laser focus on the audience they want to reach and influence. Then, teams can revisit their budgets and ensure that the spend supports initiatives that appeal to said audience.

“As the media and digital landscape evolves at breakneck speed, continually reassessing the tools, services, and programs you‘re employing is a great way to determine real-time ROI of your overall spend. Today’s measurement tool may be worthless to you tomorrow,” Eberle says.

5. Spend your budget smartly.

When you open up these budget templates and check out all the various expenses detailed in them, don‘t fret if you can’t tick every box. I’m not advocating for an “always spend more” approach to marketing.

I‘m advocating for an “always spend smart” approach. The expenses listed out aren’t mandatory — they‘re just meant to guide your thinking and to help ensure that you haven’t overlooked any hidden costs.

6. Prepare to measure ROI.

When I put a certain amount of money into a certain area, I want to determine if my budgeting helped or hurt me as I plan out future budgets. The best way to do this is by measuring ROI — or return on investment.

If the money I’ve spent on one item results in my company making more in return, I may want to increase the budget in the next year. If my money doesn’t end in returns, I re-examine my budget.

Marketing Budget Templates

Using a marketing budget template can be useful when you’re not sure how to split or track your marketing costs.

For instance, let’s say your company decided to invest in a website redesign to improve lead generation, and you’re responsible for managing the project.

Naturally, one of the first questions you ask is, “How much is this website redesign going to cost?”

The answer, of course, is “it depends.” Are you simply switching to a new template and adding some new CTAs, or are you migrating your entire website to a new platform?

If only there were a way to organize your answers to all of these questions — a place where you could enter in estimated costs for all of your line items and then compare your projected marketing budget to what you actually end up spending. Good news: Marketing budget templates can help.

Included in our eight marketing budget templates bundle is a template to manage your website redesign … as well as templates for both Excel and Google Sheets to help you track your content budget, paid advertising budget, event budget, and more.

With these templates, you’ll be able to manage all of the moving pieces of your budget at a monthly and quarterly level.

Use the Excel version of the templates to keep all of your budgets in one place.

When you download the zip file, you’ll find a separate file for each marketing team, as well as a Master Budget Template to maintain a high-level view of your overall expenses.

Interested in sharing your marketing budget across a larger team?

Try the Google Sheets version of our templates to share access with other Gmail users. For the Google Sheets templates, each team budget is found in a separate tab of the same Google Sheet.

No matter which version you choose, each budget is optimized with the same line items, tips, and graphs. Read on to learn how to use each budget template.

1. Master Marketing Budget Template

Download the Master Marketing Budget Template here.

While it‘s helpful to have individual budget templates for specific marketing departments and activities, it’s also nice to be able to take a step back and see the bigger picture.

The Master Marketing Budget Template lets you do just that: It’s the place where you can collect the totals from the other seven templates in the bundle and see all of your expenses in one place.

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Budget Overview from All Departments: In the first table, you get to see both your budget and actual spending from all marketing departments, including product marketing, content marketing, paid advertising, PR, branding and creative, and events.

Month-Over-Month Expense Summary: For a more bird’s eye view of all expenses, look at this table, where you can see the aggregated budget and actual spending for all marketing activities.

Marketing Budget vs. Actual Spend Chart: This chart allows you to pinpoint trends in spending and budgeting — where you came under and where you over-spent.

2. Product Marketing Budget Template

Download the Product Marketing Budget Template here.

This template will guide you step-by-step through the process of budgeting for a product launch.

From determining product/market fit, to running user testing sessions, to promoting your finished product, our Product Marketing Budget Template will help ensure you don’t overlook any important expenses.

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Budget & Spend per Product Marketing Activity: This table allows you to set a budget and track your spending for product marketing activities such as carrying out focus groups, hosting launch events, and creating white papers.

Year-to-Date Summary of Categorical Expenses: Here, you can see an aggregated summary of all expenses divided by category, such as product release spending and product testing. It will also automatically calculate the amount of money you have left.

Year-to-Date Summary Chart: This chart allows you to see a visual breakdown of where most of your funds are going, which is immensely helpful for figuring out where to scale back and where to invest more.

3. Content Budget Template

Download the Content Budget Template here.

The budget required for creating and promoting content can vary greatly from organization to organization.

For example, while some organizations keep most of their content operations in-house, others rely more heavily on freelancers and contractors.

And while some use many different software products, publishing tools, and services, others take a much simpler approach.

Our Content Budget Template is designed to cover as many content-related bases as possible. So, if you see any expenses listed that don‘t apply to your organization, go ahead and delete them.

(That’s the beauty of Excel spreadsheets: You can customize them to your specific needs.)

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Budget & Spend per Content Marketing Activity: This table allows you to set a budget and track spending for content marketing activities, such as purchasing design software, creating landing pages, and hiring freelance writers.

