How much should a UK business spend on advertising?
There are three honest ways to set an advertising budget, and the one most often quoted — a percentage of revenue — is the weakest. Here is what each method actually tells you, and how to sanity-check the number you end up with.
Method one: a percentage of revenue
The rule of thumb you will hear from accountants is somewhere between 5% and 10% of revenue, rising to 12–20% for a business chasing aggressive growth or launching something new. It is popular because it is easy and because it protects cash flow.
Its weakness is that it is entirely self-referential. It knows nothing about how many competitors are shouting at your customers, how expensive your audience is to reach, or whether the resulting number buys enough frequency to be noticed. Two businesses with identical revenue in different markets can need budgets that differ by a factor of ten.
Use it as a ceiling — what you can afford — not as a plan.
Method two: share of voice
This one comes from decades of advertising research, and the logic is simple: over time, a brand's share of market tends toward its share of voice — its slice of all the advertising in its category. Spend a greater share of voice than your share of market and you tend to grow; spend less and you tend to shrink.
In practice you estimate what your category spends in total, decide what share of that noise you intend to own, and multiply. It is the right method when you have a defined set of competitors and some way of estimating their spend.
The catch is that share of voice is hard to measure honestly outside big consumer categories, and it says nothing about how the money should be spent.
Method three: the audience-first method
This is the one we use, because it is the only one that starts with the people you are trying to reach rather than with your own accounts.
- Count the audience. How many people could realistically buy from you, in the area you serve?
- Choose a frequency. How many times a month does each of them need to see you? Below three, almost nothing sticks.
- Price the impressions. Audience × frequency ÷ 1,000 × your blended CPM.
Forty thousand people, eight times a month, at a £13 blended CPM is £4,160 of media. That is a budget with a reason attached, and it fails loudly when the ambition does not fit the money — which is exactly what you want a budget to do.
Comparing the three
| Method | Best for | Blind spot |
|---|---|---|
| Percentage of revenue | Setting an affordability ceiling | Ignores competitors and audience cost entirely |
| Share of voice | Established categories with known rivals | Hard to measure; says nothing about execution |
| Audience first | Anyone who can define who buys from them | Only as good as your audience estimate |
Sanity-checking whatever number you land on
- Divide by your audience. If the monthly budget buys fewer than three impressions per person, you are funding a rounding error. Narrow the audience.
- Divide by a customer. If the cost per expected customer is close to what a customer is worth, the plan has no margin for the things that always go wrong.
- Check the creative line. A budget with no money set aside for producing new assets will decay within a quarter, whatever its size.
- Check the floor, not the average. Half a budget spread over twice the audience is not half the result. It is usually no result.
The short answer
Start with what you can afford, using the percentage rule. Then test it against the audience-first arithmetic. If the two disagree, the audience is the thing to change — not the frequency, and not the expectation.
Want this done for your market?
Send us your audience and budget and we will run these numbers properly, then tell you what saturation would cost and whether it is worth doing.
More reading
Effective frequency: how many times must someone see your ad?
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