Some time after filing your LLC and before your grand opening, you’ll start advertising your business. Advertising can mean posting pay-per-click (PPC) ads on Google or broadcasting commercials on television or radio. So many kinds of small business advertising exist, and it’s nearly impossible to list them all. At the same time, you’re probably wondering what you need to do for your business and—more importantly—how much it’ll cost. So, what is advertising?
To begin advertising your products or services, you’ll first need to decide which types of small business advertising you’ll be using. Then, you’ll determine how much you can spend and where you should spend it for maximum effect.
Types of Advertising for Small Business
We suggested there are a virtually infinite number of types and avenues of advertising for small business you can choose from. But it’s really not that overwhelming because all the myriad types of advertising can be grouped into five broad categories into which each individual form of advertising falls: broadcast, print, online (or digital), display, and direct.
Broadcast Advertising
Broadcast advertising is the most well-known form of advertising. It consists of advertising spots played on television or over the radio. Additionally, some sources categorize podcast advertising—specifically running paid spots within someone else’s podcast—as a form of broadcast advertising.
Print Advertising
Simply put, print advertising is any form of advertising placed in or distributed alongside a newspaper or magazine. That coupon circular in the Sunday newspaper? Print advertising. The banner running across the bottom of the front page touting a new car model? Print advertising. The full-page photo of a famous actor wearing a fancy watch? Print advertising.
Online (Digital) Advertising
Also known as digital advertising, this category of ads includes anything you post or distribute online in order to sell products or gain subscribers. Pay-per-click (PPC) ads on Google and Facebook are the most common form of digital advertising for small businesses, but other forms include:
- Social media marketing through business pages, groups, and boosted posts
- Ads on YouTube, Yelp, and more
- Ads placed via online networks, such as Microsoft Ads
- Remarketing ads on Google, Facebook, and via advertising networks
- Email blasts
Display Advertising
When you’re driving down the road, you’ll notice billboards. If you live in a city with a mass transit system, you’ll see buses and bus stops plastered with ads for lawyers, dry cleaners, or used car lots. In some cities, you’ll even find posters glued to walls. These static advertisements are known as display ads.
Direct Advertising
Any physical material you distribute directly to potential customers in an attempt to get them to buy your products or services, join your mailing lists, or take some other specific action is known as direct advertising. This form of small business advertising includes:
- Direct mail
- Fliers
- Discount cards
- Some brochures
Armed with an understanding of each of the kinds of resources available for advertising your small business, next you’ll want to consider where you can reach the most potential customers. That means diving into your local market.
Where to Advertise for Your Small Business
You must take into account several considerations when deciding where to spend your advertising dollars. What avenues are available in your market? With which media are your competitors advertising? Where are you most likely to meet customers in their moment of need? Understanding these questions will help guide your decisions. Each is outlined briefly below.
Take a moment and consider the available media outlets in your area. All areas will have some common choices. Direct advertising is always available because the postal service visits every house. But there will be others too, and they may vary.
A rule of thumb: The larger the community, the more advertising opportunities there will be. Make a list of the local media outlets. They can include:
- Local radio stations
- Local television stations
- Local newspapers—including weekly community newspapers
- Other local publications, such as magazines or trade publications
- Display advertising on billboards or bus shelters
While you’re exploring the local mediascape, take a moment to look online as well. Many communities have websites or Facebook Groups where locals congregate to learn of current events, stay on top of business happenings, and visit about their community.
Make a list of your five biggest competitors. Then, pay attention to where you’re seeing their ads. Established businesses will rarely waste money on advertising that doesn’t work. So, if you see several competitors’ ads on television, you know they’re getting results. If you don’t hear about them on the radio, chances are that’s because radio isn’t where they’re finding customers.
That’s not to say you shouldn’t consider media where the competition avoids advertising. Many reasons could explain this absence, including cost and return on investment (ROI). But, a good rule of thumb is a media your competitors ignore is one you can safely ignore, as well.
A customer’s moment of need is the step in the buyer’s journey when a potential customer decides to make a purchase. They are going to buy someone’s product, and usually that someone is the first provider they encounter while deciding to buy.
For many businesses, building a good small business website will be the primary means of connecting with customers when they decide to buy. But, through effective advertising, businesses can increase the likelihood of sales by tapping into other avenues, such as a Facebook Business Page, a Google Business Listing, or even a phone book ad for us old fogies.
So, as you’re just starting to think about your advertising plan, make sure you take a moment to explore where customers are most likely to see your ads. That’s where you’ll want to invest the most money.
Now that you have some idea of the places you can advertise and the kinds of ads that speak to your customers, it’s time to start building your own advertising plan. The first step: creating a budget.