Year-to-Date Summary of Categorical Expenses: Here, you can see an aggregated summary of all expenses divided by category, such as software purchases and freelancer costs. It will also automatically calculate the amount of money you have left.

Year-to-Date Summary Chart: This chart allows you to see a visual breakdown of where most of your funds are going, which is immensely helpful for figuring out where to scale back and where to invest more.

4. Paid Advertising Budget Template

Download the Paid Advertising Budget Template here.

Paid advertising: Does it really qualify as an inbound marketing tactic/channel? That is a loaded question, my friends, and one that I don’t have room to answer in-depth in this post.

What I can tell you for sure is that you can do paid advertising in an “inboundy” way — i.e. by targeting specific buyer personas and using paid advertising as a supplement to your organic efforts to help drive awareness and conversion opportunities.

Measuring the effectiveness of your paid advertising campaigns is also paramount to doing things the inbound way.

Using our Paid Advertising Budget Template, you can keep tabs on your monthly (and quarterly) ad spending and then cross-reference the amounts with your lead-generation metrics to determine your cost-per-lead.

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Budget & Spend per Paid Advertising Activity: This table allows you to set a budget and track spending for paid advertising activities, such as launching CPC campaigns, creating social media ads, and investing in a content discovery platform.

Year-to-Date Summary of Categorical Expenses: Here, you can see an aggregated summary of all expenses divided by category, such as search advertising and lead generation. It will also automatically calculate the amount of money you have left.

Year-to-Date Summary Chart: This chart allows you to see a visual breakdown of where most of your funds are going, which is immensely helpful for figuring out where to scale back and where to invest more.

5. Public Relations Budget Template

Download the Public Relations Budget Template here.

Public relations expenses amount to more than just paying for press releases.

From reputation monitoring software to traveling (e.g., to events and trade shows) to applying for awards, there are many PR costs that can be all too easy to overlook.

To ensure you‘re accounting for all of your organization’s PR-related expenses, check out our Public Relations Budget Template.

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Budget & Spend per Public Relations Activity: This table allows you to set a budget and track spending for PR activities, such as purchasing a press release service subscription, creating PR content, and hosting PR dinners.

Year-to-Date Summary of Categorical Expenses: Here, you can see an aggregated summary of all expenses divided by category, such as subscriptions, content, tradeshows, and media relations. It will also automatically calculate the amount of money you have left.

Year-to-Date Summary Chart: This chart allows you to see a visual breakdown of where most of your funds are going, which is immensely helpful for figuring out where to scale back and where to invest more.

6. Branding & Creative Budget Template

Download the Creative Budget Template here.

In order to produce high-quality, innovative graphics, videos, and other content, the branding and creative teams of today need more than just Photoshop … a lot more. One of the largest — and often most overlooked — expenses is storage.

If your organization is producing a lot of video, storage is especially important.

Because as it turns out, when budgeting for video storage, you shouldn’t be thinking on a megabyte (MB) or even a gigabyte (GB) scale, but on a terabyte (TB) scale. FYI: 1 terabyte = 1 trillion bytes.

You can keep track of all your storage costs (and other branding and creative costs) using our free template.

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Budget & Spend per Branding & Creative Activity: This table allows you to set a budget and track spending for branding and creative activities, such as purchasing creative software, investing in hardware, and renting equipment.

Year-to-Date Summary of Categorical Expenses: Here, you can see an aggregated summary of all expenses divided by category, such as software subscriptions, equipment rentals, and outsourcing costs. It will also automatically calculate the amount of money you have left.

Year-to-Date Summary Chart: This chart allows you to see a visual breakdown of where most of your funds are going, which is immensely helpful for figuring out where to scale back and where to invest more.

7. Website Redesign Budget Template

Download the Website Redesign Budget Template here.

Budgeting for a website redesign can be seriously tricky. With so many moving pieces to consider, there is a lot of room for underestimating or miscalculating costs.

We created our Website Redesign Budget Template so you can keep all of your redesign-related expenses in one convenient location.

Unsure if your current website is right for a redesign? Grade your website using this tool.

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Budget & Spend per Website Redesign Activity: This table allows you to set a budget and track spending for website redesign activities, such as purchasing a domain name, investing in CMS software, and creating wireframes.

Year-to-Date Summary of Categorical Expenses: Here, you can see an aggregated summary of all expenses divided by category, such as software, content and design, and content migration. It will also automatically calculate the amount of money you have left.

Website Redesign “Actual Cost by Category” Pie Chart: This chart allows you to see a percentage breakdown of where most of your funds are going, which is immensely helpful for figuring out where to scale back and where to invest more.

8. Event Budget Template

Download the Event Budget Template here.

When planning an event, the associated costs can seem obvious at first.

There‘s the venue to consider, of course. And the P.A. system and microphones.

And then, the costs associated with booking and bringing in presenters/performers.

