Setting a digital advertising budget often feels like guesswork, but it shouldn't be. For Australian small businesses, a well-defined budget ensures you aren't just 'throwing money at the wall,' but rather investing in a system that generates a measurable return on investment (ROI).
In this guide, we’ll walk you through the process of determining exactly how much you should spend on platforms like Google Ads and Meta (Facebook/Instagram) to achieve your business goals without breaking the bank.
Prerequisites
Before you start crunching numbers, ensure you have the following ready:- Your Average Order Value (AOV): How much does a customer typically spend in one transaction?
- Your Profit Margins: How much do you keep after all costs (excluding marketing)?
- Historical Data: Access to your Google Analytics or previous campaign results (if available).
- Clear Goals: Are you looking for brand awareness, or do you need immediate sales/leads?
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Step 1: Define Your Ultimate Goal
Before looking at your bank account, look at your business objectives. Are you a local plumber in Brisbane looking for three new emergency call-outs per day, or an e-commerce store in Melbourne trying to clear seasonal stock? Your goal dictates your budget.- Lead Generation: Focus on Cost Per Lead (CPL).
- E-commerce: Focus on Return on Ad Spend (ROAS).
Step 2: Calculate Your Customer Lifetime Value (CLV)
Don’t just look at the first sale. If a customer spends $100 today but returns three times a year for five years, their value is $1,500. Knowing your CLV allows you to be more aggressive with your initial acquisition budget.Pro Tip: For many service-based businesses in Australia, the first job might only break even after advertising costs, but the profit comes from the long-term relationship.
Step 3: Determine Your Allowable Cost Per Acquisition (CPA)
How much of your profit are you willing to sacrifice to get a new customer?- Example: If your product costs $100 and your gross profit is $60, you might decide you are willing to spend $20 on ads to acquire that customer. Your target CPA is $20.
Step 4: Research Platform Benchmarks
Use tools like Google Keyword Planner to see what competitors in your industry are paying per click (CPC).- Screenshot Description: In Google Keyword Planner, look for the columns 'Top of page bid (low range)' and 'Top of page bid (high range)'. This shows you the price range for appearing at the top of Brisbane search results for your specific services.
Step 5: The 'Reverse Engineering' Formula
Now, let's do the math. To get 10 customers, and assuming your website converts at 2% (a standard average):- You need 500 visitors (10 customers / 0.02 conversion rate).
- If the average CPC in your industry is $2.00, your budget should be $1,000 (500 visitors x $2.00).
Step 6: Factor in the 'Learning Phase'
Every digital platform has a learning phase where algorithms test who is most likely to click your ads. Budget an extra 20% for the first 30 days. This isn't wasted money; it’s data acquisition.Step 7: Choose Between Conservative, Growth, or Aggressive
- Conservative (5% of revenue): Best for maintaining current market share.
- Growth (10-15% of revenue): Best for businesses looking to expand and take market share from local competitors.
- Aggressive (20%+ of revenue): Best for new startups or launching a new product line in a competitive Australian market.
Step 8: Allocate by Channel
Don't put all your eggs in one basket. A common split for Australian SMEs is:- 60% Search (Google Ads): Capturing people actively looking for you.
- 30% Social (Meta/LinkedIn): Building awareness and retargeting.
- 10% Testing: Trying new platforms like TikTok or Pinterest.
Step 9: Set a Daily Cap
Take your monthly budget and divide it by 30.4 (the average number of days in a month). Enter this into your platform settings.- Warning: Google Ads may spend up to double your daily budget on high-traffic days, but it will never exceed your monthly limit.
Step 10: Set Up Conversion Tracking
Your budget is meaningless if you can't see what it bought. Ensure you have the Google Tag or Meta Pixel installed. You need to see exactly which dollar led to which phone call or sale.Step 11: Review and Optimise Weekly
In the first month, check your budget daily. Are you spending it too fast? If your daily budget is exhausted by 10 AM, you may need to narrow your targeting (e.g., target only specific Brisbane suburbs rather than all of SE Queensland) or increase your budget.---
Common Mistakes to Avoid
- The 'Set and Forget' Mentality: Digital ad prices fluctuate. If a new competitor enters the Brisbane market, your CPC might rise, making your old budget ineffective.
- Underfunding the Campaign: If your industry's CPC is $5 and you set a $5/day budget, you’ll only get one click a day. The algorithm won't have enough data to learn, and you'll likely see zero results.
- Ignoring Seasonal Trends: If you’re a retail business, your November/December (Black Friday/Christmas) budget should be significantly higher than your February budget.
Troubleshooting
- Ads aren't spending: Your bids might be too low, or your audience targeting is too narrow. Try increasing your 'Target CPA' or broadening your geographic area.
- High spend, no leads: This is usually a 'landing page' problem, not a budget problem. Ensure your website makes it easy for Australians to contact you or buy.
- Budget runs out too early: Use 'Ad Scheduling' to only show ads during your business operating hours.
Next Steps
Now that you have a budget, it’s time to build your first campaign. Check out our guides on Google Search Ads for Beginners or How to Write High-Converting Ad Copy.If calculating these numbers feels overwhelming, or you want to ensure your Australian business is getting the best possible ROAS, we can help. Contact the experts at Local Marketing Group for a tailored strategy session.