Running a small business can be a labor of love. It takes a lot of hard work, but you do it because you’re committed. You have a dream you’re fighting to make a reality.
It’s hard to succeed without that kind of drive, but passion alone isn’t enough. For your business to have a strong chance of making it, your dedication must match with a knack for communication and a keen sense for organization and accounting.
Business marketing is essential for growth. Your ideal customers will never find you if you don’t help them along. It all comes down to communication: You’re trying to find ways to communicate your company’s value and services to the people who need it. That’s why your marketing and website are so crucial for your new small business.
But what should your priorities be? How much money should you be spending on marketing and advertising? This is where the organization and accounting come into play. Marketing and advertising are investments you make to grow your market share, but it’s your goods and services that actually make you money.
What is a Marketing Budget?
Every company needs a business marketing budget. This is money set aside to work on building your brand, communicating, and connecting with customers.
It doesn’t have to be unchangeable and set in stone, but you certainly need to plan. When it comes to your cash flow and business priorities, you can’t afford to play it by ear. Set a budget in advance, and don’t change it or go over without a good reason.
A marketing budget also includes details for how that money will be spent. Not all marketing investments will get you an equal return. A marketing budget should be based on a strategic marketing plan for how the money will be spent on different media purposes.
How Much Should a Small Business Spend on Marketing?
Small business owners are in a challenging position. There is no concrete science behind marketing budgets and business growth, which means there are no easy answers that always work. Every situation is unique, and each business owner will have to decide what is right for them based on their business and their market circumstances.
That said, there are common standards and established practices around efficient spending on marketing. To get the most from your marketing budget, the Small Business Administration recommends making it a set percentage of your actual or projected revenue.
Most businesses spend somewhere between 1 percent and 10 percent of their revenue on marketing. New companies will usually pay more than established businesses, and some industries will always require higher or lower marketing investments.
How to Create a Marketing Budget
To determine the perfect marketing budget for your small business, you’re going to have to consider all these factors and find out what works best for your particular circumstances. Follow these steps to help you gather the information you need and make a plan:
Have a Marketing Strategy
Before you can finalize a budget, you need to develop a marketing strategy for your business. This is your long-term plan for how you’re going to connect to potential customers and prove your brand’s value.
Creating a marketing plan to reach your audience requires knowing everything you can about your target audience. Who are your ideal customers, and what are their interests? What do you have to offer them that sets you apart from your competition?
This takes hard work and market research, but it will help you direct your marketing and shape your marketing content. Once you have all the information possible, you’ll know what marketing tools will work best for your strategy.
You’ll also be able to determine what media might be most effective for reaching your target audience. Digital marketing is going to be a priority for most businesses, but you still have to figure out what platforms your audience is most likely to use.
Measure Your Revenue
You know how you’re going to do the work of marketing, so now you need to figure out how much money you have to do it with. Your first should be to assess your company’s revenue.
If you’re starting, you’ll need to rely on projections for expected revenue. Established businesses can look at their income over the past year. This will help you set reasonable limits around your marketing spending, as you don’t want to start spending beyond your means.
Know Your Operating Costs
As you consider your revenue stream and plan out your marketing spending, you should think about where the rest of the projected revenue needs to go. What are the rest of your operating costs as a business? How much of your revenue will be required to cover those costs?
Remember to factor in wages, rent, inventory, insurance, and anything else you’ll need to be paying later. This is also an excellent way to stay on top of your financial situation and keep your finger on the pulse of your company’s cash flow and long-term health.
Set Marketing Goals
It’s not enough to have a basic marketing strategy and a dollar amount. Don’t let your marketing people spend money aimlessly. You should set clear and measurable marketing goals for your short-term and long-term marketing strategy.
Then it would help if you took the time to stop and assess progress toward those goals. Did your company’s website improve in search engine rankings? Have you seen the increase in customer referrals that you hoped for? Then you can evaluate and rethink your strategy if necessary and set new goals.
If you’ve got enough employees, you should split them into marketing teams to allow different groups to focus on other goals and marketing tools.
Define a Budget
Eventually, you need to create a concrete budget with clear and specific guidance and limits. Be firm when setting the budget, even if you’re second-guessing yourself. You can be flexible later as the situation changes, and different needs arise.
An open-ended or ambiguously worded budget is not a real budget. Your marketing team shouldn’t hesitate to spend every dollar of your marketing budget, but they shouldn’t be casually overspending.
Of course, budgets are estimates. You can’t know precisely how much something will cost until you pay for it. However, conscientious marketing spending can make a limited budget go far further than expected.
Look for the most cost-effective marketing strategies you can find for furthering your brand. Every marketing cost is an investment, and you want to see a good return on that investment. Effective marketing is about doing a lot with a little.
Reaching fewer people overall is unimportant if everyone you reach with your marketing is one of your target customers. Don’t waste money on big campaigns when there’s a more direct way to get to the people that matter most.
You can also save money by using what you have! Focus on taking care of existing customers and try to encourage referrals by word of mouth. If you already have their email address, it costs nothing to reach out. If you can mobilize their social networks to help you build your brand, you’re amplifying your marketing reach for little cost.
Stay Up to Date on Trends
Once you’ve made a decision, try to stick with it, but don’t let it hold you back later. Your market and the media environment are changing all the time, so you need to be ready to adapt and take advantage of new opportunities and marketing ideas. You’re never done with market research.
One common and popular trend right now is marketing through social media platforms. This can be paid advertising on those platforms, or curated content through a regular company presence on social media.
Investing in social media with your small business is an excellent way to build your brand and connect with target customers. Create content that’s meaningful for your audience and make your social media space a place for them to gather.
Always Evaluate and Update
Now you have everything you need to put together your marketing budget and get to work trying to grow your market share. This will take hard work, and it requires all the different pieces of your company to function well and stay in coordination.
It may take some time to calibrate the different parts of your business to work together like this. That’s OK. Not every marketing attempt is successful, and some take longer than you expect to show results.
Success is going to require patience and discernment. For every marketing investment you make, ask yourself how it will help you meet your marketing goals. If your goals aren’t being met, you may have to update and shift gears.
Your marketing budget and strategy give you the foundation and guidance to respond to changing conditions and make your company’s best decisions.