That’s pretty much it, right?

Wrong.

For example, does the venue come with tables/chairs, or will you have to rent those separately? Do you want your attendees to wear name tags, and if so, will you be printing out the name tags ahead of time or will attendees be writing their own names on blank tags?

If the latter, have you factored in the pens or markers you’ll need to accommodate that? As you can see, planning for an event can lead you down many rabbit holes.

Use our Event Budget Template to stay organized.

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Budget & Spend per Event Hosting Activity: This table allows you to set a budget and track spending for event hosting activities, such as renting an event hall, purchasing food and drinks, and hiring presenters.

Year-to-Date Summary of Categorical Expenses: Here, you can see an aggregated summary of all expenses divided by category, such as revenue, refreshments, and promotion. It will also automatically calculate the amount of money you have left.

Event “Actual Cost by Category” Pie Chart: This chart allows you to see a percentage breakdown of where most of your funds are going, which is immensely helpful for figuring out where to scale back and where to invest more.

Sample Marketing Budget

With your chosen template downloaded, it‘s time to consider which digital channels to allot a budget for.

Hint: There’s no right answer — it’ll depend on the market research you do to figure out where your specific audience spends most of its time.

If you find your buyer prefers learning and consuming content in the form of video, for example, you might invest more of your money in YouTube advertising.

Advertising Budget Example

Here‘s a small sample budget for a quarter’s worth of expenses by a hypothetical company that has decided to invest heavily in video marketing.

This template was created using the Master Budget Template, the first template listed in the section above.

Based on the figures above, video advertising‘s total expenses for the quarter exceeded budget by $20, while full-time recruitment’s total expenses exceeded budget by $2,400. This means the company is trending over budget for the first three months of the year.

Why might this happen? Perhaps a pay-per-click (PPC) campaign on YouTube received more clicks by viewers than expected, and a sharp video-savvy job candidate negotiated a higher salary.

Based on the difference between this company’s planned spend and actual spend, their budget template produced the following graph:

What is an advertising budget?

Your advertising budget is a subset of your marketing budget. An advertising budget is the total amount you expect to spend on creating, testing, and running advertisements that (hopefully) engage consumers.

Advertising budgets also cover the cost of evaluating ad performance and making necessary changes if ads aren’t meeting expectations.

Marketing Budget vs. Advertising Budget

While marketing and advertising budgets aim to capture consumer interest and increase sales, marketing budgets encompass this process end-to-end. Advertising budgets focus on creating awareness and engaging customers.

As a result, advertising budgets fall under the larger purview of marketing budgets. While ad budgets often represent the largest portion of marketing budgets, ads are only effective when combined with larger marketing efforts such as audience targeting and customer follow-up when ads capture interest.

What to Include in an Ad Budget

Six costs form the core of effective ad budgets.

1. Internal Resources

Internal resources include both people and purchases.

The amount of time staff spend working on ad campaigns plus the total cost of their wages for this time gives your total people cost.

The longer it takes to create ads and the more people are required to make these ads, the higher your spending.

Purchases, meanwhile, may include software or hardware that staff need to create and manage great ads.

For example, you might spend on business process automation (BPA) solutions to streamline key proceeds, or new laptops for advertising teams so they can work on the go.

2. Market Research

If you don’t know the market, your ads will miss the mark. As a result, every ad budget should include the cost of both micro and macro market research.

From a macro perspective, it’s worth understanding trends at scale — what do customers want from ads, and what do they want to avoid?

On the micro side, businesses need to target specific segment behaviors. For example, what type of ads are most effective in engaging first-time viewers? Which advertisements connect with existing customers?

3. Third-Party Providers

Advertising agencies can help improve market targeting and create compelling ads. Opting for third-party providers also lets your team focus on current campaign management and long-term strategy development.

Services offered by ad agencies range from consulting to market testing to ongoing ad management, making them a key line item in any advertising budget.

4. Asset Creation

It’s also important to account for any asset creation costs as part of ad budgets. These costs could include graphic designers, web designers, freelance copywriters, video creators, or social media influencers.

5. Ad Space Spending

Advertisements won’t drive revenue if no one sees them. To get your ads noticed, you’ll need to spend on digital or physical space.

Examples of physical ads include bus benches, billboards, and magazine ads. Digital ads can appear on search pages, web pages, social media sites, or on mobile apps.

6. Performance Evaluation

Finally, part of your budget has to focus on performance evaluation.

Here, spending typically focuses on software tools capable of tracking and managing ad efficacy. Common metrics include the total number of ad views, actions taken by customers, and the overall impact of ads on sales volumes.

Total up the cost of these six components to get your potential ad budget. If this is your first year creating an ad budget, set budget caps slightly higher than you anticipate. If you have previous years’ data on ad performance, use this information to help determine expected costs.