How to Create a Small Business Advertising Budget
Creating a small business advertising budget is one of the more challenging aspects of starting a business. That’s because there is no hard and fast rule about how much you need to spend. At the same time, when you’re just starting out, money is tight.
Ultimately, how much you spend on advertising will depend on your business model, cash flow, profit margins—basically, how much you can afford to spend on customer acquisition. There is no fixed rule that leads to success. However, the general consensus is a business should spend roughly 10% of gross revenues on marketing and advertising.
Yes, you’ll need to pay close attention to every dollar, but it doesn’t have to be scary. And you’re probably going to make a few mistakes along the way. Here are a few steps to guide your initial planning and help you avoid some of the more common mistakes.
This is the most important step you can take. The best advice is to spend sacrificially, as the more you advertise, the more likely you are to gain customers, grow revenues, and find success. That being said, working from the 10% rule of thumb we highlighted, you should be able to keep costs under control.
Write down your entire startup budget, including any cash you’re putting in and any lines of credit you plan to use. Then, apply the following formula:
Available Capital x 0.10 = Marketing Budget
If you’ve got $300,000 to invest, applying the formula above says your overall marketing budget should be $30,000. From that amount, you’ll need to subtract the costs of marketing. That means subtracting your logo design, website costs, printing costs for business cards and brochures, sending press releases, etc. The remaining money is what you can spend on advertising.
Using our $30,000 budget, let’s assume all your branding and marketing runs $12,000. You’ll have $18,000 to market your business until you start generating revenue.
Remember earlier when we discussed the three questions you have to answer in order to know where to advertise your small business? That’s the information you’ll use to pick which outlets to advertise your business with.
Make a list of the most important kinds of advertising you’ll need to do to reach customers. Order that list from most important to least important. You probably won’t be able to advertise on all of them, and that’s OK. Money’s not unlimited, and not every advertising medium provides a sufficient return on investment (ROI) to justify spending money on it. Consider this list for a hypothetical law practice:
1. Facebook ads
2. Google ads
3. Newspaper ads
4. Phone book ads
5. Television ads
6. Radio ads
If you’re a lawyer just starting out, you don’t have a whole lot of money to spend. At the same time, you probably have a student loan company breathing down your neck. Money is tight. Select the three or four most affordable types of advertising and spend your money there. Mark the others off your list. That’s where you’re most likely to reach the most people for the least amount of money. So, for our law practice, our list might look like this:
1. Facebook ads
2. Google ads
3. Newspaper ads
4. Phone book ads (?)
Television and radio will probably be too expensive for a new practice. They can be important down the road, but for now, a $200 commercial during the evening news may be less valuable than $200 worth of pay-per-click (PPC) ads on Facebook.
Also, note the question mark beside phone book ads? In some markets, the good ol’ Yellow Pages are still a viable option for advertising. Check out your local phone book and see how many of your competitors are listed in the Yellow Pages. If they’re all there, you’ll need to be there too.
The most challenging part of crafting an advertising budget is determining where to spend the money you have. And, frankly, there is no “right” answer. However, the easiest way to get started is to allocate roughly half your budget on the top type of media and investing the remaining half evenly on each remaining kind of advertising. Take our list from Step 2. We’re left with:
1. Facebook ads
2. Google ads
3. Newspaper ads
4. Phone book ads (?)
Starting with the $18,000 example from Step 1, you would initially allocate your budget as follows:
50%: Facebook and Google ads—$9,000
25%: Newspaper ads—$4,500
25%: Phone book ads—$4,500
Now pause and take a look at that budget. Something’s definitely off. Spending $4,500 on a phone book ad would be insane, and no one is suggesting you do this. You’ll need to refine this preliminary budget based on how much the various types of ads cost.
Google and Facebook charge variable rates for their ads based on the type of ad, the competitiveness for ads in your industry, and where your ads are being displayed. For PPC ads on Google and Facebook, you’ll set a budget and, once that budget is spent, decide whether or not to spend more. The other media outlets are different, though, because they have a fixed cost that you’ll know before your ads run.
Ads in the Yellow Pages are costly, ranging from $250 for a simple placement to as much as $1,300 for a quarter of a page. The larger the ad, the more it costs. But let’s assume you decide to place a quarter-page ad for $1,200. You’ll have an additional $3,200 to spread across your other media choices.
Allocate that money in the same fashion as before: one half, then a quarter on the remainder. Note that there are only two media types remaining in our budget after adjusting the phone book ad. So the extra money will be split 50/50:
50%: Facebook and Google ads—$10,600
25%: Newspaper ads—$6,200
25%: Phone book ads—$1,200
That’s a pretty healthy advertising budget, and it takes $18,000 and stretches it very far. That being said, before you dive too far into any form of advertising, keep in mind diversity is important as well. You would serve your business well to familiarize yourself with the costs associated with each kind of advertising.
