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Ad Budget

1301 Words6 Pages

The trick to finding the perfect ad budget is a balancing act between what you can afford to spend, your objectives, your profit and the results you want to achieve. In other words finding your optimum ROI - return on investment - to meet your financial limitations while still turning a profit. If this sounds daunting, not to worry, I will be laying it out step by step.

Firstly, let’s look at three very important aspects of your overall budget and costing that are important to consider when finding your Ad Budget. Your Markup
This refers to the amount of money between how much a product costs you and how much you sell it for. For example, if you are selling an item on your site for $20, but it only costs you $10 to make or dropship, then …show more content…

This includes shipping, handling, web hosting, and inventory management.

You will need the above metrics to calculate your ad budget. Here’s an example:

Right, now that the bulk of the maths is out of the way (thank goodness!) let’s dig a little deeper. Before locking down your exact ad budget in money terms, it’s not only important to determine your store averages as above, but to know which kinds of ad budget formulas there are. Let’s discuss.

Fixed Budgets
As a new store owner, fixed budgets will be your best ad budget options. Fixed budgets allow eCommerce sites to determine a fixed amount they can afford and work their marketing plans around this. We will discus getting to this amount in more detail further on, but generally speaking budget allows you to choose different strategies and campaigns based on your budgets until you find the best ROIs for your …show more content…

If your business is only barely covering costs, then this type of budgeting would not be practical for you.

However, if you are running on higher margins and have bigger cash flow then this budget system may be for you. This ad budget amount is 7-12% of the total revenue (gross profit before expenses, a store makes. The advantages of this method is the amount you spend on marketing will be based on the amount of sales you are brining in which helps to sustain long-term profitability.

To sum up: Choosing the right kind of budget will depend on your type of business, how long your store has been operation and your current sales. So, how to work out the perfect ad budget for your store?

There are three main considers when determining how much to spend on advertising and marketing. These are:

Your Margins: The higher your margine, the more available money you will have for

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