It’s also worth noting that ad budgets rarely remain on target as the cost of digital advertising space increases and customer expectations evolve.

As a result, it’s worth building in some extra budget room in case ads don’t live up to expectations or high-performing campaigns can benefit by increasing their reach.

How to Set & Monitor Your Ad Budget

Advertising budgets aren’t static. Instead, they change over time in response to business goals and consumer expectations.

To make the most of your ad budget, it’s important to both set a baseline and monitor metrics over time. Here’s what this looks like in practice.

Setting An Ad Budget

Follow three steps to set your basic ad budget:

1. Decide on a strategy.

There’s no upper limit for ad spending. If you wanted to reach every possible member of your target audience, budgets would quickly balloon out of control.

As a result, it’s critical to select an advertising strategy before you assign a budget value.

For example, if your target audience primarily uses social media sites such as Instagram and Facebook, it may be worth focusing on this advertising avenue rather than casting a wider net.

Pro tip: Meet customers where they are, not where you want them to be. If current strategies aren’t working and data tells you that customers have moved on, pack your bags and make the change.

2. Select measurable goals.

If you can’t measure it, you can’t act on it.

Let’s say you’re running a new ad campaign and early results seem positive. Sales numbers are up, and engagement with the ad is steady, so you expand its reach.

Expected conversions fail to materialize, however, and spending now outpaces success.

So what happened? In this case, a deep dive into metrics would have revealed that seasonal buying trends led to the brief sales increase, and while engagement with ads was steady, customer perception of the campaign was negative.

To ensure ads perform as expected, set measurable goals. These might include X% sales increase over Y period of time. Monitor customer behavior and conduct engagement surveys to link causes and results.

Pro tip: Pick just a few metrics to start. While more data provides more insight, doing too much too quickly can lead to information overload, increasing the risk that actionable data gets lost in the shuffle.

3. Do your research.

The more you know, the better. Customer expectations are constantly evolving, which means the preferences of your target audience aren’t static.

By asking buyers what they want and what would influence them to make a purchase, companies are better prepared to create ads that have an impact.

Pro tip: Cast a wide net. Use a combination of in-person interactions, online reviews, digital surveys, and customer service histories to better understand what customers want — and if you’re providing it.

Equipped with strategies, goals, and data, you’re better positioned to create a realistic ad budget that lets you both target the ideal audience and capture their interest.

Monitoring Your Budget

Keep your budget on track by monitoring three key metrics:

1. Return on Ad Spend (ROAS)

ROAS helps determine if your ads are generating sales or losing money.

To find ROAS, divide sales tied to ads by the cost of those ads. For example, if your ads produced $1,000 worth of sales and cost $200, you divide $1,000 by $200 to get a ROAS of 5.

Higher ROAS values mean more performance for the cost. Values under 1 mean that ads cost more than the revenue they produce.

Pro tip: ROAS isn’t enough in isolation. While it tells you the total value of ads versus spend, it doesn’t tell you anything about customers themselves.

If your goal is to encourage repeat purchases, ROAS can show you that ads are working but can’t tell you if the same customers are coming back or if purchases are one-and-done.

2. Conversion Rate

Conversion rate measures how frequently customers take a specific action when they view an advertisement.

This action might be clicking on the ad to visit your website, clicking through to download a free ebook or other resource, or signing up for email newsletters.

To find the conversion rate of your ads (measured in a percentage), divide the total number of conversions by the total number of advertisement views, then multiply by 100.

Pro tip: Conversion rate is often the first metric to fall as advertisements lose efficacy. As a result, it’s worth measuring conversions on a weekly or bi-weekly basis to make ad changes as necessary.

3. Cost per Lead (CPL)

Cost per lead offers a per-person look at ad spending.

This value is calculated by dividing the total amount spent on an advertisement by the total number of leads attributed to this ad. While metrics like ROAS show sales in relation to ads, CPL shows the number of leads.

Consider a company that measures ad-attributed sales at $10,000 and ad spend at $1,000 for a stand-out ROAS of 10. The following month, however, sales plummeted. What’s going on?

CPL, meanwhile, shows just 20 leads for the ad, meaning that each lead cost $50 — and without repeat spending the following months, the ad underperformed. As a result, it’s critical to measure both ROAS and CPL to get the big picture.

Pro tip: Companies can reduce their CPL with A/B ad testing before campaigns go live. The concept is simple: Test out two (or more) ads in limited distribution to see which one gets the most interest and generates the most leads.

Create Marketing and Advertising Budgets That Prioritize Your Goals

A well-thought-out marketing budget serves as a roadmap to your team’s success. Revisit the buyer’s journey, flesh out your goals, and stay away from tempting add-ons that are not in line with your marketing priorities.

Go now and plan wisely — your marketing staff is counting on you.

Editor’s Note: This blog post was originally published in December 2015 and has been updated for comprehensiveness.

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