Notes for owners · Business growth
How much should I spend on advertising?
Work back from the orders you need to the enquiries they take and what an enquiry has cost you. Then check the number against the floor every medium has.
The GullySales team · Updated 15 Sept 2026 · 7 min read
Work backwards, not forwards. Start from the orders you need this quarter, divide by the rate at which your enquiries become orders, and you have the number of enquiries required. Multiply that by what an enquiry has actually cost you in the last six months. That is your media figure. Then test it against a floor, because every medium has a minimum below which the buy does nothing at all. If the number is more than you can afford, cut the target or cut the number of mediums. Never thin the spend per medium.
The calculation, with illustrative figures
For example, a furniture retailer wants 40 additional orders this quarter. Every number here is invented.
The shop closes about one in five of the people who walk in with a real requirement, so 40 orders need roughly 200 qualified enquiries. Its records show that about half the enquiries that arrive are qualified, so 400 enquiries in total. The last six months put the cost of an enquiry at around ₹600 across search, Meta and the local insert. That gives ₹2.4 lakh of media for the quarter, or ₹80,000 a month.
Now check it against the margin. If an average order earns ₹9,000 of gross margin, 40 orders bring ₹3.6 lakh. The media costs ₹2.4 lakh of that, before production and before anybody's salary. The calculation has just told you something useful, which is that this business needs a better conversion rate more than it needs a bigger budget.
Why percentage rules mislead a small business
Two to five percent of revenue is a rule built from averages across large companies with many products and a marketing department. It has no view on whether your team calls an enquiry in five minutes or five hours, and that single fact can double or halve the money you need.
Use the percentage only afterwards, as a sanity check. If the backwards calculation lands at 14 percent of revenue, either your conversion rate or your target is wrong. The wider question is the whole marketing budget, including the website and the agency time. Our guide to what an SME should spend on marketing covers that one.
Every medium has a floor
This is the part that budgets ignore, and it is where small businesses waste most of their advertising money.
| Medium | Below the floor it does | What the floor looks like |
|---|---|---|
| Google search | Three clicks a day, no learning, no pattern | Enough daily budget to hold position on your core terms |
| Meta | Restarts the learning phase constantly | A steady daily budget per ad set, held for weeks |
| A hoarding | One month on a weak site nobody passes | A good site held long enough to be noticed |
| Newspaper insert | A few thousand copies in scattered pin codes | Full coverage of the pin codes you actually serve |
| Radio | Two spots a day that nobody hears twice | A real frequency across drive-time for a fortnight |
| Cinema | One screen in one mall | The screens in your catchment, for the run of a release |
A budget that funds six mediums at half their floor produces six failures and no information about any of them. One medium funded properly produces a number you can plan with next quarter.
Media money is not the whole advertising cost
The rate card is one line. The others get forgotten and then get taken out of the media budget in month two.
Production is the creative work, the photography or the film, the printing, the flex, the mounting and the artwork changes. Add it up early. A hoarding site rented for a month still needs a flex printed and a crew to mount it. A television or radio buy needs a finished spot before anything can be scheduled. Budget production separately at the start, or the campaign will run with the first draft of the creative.
The season tax
Rates are not the same in every month, and the good inventory goes first. In the fortnight before Deepavali, property and jewellery advertisers have usually taken the hoardings on the roads that matter, and what is left is the sites they rejected. Television inventory around a major cricket tournament prices itself accordingly. Wedding season takes the print and the local cable in some markets.
So book early or buy a different fortnight. A retailer who cannot outbid a jeweller for the Deepavali sites can own the same road three weeks earlier. That is when the family is still deciding what to buy, and the rate is lower.
When to spend nothing
There are three honest cases. You have no capacity to serve more orders, so the enquiries will queue and the reviews will suffer. Nobody answers the phone within the hour, in which case media money leaks out the same day it is spent. Or the offer has never been tested on a single customer, and advertising will only tell you faster that it does not land.
Fix the constraint first. It is cheaper than any campaign and it changes the arithmetic at the top of this page.
What to do next
Pull six months of enquiries with what each source cost and how many became orders. That gives you the two numbers the calculation needs, and most businesses find them uncomfortable rather than unavailable. Work the sum backwards from your own target. Then check it against the floors above. To have that done against your records and your margins, book the free audit.