Tagged: Google ads budget
What a Realistic Ad Budget Looks Like for Small Businesses
- by Alicia Kurz
"How much should I spend on advertising?"
It's one of the most common questions we hear from small business owners, and unfortunately, the answer isn't as simple as we'd all like it to be.
You can spend $100 on Facebook ads. You can spend $1,000. You can spend $10,000. Meta will happily take your money regardless.
But just because you can spend a certain amount doesn't mean it's enough to accomplish what you're hoping to achieve.
We've seen businesses throw $50 behind a Facebook post and wonder why their phones aren't ringing. We've also seen businesses willing to spend thousands of dollars on advertising without having a clear idea of what success would look like.
Neither approach is particularly helpful.
The reality is that a realistic advertising budget depends on your business, your goals, your industry, and what you're expecting that money to accomplish.
Let's break down what small businesses should actually be thinking about before deciding how much to spend.
1. Your Marketing Budget and Your Advertising Budget Are NOT the Same Thing
This is an important distinction that often gets overlooked.
Your marketing budget includes everything you spend promoting your business. That might include your website, social media management, photography, graphic design, email marketing, SEO, and paid advertising.
Your advertising budget is the money you're spending to get your content in front of people through platforms like Facebook, Instagram, Google, or LinkedIn.
And yes, if you're working with an agency, the money you pay them to manage your advertising is separate from the money going directly to the advertising platform.
For example, if you're paying an agency $500 a month to manage your Meta ads and allocating another $500 toward the actual ads, your total monthly investment is $1,000.
Only $500 of that goes to ad placement.
That doesn't mean management fees aren't worthwhile. Having someone develop your strategy, create ads, monitor performance, and make adjustments can be incredibly valuable.
But you need to understand where your money is going.
2. So, How Much Should a Small Business Actually Spend?
Let's get into some numbers.
According to the Business Development Bank of Canada (BDC), a common guideline is for business-to-business (B2B) companies to spend approximately 2–5% of their revenue on marketing, while business-to-consumer (B2C) companies often spend 5–10%.
That doesn't mean every business needs to follow those percentages exactly, but they're a useful starting point.
For example, a business generating $500,000 in annual revenue and allocating 5% toward marketing would have a yearly marketing budget of $25,000, or approximately $2,083 per month.
Remember, that amount needs to cover ALL your marketing activities, not just your Facebook ads.
Source: BDC: What Is an Average Marketing Budget for a Small Business?
So, what does that look like when we're talking specifically about digital advertising?
Here are some illustrative starting points for small businesses experimenting with Meta advertising. These are planning examples, not industry averages or guaranteed minimums.
$100–$300 per month: Getting Started
At this level, you're working with approximately $3–$10 per day.
That isn't necessarily a bad thing! If you're a small local business looking to promote an upcoming event, introduce a new product, or get more people familiar with your brand, a modest budget can still be useful.
However, you're probably not going to generate a huge volume of leads or sales.
Your best approach is to keep things focused. Choose one goal, one audience, and a clear message instead of trying to promote everything your business offers.
$300–$750 per month: Building Some Consistency
With approximately $10–$25 per day, you have a little more room to work.
You might be able to run a consistent awareness campaign, promote a specific service, or test a couple of different creative approaches.
This can be a reasonable starting point for a local business that wants to make advertising part of its regular marketing efforts.
The important thing is to avoid spreading that money too thin.
If you have $500 to spend and create five different campaigns, each one is only getting $100 for the entire month.
Sometimes doing ONE thing well is better than doing five things poorly.
$750–$1,500 per month: More Room to Test
At this level, you have approximately $25–$50 per day to work with.
Depending on your industry and goals, this can give you more opportunities to test different messaging, audiences, and creative while collecting enough information to make more informed decisions.
You might run a campaign introducing your business to new customers while also reconnecting with people who have already visited your website.
Or you might focus your entire budget on generating leads for one particular service.
Either way, you're starting to have more flexibility.
$1,500+ per month: A More Developed Advertising Strategy
Once you're spending $1,500 or more each month, you have additional room to build campaigns around different business goals.
That could mean testing multiple offers, promoting several services, or reaching customers at different stages of their buying journey.
But here's something worth remembering:
Spending more money doesn't automatically make your advertising better.
A poorly planned $2,000 campaign can waste just as much money as a poorly planned $200 campaign. In fact, it can waste even more.
The goal isn't to spend as much as possible. It's to understand what's working and invest accordingly.
3. A $500 Budget Doesn't Mean the Same Thing for Every Business
Let's say we have two Winnipeg businesses.One is a neighbourhood coffee shop selling $6 lattes. The other is a roofing company where a single new customer could represent thousands of dollars in revenue.
Both businesses have $500 to spend on advertising. Should they use that money the same way? Probably not.
The coffee shop might focus on reaching people within a few kilometres of its location, promoting a seasonal drink, or encouraging people to visit.
The roofing company might be more interested in generating qualified leads from homeowners who need a specific service. Even if the roofing company only generates a handful of inquiries, one new customer could make the campaign worthwhile. Meanwhile, the coffee shop may need dozens of additional purchases to cover its advertising costs.
This is why comparing your advertising results to another business without understanding the bigger picture isn't particularly useful.
You need to think about the value of a customer, how often they purchase, and how much you're willing to spend to acquire them.
4. Your Goal Determines How Far Your Budget Can Go
Not all advertising results cost the same amount.
Getting someone to watch a video is very different from getting them to fill out a contact form, book an appointment, or make a purchase. Think about it: if someone is scrolling Instagram and sees an entertaining video from your business, watching a few seconds requires almost no effort. But asking that same person to visit your website, fill out a form, and commit to spending $2,000 on a service? That's a much bigger ask.
