ADVERTISING BUDGETS AND FINANCIAL PERFORMANCE: ANALYZING THE OPTIMAL BALANCE FOR LONG-TERM PROFITABILITY IN NIGERIAN STARTUPS

Abstract

This study aimed at investigating the relationship between advertising budgets and financial performance in Nigerian startups, focusing on identifying optimal budget allocation strategies that promoted long-term profitability and financial sustainability. Utilizing a sample of 384 startups across sectors such as fintech, e-commerce, health tech, and logistics, the study employed descriptive statistics, Pearson’s correlation, and multiple regression analysis to examine the impact of advertising expenditures on key financial metrics, including revenue growth, profit margins, return on investment (ROI), and cash flow stability. The findings revealed a significant positive correlation between advertising budgets and financial performance, particularly highlighting the effectiveness of digital advertising strategies such as social media and search engine marketing. However, the results also indicated diminishing returns on advertising investment beyond a certain expenditure level, suggesting that startups needed to carefully balance their advertising spending to avoid financial strain. It was concluded that while advertising was crucial for driving growth, Nigerian startups needed to adopt a data-driven approach to optimize their advertising expenditures, ensuring long-term profitability in a volatile economic environment. Recommendations included focusing on digital channels, monitoring for diminishing returns, and aligning advertising strategies with financial objectives