How to Develop a Marketing Budget for a Small Business
Most small businesses, like startups and small enterprises have limited capital to spend on marketing, and while it is tempting to try and do it all internally, hiring out core work to an expert team at an agency can actually save you time and money. With this in mind, putting together a marketing budget for a small business requires careful and thoughtful planning and consideration of various factors.
If you search online, there are a variety of answers to the question of “what is the average budget for a small business?” and “how much should a marketing budget be for a startup?”. No doubt that this can be confusing.
The US Small Business Administration recommends a marketing and advertising budget of 7%-8% of Gross Sale. But the agency generally observed that a small business typically spends around 10% of its revenue on marketing and advertising. Meanwhile, it’s recommended that startups spend a little more than 11% on marketing to give marketers enough resources to build brand awareness and start attracting leads.
However, the final percentage you spend may be determined by your audience. For instance, if you’re business is B2B it may cost less to attract your audience because there are niche media and groups that allow you to directly target those customers. If you’re a B2C company wanting to attract a mass audience, then you can expect to spend more, even if the approach is highly targeted and creative.
So, how should you budget as a startup or small enterprise to market your product, service or business as a whole? Here are some things to consider, and, as always, it begins with a good plan.
Define your audience: Who are your customers? Where are they? What is it about your product or service that they will find attractive? How do you reach them? Defining and understanding your audience is the key to your success in marketing and in business. Following on the heels of marketing funnels, this has expanded, in recent years, into the concept of creating a customer journey to define who your audience is and how they will find you, or you will find them, to how they will engage and experience your product or service. Breaking down into customer personas is a helpful way to clearly give life to your ideal customer.
Define Your Marketing Objectives: Start by identifying your marketing objectives. What do you want to achieve with your marketing efforts? What is the end goal of your campaign? Examples of marketing objectives could include increasing brand awareness, media exposure or exposure within an industry, driving website traffic, generating leads, increasing expert positioning or increasing sales. Clearly defining your marketing objectives will help you allocate your budget effectively because you understand both the audience and the objectives.
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Determine Your Total Marketing Budget: Next, determine the total budget you have available for marketing based on some of the percentages noted above. Consider your overall business budget and how much you can realistically allocate to marketing without negatively impacting other essential business operations. The goal is that marketing should provide a return on the marketing investment essentially replacing the budget and helping to grow it for expanded marketing and growth. Finally, measure that budget against what your initial thoughts on marketing might look like and then cut areas as necessary.
Research Marketing Channels: Just because there is a social media channel doesn’t mean you have to be on it. If you stretch yourself too thin, then nothing you do to marketing your business will be successful. It’s widely known that organic search and content marketing can take some time to catch on, so be prepared for this. Moreover, advertising is not a one-hit-and-done tactic. Companies that are successful at generating ROI on advertising understand that it’s a long-term commitment with it taking more than 12 touches with one customer to finally get them to take action. Go into your marketing with realistic, researched expectations to create the best campaign for your business.
Allocate Budget to Different Marketing Channels: Based on your marketing objectives, identify the most effective marketing channels for your business with your audience in mind. Do you have a niche target audience that can drive sales immediately and help generate revenue to be put back in for broader national marketing? These channels may include digital marketing channels such as social media organic and paid advertising, search engine optimization (SEO), pay-per-click (PPC) advertising, email marketing, and content marketing, as well as traditional marketing channels such as print advertising, public relations, direct mail, and events. Allocate your budget to these channels based on their potential effectiveness in reaching your marketing objectives and generate a fast return on investment (ROI).
Research Marketing Costs: Research the costs associated with each marketing channel you've chosen. For digital marketing, consider factors such as ad spend, agency fees, software subscriptions, and content creation costs. For traditional marketing, consider design and printing costs, mailing costs, event expenses and agency fees, and other related expenses. This information is relatively easy to track down online, just don’t let yourself get lost in the weeds. Focus on search queries directly related to a company like yours and save yourself some time, energy and frustration.
Prioritize Your Marketing Channels: If you realize that your marketing budget is too small to achieve everything you want to, prioritize your marketing channels based on their potential impact on your marketing objectives and budget constraints. Some marketing channels may be more cost-effective or have a higher ROI (Return on Investment) for your specific business, while others may require a larger budget. Allocate your budget accordingly, focusing on the channels that are the most likely to yield the best results.
Consider Testing and Experimentation: Every good marketing campaign starts with testing. Every good marketer knows that you have to experiment and test to get the data you need to show you which is the best path to reach your audience. As a small business, you may have limited resources, so consider allocating a portion of your marketing budget to testing and experimentation with the understanding that it will help refine and redefine your campaign for optimal results. Try out new marketing channels or strategies on a smaller scale with a small budget to see if they yield positive results before committing a larger portion of your budget.
Monitor and Adjust Your Budget: Any good marketing campaign starts with testing, monitoring and adjusting as needed. This reduces the odds of waste – money, time and energy on channels and content or ad copy that isn’t working and gives you information on what is working so you can do more of it. Monitoring the performance of your marketing campaigns also allows for adjustments in your budget to optimize for better results. If a particular channel is not delivering the desired results, consider reallocating your budget to other channels that are performing better.
Remember that marketing budgets are not set in stone and may need to be adjusted over time based on your business goals, market conditions, and results. While you may see some immediate results with initial campaign launches, great campaigns require time and can offer a lot of data on your marketing campaign and audience engagement. Regularly review and update your marketing budget to ensure you are getting the best possible return on your marketing investment.