Advertising platforms like Meta allow businesses to optimize campaigns around different objectives, including awareness, traffic, engagement, leads, and sales.
The objective you choose influences the type of result the system tries to generate.
If you have $300 to spend and your goal is simply to introduce your business to more local people, that budget may be perfectly reasonable.If you're expecting that same $300 to generate 50 qualified leads for an expensive service, you might need to reconsider your expectations.
Before choosing a budget, figure out what you're actually trying to accomplish.
5. Stop Expecting Every Advertising Dollar to Turn Into an Immediate Sale
We love being able to show clients measurable results! Website clicks, form submissions, phone calls, purchases, and other conversions can tell us a lot about how a campaign is performing, but not every ad needs to result in an immediate purchase to be valuable.
Imagine someone sees an ad for your business on Instagram. They don't click it. A few days later, they see another post from your company. They visit your profile, scroll through a few photos, and decide to follow you.
Two weeks later, they need the service you offer and remember your business. Was that first ad a complete waste of money because they didn't click it? Of course not.
Advertising can help build familiarity and trust, especially for businesses selling products or services that people don't need every single day.
That doesn't mean awareness campaigns should get a free pass when it comes to measuring performance. It means you need to evaluate them based on what they were designed to accomplish.
A campaign focused on visibility shouldn't be judged exactly the same way as a campaign designed to generate online purchases.
6. Don't Spread a Small Budget Across Every Platform
Facebook, Instagram, Google, LinkedIn, TikTok, Pinterest...There are plenty of places to spend your advertising dollars, and every platform would love a piece of your budget. But if you have $500 a month to work with, trying to advertise everywhere probably isn't your best strategy.
Think about where your customers are and what they're doing when they use those platforms. Someone searching Google for "emergency plumber Winnipeg" is showing a very different level of interest than someone casually scrolling Instagram and seeing an ad for a plumbing company.
Both advertising opportunities can be valuable, but they serve different purposes. A business selling products directly to consumers might find Meta advertising particularly useful, while a company selling specialized services to other businesses might want to explore LinkedIn or Google.
These are not hard-and-fast rules.
The important thing is to choose platforms based on your customers and your goals, not because you've heard that everyone should be advertising on TikTok. Start where you have the strongest opportunity to reach the right people. You can always expand later.
7. Give Your Advertising Enough Time to Learn Something
One of the biggest mistakes businesses make is running an ad for three days, seeing disappointing results, and deciding advertising doesn't work. We get it. Nobody likes spending money without seeing an immediate return, but advertising involves testing.
You might discover that one image performs better than another, that your audience responds more positively to a different offer, or that your website isn't doing a great job of converting the people who click through.
Those are useful things to learn! However, you need enough time and data to identify what's happening. If you're constantly changing your audience, budget, creative, and campaign objective, it becomes much harder to understand which adjustments are helping. That doesn't mean you should let a clearly unsuccessful campaign run indefinitely, it means giving your strategy a reasonable opportunity to work before making decisions.
For many small businesses, setting aside a consistent monthly budget for a few months is more useful than spending a larger amount once and disappearing from advertising altogether.
8. Your Website and Content Matter Just as Much as Your Budget
Here's something businesses don't always want to hear:
Sometimes your advertising budget isn't the problem.
Let's say you spend $1,000 on an advertising campaign that successfully brings people to your website. But your website takes forever to load, doesn't clearly explain your services, and makes it hard to contact you. You can probably guess what's going to happen: people leave.
And now you've paid to send potential customers to a website that isn't helping them take the next step. The same applies to the content you're using in your ads. Poor-quality images, confusing messaging, or an offer that doesn't appeal to your audience won't magically become effective just because you increase your budget.
Before investing heavily in advertising, make sure the rest of your marketing is doing its job. That includes having a clear message, strong creative, a useful website or landing page, and an easy way for potential customers to take action. Otherwise, you may be spending money to highlight problems that need fixing first.
9. Know When It's Time to Increase Your Budget
Let's say you've been spending $500 per month on advertising. Your campaigns are generating qualified leads, you're converting those leads into customers, and the revenue you're bringing in makes the investment worthwhile. Great! Now you have a reason to consider increasing your budget.
But don't double your spending simply because one campaign had a good week. Look at your results over time.
- Are you consistently reaching the right audience?
- Are leads turning into actual customers?
- Can your business handle additional demand?
- Are you still making money after accounting for advertising costs and the cost of delivering your product or service?
If the answer is yes, increasing your budget may make sense.
If the answer is no, spending more probably isn't going to solve the underlying problem.
Sometimes the best next step is improving your creative, adjusting your targeting, or making changes to your website before investing another dollar.
So, What's the Right Advertising Budget for Your Business?
We wish there were a magic number we could give every small business owner. It would certainly make our meetings a lot shorter.
The reality is that a $300 budget might be perfectly reasonable for one business and completely unrealistic for another. The best advertising budget is one that supports a clear goal, gives you enough information to make decisions, and makes financial sense for your business.
Start with what you can reasonably afford, be realistic about what that amount can accomplish, and pay attention to the results that actually matter. And remember, you don't need to advertise everywhere, promote every service, or spend thousands of dollars just because another business is doing it. You need a strategy that makes sense for YOUR business.
If you're not sure where to start, or you're already spending money on advertising without knowing whether it's working, get in touch with Starling Social.
We can help you figure out where your advertising dollars should go and build campaigns that support your business goals, rather than spending money just to be seen.
