Creating a marketing budget for your small business can involve plenty of guesswork, especially for a first timer. It is easy to know that marketing is essential, but what is not easy is to develop, plan, and assign funding amounts to that plan that are both aggressive enough to be effective yet modest enough to not sink your small business. What is a good marketing budget for a small business?
In the past, putting together a marketing budget for your small business required a lot of guessing. This method of trial and error is both costly and unsuccessful. Instead, opt for a more methodical approach that is applicable to the specifics of your business plan.
Knowing why you need a marketing plan and why you need to spend money in this area is step number one. Marketing helps to grow your business. Product, service, and price are three of the main ways to remain competitive and are good guides for how to develop your marketing plan.
As a startup it is easy to feel like you are hemorrhaging cash and that you want to cut back in as many areas as you can to regain control over your cash flow. While cutbacks and streamlining are not bad ideas, be advised that doing so in certain areas as opposed to others can do more harm than good. The hope of effective marketing is that you will generate leads that turn into clients, who develop an allegiance to your business exclusively.
Different marketing strategies will come with different price tags and shopping around is one way to be respectful of both your budget and your goals. Research different approaches and the costs associated with each, seeing these totals can be a quick way to eliminate costly options that do not make sense for your needs at this time. SEO is an extremely popular way to increase your online marketing efforts in the online arena. Since the majority of consumerism now includes an element of online activity in some way, shape, or form, spending money here makes sense in almost every scenario.
You can review a guide on SEO pricing to help you determine the marketing budget to use on this approach. SEO is layered which gives you as the business owner an element of flexibility. If you are not someone who is knowledgeable how to optimize in this way it is best to contract this element of your marketing plan so that you are not wasting your valuable, and likely limited, time here that could be better used in other areas of developing your business.
If you’re producing less than $5 million in sales per year and your net profit margin – after all expenditures – is in the 10% to 12% range, the US Small Business Administration (SBA) suggests spending 7 to 8% of your gross revenue on marketing and advertising. While according to some marketing professionals, startups and small firms often devote only 2 to 3% of their sales to marketing and advertising. However, depending on how long you’ve been with the company and how competitive your industry is, some marketing gurus recommend a range of 1 to 10% or more.
These figures are clearly all over the board. While some may be self-serving, the SBA’s 7 to 8% of total income appears to be a reasonable standard. What if you’re not yet profitable? Apply the above proportion to your company plan’s expected revenue. What is true is that what works for one may not always work for all. Creating a marketing plan for your business should be based loosely on what strategies are proven to work universally.
Once you have your marketing plan developed, you need to consider where you will execute it to maximize its effectiveness. Are you going to begin a massive digital marketing social media campaign? Start a blog? Create a YouTube channel? Focus on local efforts? Knowing the effectiveness rate of each approach will help you justify the costs associated with them.
Virtual marketing efforts are notorious for being on the lower end of the cost spectrum. Once you have a healthy contact list for your customers and target market think about how email can increase sales from a marketing standpoint, and how to incorporate it into your budget.
Email is a good way to extend benefits and appreciation to your customers as well, which is a good marketing strategy to encourage repeat business. Email is also a great opportunity to promote SEO efforts because you can include ease of access and increase traffic back to your website by including links and clickable images in these emails.
Know What is Included in Marketing
You know what a marketing plan is, but what you may not know are all the pieces that come into play to put your plan into motion. To be able to keep your budget realistic you need to acknowledge each of these pieces and understand their value. Here are some elements to consider:
- Software/tools: Take advantage of any services your existing software can provide towards your marketing efforts before investing in something new.
- Payroll: If you plan to add marketing to an existing employee’s work load you should anticipate the potential for a request for an increase in salary. If you are hiring out new team members or consultants to handle your marketing, consider those costs as well.
- Swag: If your marketing campaign includes tangible goods to promote your brand, those will add to the cost. Things like t-shirts, and drink koozies are popular examples.
On a day-to-day basis, marketing budget refers to all expenditures for marketing, advertising, public relations, promotions, and everything else that falls under the broad umbrella of ‘marketing,’ such as Google AdWords, social media, print advertisements, sponsorships, collateral, and events. When the results of your sales and marketing cycle are reviewed, it is hard to ignore the fact that good marketing is worth your initial investment.