It’s no secret that your small business needs to invest in marketing strategies to keep up with the competition, generate leads and raise brand awareness. There are different routes your business can take with a marketing strategy, whether that be social media marketing, email marketing, search-based marketing, billboards, magazine ads or one of many other marketing strategies. But before you start with all these strategies, your business needs to answer an important question: How much should your small business marketing budget be?
Creating a small business budget for marketing is an essential first step to successfully growing your small business. However, you shouldn’t blindly throw money into a marketing campaign and hope it works. Your business needs to have a strategy. A plan will make developing an appropriate marketing budget for your business easier.
So how can you get started creating a budget for marketing that aligns with a good marketing strategy for your business? There are a few elements to consider, but these tips will help you get started:
Research Your Industry
A good rule of thumb for determining what to spend on your small business marketing budget is to look at what others in your industry are doing.
A BDC 2019 survey of Canadian businesses found that “Canadian small business marketing costs average just over $30,000 a year, while those with 20 to 49 employees spend twice that amount. Companies with 50 or more employees tend to have marketing budgets above $100,000.”
It’s important to understand that the BDC survey isn’t saying what your business should spend; this is just an average across Canadian companies. Research what other businesses in your specific industry are spending to gauge what an appropriate marketing budget would be for your small business.
Follow the Percentage of Revenue Rule of Thumb
Another way to scope what your small business marketing budget should be is through the percentage of revenue rule of thumb. A common practice across B2B companies is that you should consider spending 2% to 5% of revenue on marketing. However, for B2C companies, the percentage of revenue spent on marketing is typically between 5% and 10%. And 20-25% may be more reasonable for young companies just starting.
Your business should increase or decrease this percentage depending on your strategy and ROI.
Create a Strategy-Centric Budget
Having a good marketing strategy in place will help you avoid blindly throwing your budget away on marketing efforts that may or may not be effective. These four tips for setting up a marketing strategy can help create a more thoughtful marketing budget.
- Start Small. If this is your first marketing effort, there’s no need to go all out. Stay away from the five-figure television or radio ads before and concentrate on building a manageable marketing strategy that works. Digital marketing is a great place to start. Digital marketing is known for having a high ROI and works as both an excellent long-term and short-term strategy.
- Set goals. What is your objective with your marketing efforts? For example, do you want to generate leads, convert leads, increase total sales, or drive more in-person traffic? Establishing clear goals will allow you to determine how much of your campaign to dedicate to a specific effort. From here, you can measure your goals and see how your strategy performs to determine if you should increase or decrease your money spent on that specific marketing effort.
- Track results. Track. Track. Track. Tracking results is the only way to see if you’re spending the right amount on marketing.
- Adjust Your Budget as Needed. If something is working, and bringing a high ROI, dedicate more of your budget to that specific marketing strategy. Feel free to adjust your budget as you learn more about what’s working or not.
Create a Strong Strategy for Your Budget
The number one driving factor behind your small business marketing budget should be a strategy that works. Need help gauging what you should be spending on marketing based on your business’ marketing goals? Contact one of our digital marketing experts today for a free marketing consultation!