Learn More:
To explore the costs of various advertising media, read these informative articles:
- How Much It Costs to Advertise on Google
- Facebook Ads Cost in 2023: Stats, Trends & Return on Spend
- Everything You Need to Know About TV Advertising Costs
- Newspaper Ad Cost & Factors Affecting How Much You Pay
- Radio Advertising Costs: A Simple Guide to Ad Spend
- How Much Does a Billboard Cost (+ Pricing & Ad Tips for 2024)
Customers are coming through the doors, you’re moving products, and people are paying for your services. Congratulations! You’re in business. Your advertising work isn’t done, though. Give your advertising plan a month and see how it’s doing. Gauge where customers are coming from. You can track sales by asking customers directly, conducting surveys, or offering coupons or special pricing in different types of ads.
At the end of your first month, sit down and determine how many customers came to you from each kind of media. Chart that information by advertising type.
Advertising Type | Customers Acquired | Amount Spent |
---|---|---|
Google & Facebook Ads | 150 | $10,600 |
Newspaper Ads | 23 | $6,200 |
Phone Book* | 30 | $100 |
Total | 203 | $18,000 |
*Note a phone book ad is a single expenditure but appears for 12 months, meaning the monthly expense is just $100.
Once you’ve compiled the information, calculate customer acquisition costs (CAC). The formula for determining customer acquisition cost is:
Amount Spent | = | Customer Acquisition Cost |
# Customers |
Applying this formula to the table above produces the following results:
Advertising Type | CAC |
---|---|
Google & Facebook Ads | $70.66 |
Newspaper Ads | $269.57 |
Phone Book | $2.50 |
Average CAC | $88.67 |
Looking at these numbers, a few things immediately jump out. First, Google and Facebook cost less than a third of newspaper advertising. Also, both Google and Facebook are below the average CAC, which means they’re over-performing. It warrants consideration to shift some of the budget of newspaper ads to Google and Facebook. However, before you pull that trigger, maybe dive a little deeper.
Take a look at the phone book cost. Because it’s a single-point expenditure amortized over 12 months, the customer acquisition cost is insanely low compared to the other two media outlets. For a business in this situation, it might be worth considering shifting some, if not all, of the newspaper advertising budget to other single-point expenditures.
Billboards and other display advertising typically have contracts longer than a month. An adjusted budget might shift half of the newspaper budget to a high-visibility billboard for a few months.
Regardless of how you adjust your budget, the numbers are clear. Spend less on newspapers and more somewhere else.
Warning: Don’t Neglect Advertising in Your First Marketing Budget
When you are starting a business, you’re going to make a considerable investment in marketing. Among the initial choices you might make:
- Choosing brand colors
- Designing a logo
- Building a website
- Sending out a press release announcing your grand opening
- Joining professional and business organizations
- Launching profiles on Facebook or Instagram
- Completing a Google Business Profile
But many small businesses will make precisely the same mistake when considering how to market their new business:
They will fail to save money in their initial marketing budget for advertising.
Advertising is an essential part of building a brand identity. While it’s common for a new business to spend a substantial portion of its marketing budget on branding, it’s still vital to reserve some of that money for advertising the products and services you hope to sell.
Frequently Asked Questions (FAQs)
Determining the cheapest form of advertising depends on how you’re measuring cost. Generally speaking, you can measure costs two ways: raw dollars spent on an ad, or by performance as measured in cost per impression (CPI)—how many times the ad is viewed. From a raw dollars perspective, digital advertising on Facebook and Google tend to be the cheapest, with a single ad running less than a few bucks. But from a performance perspective, billboards win hands down, with an average CPI ranging from $0.002 to $0.009 per impression—less than a penny.
The best place to advertise your small business is wherever you’re likely to reach the most customers for the least amount of money. For some businesses, this will mean advertising on the radio or television. Others may invest more heavily in Google, Facebook, and other online ads. To determine where to advertise your business, research your competitors and see where they’re advertising. Most businesses won’t waste money on advertising that doesn’t produce results.
Advertising your small business is one of the most important ways to pursue success. Through advertising, you’re able to position your products and services as potential solutions to customers’ problems or needs. Without advertising, how will a customer in need find your product? They won’t. Instead, they’ll turn to a competitor and buy that product or service. Advertising means sales, which is why it’s a vital part of every business plan.
Bottom Line
Where you’ll advertise and how much you’ll spend are two of the most important decisions you’ll make as a small business owner. It’s easy to make mistakes—and you’ll probably make more than a few. But with careful consideration, planning, and attention to detail, you’ll master the art of advertising and steer your small business to success.