You know your small business needs a marketing budget but you’re overwhelmed by the idea of creating one. Follow our seven-step plan to smarter spending and watch your business grow!
What counts as marketing?
There is a textbook definition of marketing. However, when we say marketing budget, we’re including everything under its umbrella: advertising, public relations, branding, digital marketing, and the salaries that support those areas.
1. Accept that you’re spending money
“Often, small businesses estimate their sales revenue, cost-of-goods, overhead and salaries, and then gross profit. Anything left is considered available funds for marketing support. That’s not such a good idea.”
This quote from SCORE sums up the leftovers attitude toward marketing budgets that often occurs in small businesses. Some business owners don’t believe marketing is essential to their growth. More often, they have no idea how much they should spend on marketing, so they just spend “what they can” without much strategy.
So, how much should I spend on marketing?
Answers to this question vary. We found recommendations ranging from 3% to 20% of revenue. The percentage varies by industry, too. The consensus, however, is that an established small business should spend 7-8% of its revenue on marketing.
If you’re a young business or startup, you may need to spend more. “If you are the new competitor in the marketplace, you will have to spend more aggressively to establish your market share objective,” SCORE says. You’ll also need a larger marketing budget if you’re rebranding, launching a new product/service/location, or pursuing aggressive growth.
2. Be SMART about goals
Marketing is a tool not an end in itself. Thus, one of the first steps to creating a solid marketing budget is thinking about what you want to accomplish. In the marketing world, goals usually involve brand awareness and sales. Do you want more customers to walk through the door? Do you want them to spend more each visit? Or do you need to increase your social media presence and web traffic?
Be SMART about your goals. Make them Specific, Measureable, Achievable yet Rigorous, and Time-bound.
Sample SMART goals for marketing:
We’ll increase unique visitors to our website by 50% from 2017 to 2018.
We’ll improve our conversion rate by 2% each quarter in 2018.
We’ll gain 50 new Facebook followers per month in 2018.
3. Fix the foundation first
Clever advertisements, catchy jingles, and flashy signs can be fun. But if your small business is built on an unstable foundation, you won’t see the return-on-investment (ROI) you need. If these essential elements aren’t in place for your small business, prioritize them in your marketing budget.
Marketing foundations checklist:
Do you have a clear, relevant brand?
Is your message and style consistent across all channels?
Is your website up-to-date and professional?
Do you have tools in place to measure your marketing success?
Do you have a strategy for converting leads?
4. Look back to move forward
Before you take off on this year’s campaigns, stop and assess the old ones. What tactics weren’t successful or cost more than they should have? What opportunities were underfunded? What continues to be successful? If you had a marketing budget the previous year, did it sufficiently cover all your needs?
It may be helpful to complete a SWOT analysis with your marketing team or key employees, particularly if you didn’t have good metrics in place. This evaluation should inform your new marketing budget.
5. Do your research
Now that you’ve decided how much to spend, set goals, checked for foundation issues, and assessed past efforts, you can finally think about how you’re going to spend your money. Look at how your competitors are spending their marketing budgets. Are there certain channels where your industry invests heavily? If so, make sure that’s really the best way to target your audience before you follow the crowd.
Walk through the channels that are most relevant to your audience. Consider branding, content marketing, website, digital media, and traditional channels like radio, TV, and print. For each one, research how much it would cost to utilize the channel well. Your available funds may disqualify certain tactics and that’s okay. Rank each channel as high, medium, or low priority.
6. Divvy up the dough
Based on your research, allocate your budget starting with the areas of highest impact. Don’t spread yourself too thin. There are countless good ways to market a small business. Not only can’t you afford to try them all at once, you probably can’t maintain and evaluate them all. This is where marketing budget and marketing strategy intersect. Think about how you’re going to attack each channel as you go.
The bulk of your marketing budget should go to the tried-and-true methods that have a proven success record for your small business. You should also invest in something new each year. Try the 70/20/10 rule. Allot 70% of your marketing budget to channels and tactics that are already effective, 20% to something experimental, and 10% to something totally crazy.
7. Evaluate along the way
Think about what success will look like for each channel or tactic you include in your marketing budget. Refer back to your SMART goals and create milestones that can help you track success along the way. Figure out what needs to be measured for you to be able to calculate your marketing ROI. If you didn’t have good metrics in place for the previous year, think about what you need to do now to get an accurate before-and-after.
Typically this is the step people skip. However, marketing departments are focusing more on ROI accountability than ever before, spending an average of 9.2% of their marketing budgets on analytics. This is now the number one area of spending within marketing budgets. So, make sure you know how you’ll evaluate this year’s efforts before you start.
Granted, some things are easier to measure than others. Goals related to digital marketing and its world of trackable clicks, views, and page ranks, are easy to evaluate. Brand awareness is harder to nail down and may require some creativity to establish a baseline. You may have to look at correlations, e.g. our sales increased 17% in the year following our rebrand. Be realistic about the amount time different tactics will take to garner results.
Do I have to?
It may be tough to believe you need to spend 7-8% of your top line on marketing-related activities. Keep in mind, that a steady strategic marketing budget will not only help your small business grow but also survive economic downturns. Finally, get the most out of your marketing budget by hiring the best professionals.
How can we help you develop a marketing budget for your small business? Let us know in the comments.