TLDR:
- Budget size is the biggest driver of advertising effectiveness and accounts for 89% of the variation in ad payback (IPA), more than creative or media planning.
- Most companies still set the ad budget backwards, anchored to last year’s spend rather than to where the business is trying to go.
- Two evidence-based ways to size it to your goal: excess share of voice (are you investing ahead of your market position?) and objective-and-task (work your revenue target back through your funnel).
- Sanity-check whatever you land on against Nielsen’s 1–9%-of-revenue band (median 3.8%) and what your business can actually afford per customer.
- Use the free calculator to get your own number.
Table of Contents
When it comes to advertising effectiveness, the size of your budget matters more than you think: how much you spend correlates with how effective your ads campaign will be.
Les Binet and Will Davis’s 2025 IPA study, “Go Big or Go Home“, analyzed effectiveness award-winning case studies and found that budget size alone accounts for 89% of the variation in advertising payback, far more than creative or media planning. What this is saying is that what you spend impacts your ads performance more than what the ad looks like.
A separate study by Nielsen analyzing nearly 150,000 ROI observations found that under-invested brands could see a median 50% jump in ROI if they increased spend to the right level.
So how do you know if what you’re spending is enough to reach your goals? And how can you actually come up with a budget that is connected to your goals and just the right size?
Method 1: Excess share of voice
The Five Principles of Growth in B2B Marketing research commissioned by LinkedIn’s B2B Institute, analysing the IPA Effectiveness Databank shows that a brand’s share of voice (SOV) relative to its share of market (SOM) predicts market share growth. A 10-point excess share of voice (ESOV) is associated with market share growth of roughly 0.7% per year on average for B2B brands, rising to 1.8% per year for B2B service brands specifically.
And the reverse is also true: if your SOV is consistently below your SOM, your SOM will shrink.
Richard Parsons, Co-founder of True puts the practical implication simply:
"The trick is always to punch above your weight. Keeping your share of voice above your share of market is what signals growth and confidence to your market, regardless of your size.”
So a good sense check is to work out your current share of market and share of voice, to see whether your advertising is under- or over-invested relative to your size.
Determining your excess share of voice comes with its own challenges. Here’s what you’ll need:
1) Your brand’s market share
SOM = your company’s sales ÷ total category sales
You’ll first need to define your market and competitor set to establish its size, either through independent research firms, official government data, or trade body research.
2) Total advertising spend in your category
This is a particular challenge for smaller B2B brands in fragmented categories with many competitors. Consumer brands can lean on established databases like Nielsen; for most B2B brands, that data simply isn’t available, and commercial ad-monitoring panels rarely cover niche or fragmented B2B categories.
Where that data doesn’t exist, you can estimate it using Nielsen’s benchmark: brands reinvest an average of 3.8% of revenue in advertising globally. Applying this to your category’s total revenue gives you a rough proxy for category ad spend – not a perfect solution, but it fills a void when you have little to no data available.
3) Your brand’s share of that total advertising spend
SOV = your ad spend ÷ total category ad spend
4) Your excess share of voice
ESOV = SOV − SOM
From here, you can determine if you’re under- or over-invested and even work backwards from your market share growth target to the ESOV needed to achieve it, using the 10-point ESOV ≈ 0.7% annual growth ratio above.
While there’s solid research behind the link between excess share of voice and market share growth, estimating category ad spend and your own SOV can be genuinely difficult in practice.
That’s where the second method, objective-and-task, can be an alternative.
Method 2: Objective-and-Task
In this method, you’re starting with setting the revenue goal and working backwards through your sales funnel to compute the ad budget for demand (sales activation campaigns).
Here are the steps to go through
- Set the real revenue/growth target from the goal owner directly
- Determine your average deal size
- Calculate the number of new customers needed by dividing the revenue target to the average deal size
- Find your historical conversion rates:
Leads → Marketing qualified leads → Sales qualified leads → Opportunities → Won deals (or however you define your sales funnel).
- Now that you have your target of new customers and conversion numbers, reverse-engineer the funnel backward from that customer number using your conversion rates, to find required volume at each stage. To convert 10 new customers, how many leads would you need?
- Knowing the volume at the top of the funnel, apply your historical cost-per-unit metric (eg. cost per lead, cost per demo, cost per meeting etc) to that volume to arrive at the budget.
As Dennis Güth, Chief Growth Officer of WOB agency puts it, a budget built this way stops being a guess and becomes a business case you can defend to whoever holds the purse strings:
"It's not your opinion - it's an experienced fact."
Let’s work with a practical example: Company A is an IT services provider that targets to grow its revenue from €5M to €8M in 3 years.
Their conversion numbers are MQL→SQL 75%, SQL→Opportunity 60%, Opportunity→Close 25%.
