In order to set advertising rates for a magazine, you'll need to learn what advertisers will be willing to pay and what you'll need to earn to stay in business. You can do this by analyzing not only competing magazines, but other venues where your advertisers are spending their money, such as on radio, TV and the Internet. Using a survey of potential advertisers and a simple formula for comparing yourself to the competition will help you set realistic rates.

Collect media kits from your competitors. Media kits contain the advertising rates of a magazine, newspaper, website or broadcast outlet. Study the rate cards in these media kits to determine their cost per thousand, or CPM. This is the price an advertiser will pay to reach 1,000 people. For example, if a newspaper has a circulation of 50,000 and an ad costs $3,000, that newspaper's CPM is $3,000 divided by 50 = $60.

Set your ad rates based on whether you want your CPM higher, lower or the same as your competitors. If you have a more attractive or unique circulation, you can set your rates higher. If your readership is similar to your competition, you may have to set your CPM lower, based on the fact that you are an unknown quantity.

Create frequency discounts. If an advertiser buys more than one ad, give that advertiser a discount. Set different rates for different quantity buys. For example, if you publish monthly, you can set the rate for an ad based on a one-time, three-time, six-time and 12-time contract.

Create package rates. If you sell display space in your magazine and banner ads on your website, offer direct mail to your subscription list, and include blow-in cards or polybagged customer marketing materials, bundle different combinations of purchase options. For example, if an advertiser buys three ads, you might give them a free banner ad on your website. If an advertiser buys a print ad, a banner ad and a blow-in card, you might give them a percentage discount on all three.

Meet with or call potential advertisers to discuss what they would be willing to pay for advertising in your magazine. If advertisers feel you are trying to create a magazine that will help them reach their audience in a cost-effective manner, they might be more likely to give you realistic impressions of how often and at what price they will advertise in your publication.

Create a budget for your magazine. You might need to set your ad prices in conjunction with your expected income and expenses. If you have a limited number of pages you can afford to print and mail, and you know the percentage of your magazine you want to dedicate to editorial and advertising, you can use those figures to help set your ad rates. For example, if you are printing a 48-page magazine and you want a 50-50 ratio of editorial to advertising, you must cover your expense and provide a profit by selling 24 pages of advertising. If you need $48,000 to cover the costs, including overhead, of one issue of your magazine, you'll need to set your ad rates to generate $2,000 per advertising page. If your circulation is 50,000, your CPM for a full-page would be $40. You'll need to sell full-age ads for $2,000, half-page ads for $1,000, quarter-page ads for $500 and so on.