How companies decide their ad budget?

Sherif Omran

January 10, 2026

1️⃣ Do Companies Use Past Sales or Future (Projected) Sales?

✅ The answer: Both — depending on business size

Business Type	Budget Based On
Multinational Companies	Future projected revenue + market share goals
E-commerce Brands	Past 30–90 days revenue
Dropshippers	Test budget first → scale with profit
Small Businesses	Available cash + survival math

✅ The Golden Rule Used Globally:

Advertising budget is always tied to REVENUE, not hope.

2️⃣ How Much % Do They Spend on Advertising?

This is the real industry standard range:

Business Type	% of Revenue Spent on Ads
Multinationals	5% – 12%
Growing E-commerce Brands	10% – 25%
Aggressive Scaling Brands	25% – 40%
Dropshipping Stores	30% – 50%
Small Home Businesses	5% – 15%

✅ Example:
If an e-commerce brand makes:

$50,000/month revenue
× 20% ad budget
= $10,000/month total ad spend

3️⃣ How Video Ad Production Budget Is Calculated

Here’s the big mistake most beginners make:
❌ They think production comes from the ad spend.
✅ In reality, production is a SEPARATE business investment.

Standard Industry Breakdown:

Scenario	Video Production %
Small Business	5% – 15% of TOTAL monthly ad budget
E-commerce Brand	10% – 20%
Large Brand	20% – 35%

✅ Example:

Monthly Ad Spend: $10,000  
Video Production (15%) = $1,500  
Media Buying = $8,500

⚠️ Big brands NEVER run cheap videos with big budgets.
They increase production first, THEN scale ads.

4️⃣ How Many Videos Do They Use Per Campaign?

This is based on creative testing, not random picking.

Testing System Used by Meta, TikTok & YouTube:

Business Type	Videos Per Month
Small Business	4 – 8 videos
E-commerce Brand	10 – 30 videos
Scaling Brand	30 – 100+ videos
Multinational	100 – 500+ assets

Why so many?

Because:

80% of ads fail
20% become winners
5% become scaling machines

So they test:

Different hooks
Different angles
Different emotions
Different offers

5️⃣ Weekly, Monthly & Yearly Budget Example (REALISTIC)

Let’s build one complete real e-commerce case:

📦 Example Brand:

Monthly Revenue: $40,000

Step 1 – Ad Budget (20%)

$40,000 × 20% = $8,000/month ads

Step 2 – Video Production (15% of Ads)

$8,000 × 15% = $1,200 video production

Step 3 – Weekly Breakdown:

Weekly Ads: $2,000  
Weekly Video Budget: $300

Step 4 – Yearly Projection:

$8,000 × 12 = $96,000/year ads  
$1,200 × 12 = $14,400/year production

✅ This is exactly how professional media buyers structure campaigns.

6️⃣ Do Big Companies Ever Use Fixed Budgets?

Yes — in these cases:

Situation	Budget Style
Product Launch	Fixed (e.g. $500k launch)
Market Expansion	Fixed (per country)
Branding Campaigns	Fixed yearly contract
TV / YouTube Big Buys	Fixed media deals

But e-commerce & dropshipping = % based ALWAYS.

7️⃣ The Formula You Can Use With Clients (Professional)

Here’s the simple formula you can literally put on your website:

Monthly Ad Budget = Monthly Revenue × 10% – 30%

Video Production Budget = Monthly Ad Budget × 10% – 20%

Number of Videos = Production Budget ÷ Cost Per Video

✅ This instantly makes you look like a serious agency, not a freelancer.

8️⃣ Why One Professional Ad Beats 5 Cheap Ones