How Startups Should Budget for Paid Media in the First 18 Months

Still, many young companies make a wrong choice in terms of their budget allocation – they spend too much at once or completely neglect paid advertisement. In both cases, such decisions prevent companies from growing.

The first 18 months remain particularly vital since this period is used by companies to validate their product, understand the needs of ideal customers, and develop scalable marketing systems. Every spent cent must work towards achieving these goals instead of providing only clicks.

This article will cover the issue of how startups must budget for paid media marketing within their first 18 months, what channels deserve your investments, the major budgeting mistakes that you have to avoid, and how to utilize every marketing dollar to the fullest extent.

Importance of Paid Media for Startups in Their Early Stage

Organic marketing is important; however, it can take a long time before showing any visible results. Paid media provides instant visibility. The aim here is to buy data that helps you make decisions in the future regarding marketing.

With paid marketing, there is no need to speculate if your offer will appeal to the audience; you get definite answers within days.

There are many startups that use paid media to test before investing heavily in it. Putting money on a few relevant channels works better than allocating little budgets on multiple platforms.

Break Down the First 18 Months Into Growth Stages

Growth stages for startups are inevitable. So should be the evolution of your ads.

Stage One (Months 1-3): Verify before Scaling

For the first three months, it is not about scaling. It is all about learning. For now, the budgets are still small. Instead of spending $20,000 right away, spend what is needed to collect statistically significant data. Consider the first month's market research funded by ads.

Stage Two (Months 4-9): Go For Double Winners

Once you have collected enough data, start increasing budgets. Instead of introducing new channels, try to scale those that work. Increasing budgets by 15-25% at a time might keep advertising platforms performing while still learning.

Stage Three (Months 10-18): Scale Predictably

After your acquisition costs become stable, then scaling will be much easier.

This will be the stage for experimentation on more platforms, higher budgets per day, greater geographic reach, implementation of retargeting strategies, and better creative work. Scaling will become easy after having successfully tested the profitable customer segments earlier on.

What Is The Target? How Much Should Startups Need To Spend

However, there's no noted universal number that can estimate the cost of startups. Although you can manage your budget depends on:

• Funding
• Industry
• Customer lifetime value
• Competition
• Revenue
• Profit margins.

Distribute Budgets on Various Channels

Each channel is not worth the same amount of budget. The distribution should be as follows in year one:

1. Paid Social (35%)

Social media creates demand. They make your product known to people who do not yet know your product or company. Paid social advertising campaigns that are well executed allow startups to raise brand awareness and drive quality leads by segmenting the audience efficiently.

2. Paid Search (40%)

The search channel works on capturing demand. The people here are already looking for something. They will typically convert better.

A paid search agency that knows what they are doing can help start-ups find good keywords, cut costs, and create campaigns that deliver results straight away.

3. Remarketing (15%)

Not everyone buys instantly. Remarketing reminds past visitors about your product. These campaigns usually deliver great results since the audience is familiar with your brand.

4. Testing (10%)

You may need to reserve part of every budget for the next testing or experiment.

This may include:

• New audiences
• New platforms
• Video ads
• New creatives
• Seasonal campaigns.

If you go without an experimentation process, your growth eventually plateaus.

Don’t Spread Yourself Too Thin Over Multiple Channels

The biggest mistake that startups make is starting off with campaigns on all fronts at once.

• Google.
• Instagram.
• Facebook.
• LinkedIn.
• YouTube.
• TikTok.
• Pinterest.

Focusing your budget works well because your ad algorithms get enough data to make optimization happen.

Conclusion

The first 18 months will decide whether the startup succeeds in developing a growth engine that repeats itself or wastes precious capital. Paid media marketing should never be thought of as an expenditure in itself; it is an investment in gaining customers, validating your market, and acquiring business insights.

Start with the definition of some well-defined business goals, concentrate on 1-2 top-performing media channels, and measure the KPIs like customer acquisition costs, ROI, and lifetime value of the customer.

Set aside a portion of all budgets for experimenting and optimizing the proven campaigns at the same time. As you start becoming increasingly successful and predictable with your performance, do not increase your budget suddenly.

With proper budgeting, experimentation, and optimization, startups can extract the maximum out of their marketing efforts.

Author Bio

Luke Hodgkins is the CEO & Founder of RiseUp - a paid search agency that focuses on helping companies grow sustainably using search and paid media techniques. With years of expertise in PPC campaigns, SEO, paid social, and performance marketing, Luke helps start-ups and well-established brands optimize their marketing budgets and get more ROI from their marketing efforts.