How to allocate your advertising budget

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Many local business owners wonder how to allocate their ads budget. We found a structured approach to allocating advertising budgets work well.

Here is an example; let’s say your advertising budget is $10,000 per month.

For your advertising you have the following channels:

  1. Local billboards
  2. Google ads
  3. Facebook ads
  4. SEO
  5. Email

Have the full cost for each channel and how much you are spending on a monthly basis:

  1. Local billboards: $4000 (40%)
  2. Google ads: $2000 (20%)
  3. Facebook ads: $2000 (20%)
  4. SEO: $1000 (10%)
  5. Email: $1000 (10%)
    TOTAL: $10,000 ads budget

From your research, you determine the sales you are making is:

  1. Local billboards: $10,000
  2. Google ads: $20,000
  3. Facebook ads: $15,000
  4. SEO: $2000
  5. Email: $5000
    TOTAL: $52,000

Your ROAS in this case is 5,2. Percentage wise, here is what each channel is contributing:

  1. Local billboards: 19,23%
  2. Google ads: 38,46%
  3. Facebook ads: 28,84%
  4. SEO: 3,84%
  5. Email: 9,61%

In this case, local billboards is getting 40% of the budget but only generating 19% of sales.

To get better results, see how you can allocate budget towards each channel from the sales it is generating, this means on the $10 000 budget:

  1. Local billboards: $1923
  2. Google ads: $3846
  3. Facebook ads: $2884
  4. SEO: $384
  5. Email: $961
    TOTAL: $10,000

You have now allocated your budget to each channel according to sales, which means, the new sales numbers from each channel could be:

  1. Local billboards: $4807
  2. Google ads: $38,461
  3. Facebook ads: $21,634
  4. SEO: $769
  5. Email: $4807
    TOTAL SALES: $70 480

Now you have a 7 ROAS using the same advertising budget.

On paper that looks great, but in reality, it does not work out that way.

The local billboard might only be available at a fix price. At one location. And there is only one available.

You might have heard of Constraints Theory. The bill board could be a physically constraint.

So, what do you do? You re-work your budgets with that constraint.

Great, and then?

Then you start working on improving the result from that advertising channel.

For instance, the billboard you might be able to switch to a different advertisement every 3 months. So, every three months test and see if another one works better.

On Facebook ads, does call ads, message ads, or click ads work better?

These are micro channels, it is channels within bigger channels.

With the advertising budget you have for that channel, you can then test each one of the micro channels to see what works best.

Then you test different ads for each of the those micro channels. Start with at least 3 different ads. These advertisement do need to be very different and unique. Usually one works better than the other two.

If your budget allows it, increase the number of ads you are testing. The more and faster you test, the faster you get a result.

And the end result?

It all depends on the effort, your market, etc. We have had clients double sales doing this. A client went from 6 million to 17 million in sales in less than 12 months.

You have a choice, either do the work, or be happy with the result you have. The choice is yours.