How to Determine a Digital Advertising Budget
If we had a dollar for every time a client asked us about budgets…well, we’d have a really big digital advertising budget. Last month, we covered digital advertising lead generation strategies. If you missed it, you can read it here! This month, we are going to give you the keys to the kingdom…well, not quite, but we are going to give you KILLER guidance to help you determine your own digital advertising budget!
We’ve put together a step-by-step formula to help you determine your digital advertising budget. Before you even ask, no, you can’t afford to NOT read this.
Step #1 Identify Your Annual Sales/Revenue Goals
Believe it or not, there are formulas (not invented by us) to help you figure out exactly how much to invest in your digital marketing efforts, and they are almost identical to how you determine your marketing budget as a whole.
The first step is to identify your revenue goal. What’s your annual revenue goal, and what does that equate to in monthly business closed? Got that number? Great, hang on to it.
Step #2 Monthly Sales
Now that you have identified your digital marketing budget—it’s time to identify how many deals you need to close each month in order to reach that goal. So, how do we do that? Take your monthly revenue goal and divide it by your average deal. This equals the number of sales you need to close each month.
THE EQUATION: Monthly revenue goal / average deal = # of sales you need to close each month
Step #3 What’s Your Conversion Rate?
We have now established your revenue goals and how many deals you need to close. The next step to the puzzle is determining how many leads you need each month in order to meet your monthly/annual sales goal.
THE EQUATION: # of sales each month/average conversion rate x 100 = amount of leads per month you need to generate.
NOTE: It’s important to remember that if you’re targeting cold traffic, you will likely need to reassess monthly for the first 3–6 months you are running ads. Cold leads do not have established loyalty and therefore may not convert at the level of referrals and your established book of business. Understanding your conversion on digital marketing leads is important.
Step #4 Establishing Your Monthy Digital Advertising Spend
It’s time to establish your monthly ad spend. Ready for the final piece?
THE EQUATION: Take the # of leads you need to generate x cost per lead = monthly ad spend
As we mentioned, this number should be assessed monthly when you are running ads and may be subject to change based on ad performance.
Creating a budget for your ads doesn’t have to be intimidating. It’s also okay to admit that it’s not your strong suit and that you’re just not quite sure where to start. That’s where we come in. Ready to get the ball rolling? Click here to book a complimentary consultation today.