- Revenue gap: €8M − €5M = €3M over 3 years
- Assumed average deal size: €50,000/year
- New customers needed: €3,000,000 ÷ €50,000 = 60 clients over 3 years (~20/year)
- Reverse-engineer through the funnel
- Opportunities needed = 60 ÷ 25% = 240 opportunities over 3 years (~80/year)
- SQLs needed = 240 ÷ 60% = 400 SQLs over 3 years (~133.3/year)
- MQLs needed = 400 ÷ 75% = ~533 MQLs over 3 years (~177.8/year)
At an average cost per MQL of €750, the advertising budget for demand gen / activation needed is €133,350/year.
To work out the brand advertising budget and the total ad budget, we can rely on LinkedIn’s B2B Institute research which suggests B2B efficiency peaks when ad budgets are split 46% to brand campaigns and 54% to sales activation campaigns (the study advises to treat this 46/54 split as a guiding principle as the optimal split may vary across categories. For lack of better data we’ll use this principle).
Using the 46/54 brand-to-activation split, Company A’s brand budget comes to €113,594/year, for a total advertising budget of €246,944.
Objective-and-Task is a more straightforward approach in calculating your short-term campaigns spent, and for an established business, you should have historical data to rely on.
There are no large-scale effectiveness studies (like the IPA Databank research behind ESOV) directly linking this method’s outputs to actual business growth; it’s an internally consistent calculation, not an externally validated one.
What does the research say about the right ad spend?
If you want a fast sanity check before or after running either method above, Nielsen’s 2022 ROI Report offers a rigorously-sourced benchmark, drawn from an analysis of nearly 150,000 marketing ROI observations combined with a database of client-supplied media plans, making it one of the largest datasets of its kind.
The headline finding: media spend needs to be between 1% and 9% of revenue to stay competitive, with most brands landing between 1.4% and 9.2% of revenue, and the median brand reinvesting 3.8% of revenue into advertising.
In other words, your ad budget should be anywhere between 1% and 9% of your sales revenue.
What is your spending ceiling?
We walked through two different ways to think of your ad budget, as well as what research shows is an optimal ad spend. But where is the ceiling – what is the maximum your business can actually afford to spend?
How much you spend on acquiring a customer – including advertising, sales, other marketing costs (in short, your CAC) should be lower than the lifetime value (LTV) of a customer.
If you’re a B2B SaaS, a healthy ratio you can work with is LTV:CAC = 3:1, meaning CAC should be ⅓ of the customer LTV. The 3:1 rule was popularized by David Skok of Matrix Partners around 2010, based on observations of mature, publicly-traded SaaS companies at steady state.
Outside of B2B SaaS, there are no reliable benchmarks on the ideal LTV:CAC ratio. You’ll need to work out what your business in particular can afford to spend on acquiring a customer – but if you’re running on lower margins it’s safe to say the 3:1 rule won’t apply.
So, what’s the answer to “what is the right ad budget size”?
The two methods aren’t competing, they answer different questions. ESOV tells you what it takes to move your actual position in the market; Objective-and-Task tells you what it takes to hit a specific revenue number given how your funnel converts today.
Either way, run the number through the CAC ceiling before you commit to it. For Company A, the full ad budget of €246,944/year, brand and activation combined, against roughly 20 new clients in year one, works out to about €12,347 per client in ad spend alone. That’s not the same as total CAC, which would also need to fold in sales salaries, commissions, and other costs of closing each deal, but it gives you the advertising piece of that equation, and a useful ceiling to check the rest against once you have those other numbers.
What both methods have in common matters more than where they differ: each starts with your actual growth target and works backward to a number, instead of starting with last year’s spend and hoping it’s still enough. This shift changes what a marketing budget actually is: marketing is going to be an investment and not a cost center.
Try it with your own numbers
Reading about the two methods is one thing; seeing what they say about your business is another. We built the calculator below so you don’t have to run the arithmetic by hand.
Start with the budget tab: enter your revenue target, your average deal size, and how your funnel converts, and it works back to the demand-gen and brand spend you’d need to get there. Then use the share-of-voice tab as a sense-check. It tells you whether you’re currently under- or over-invested for your size. Whatever number you land on, hold it against the 1–9%-of-revenue benchmark before you commit.
None of this is exact; some inputs you’ll have to estimate. But a budget you’ve reasoned back from a goal is a great deal easier to defend than last year’s number plus inflation.
Is your advertising budget fit for your growth goals?
Two tools in one. A budget worked back from your revenue goal, and a share-of-voice sense-check to see whether you're under- or over-invested for your size. Figures are pre-filled with an example — change them to your own.
Share-of-voice sense-check
This won't hand you a budget. It tells you whether your advertising is under- or over-invested relative to your size — and the excess share of voice a growth goal would imply.
Optional: work back from a growth goal
Fill these in to see the excess share of voice your goal would imply. Leave blank to skip.
Optional: check your current share of search
Share of search is a free stand-in for share of voice — a second read on where you stand today.
Objective & Task
Start from the revenue you want to add and work backwards through your funnel to the demand-gen spend it takes — then add brand at the 46/54 split.
Fixed split from LinkedIn's B2B Institute research: 46% brand / 54% sales activation, treated as a guiding principle.
* Ad spend per client is advertising only — not full CAC. It excludes sales salaries, commissions and other closing costs.
