Steps to create a marketing budget for a small business

16
June 2022

So, you have a product to take to market. Great! The next big step is to actually take the leap and invest in a marketing strategy. The question that begs to be asked at this stage is how you intend on marketing that product? What channels do you intend on using? How long will your marketing campaigns run? How much money will you spend? Can your business afford it?

There are many factors to consider when planning out your marketing budget. Without a marketing plan, we have no idea on how to answer any of these questions. And approaching your marketing from the wrong angle will only cost you time and money. To help you craft a marketing budget for your small business, here are 5 steps to keep you on the right track.

5 Steps to create your marketing budget

1. Create your marketing strategy

Before you even start thinking about a marketing budget, you need a strategy. Sitting down and creating a marketing strategy allows you to understand:

  • Where you will spent your money.

  • The length of your campaign(s).

  • How much money you’ll need to achieve your goals.

You should focus on where you want to market - with sales channels and target market. This will help you to paint a clear picture as you plan out your budget. In the example section, we’ll show you a few ideas of what you can add into the strategy.

2. Base your budget on your revenue expectations

Of course the main part of your budget is knowing where the money is coming from and what your spending will produce. Percent of revenue is a method that base your budgets on either your actual or projected revenue. For small businesses that follow this strategy, they typically allocate 3 – 5% of their revenue to their marketing budget, but this can vary according to the following factors:

  • Your business’ capacity.

  • The length of your campaign.

  • What industry you work in.

  • The amount of growth your business can handle.

The early stages of your business are vital for its growth. Below you'll find some rules of thumb when creating a marketing budget:

  • New businesses should allocate 12-20% of revenue.

  • Companies that are older than five years should allocate 6-12% of revenue.

  • B2B companies should allocate 7-8% of revenue.

  • B2C companies should allocate 9% of revenue.

This can work as long as these margins cover the rest of their regular expenses.

A woman working on her small business marketing budget

3. Choose your distribution channels

Once you have your strategy, the next step is determining where you are putting that strategy. There are two categories of distribution channels you need to be aware. These are inbound and outbound marketing.

Outbound marketing means you are putting yourself in front of your customer. These channels are usually live events, billboards, flyers, posters, and TV commercials. Inbound marketing involves bringing customers to you. Inbound marketing includes content marketing channels, SEO, optimizing your website, and PPC campaigns. You should aim at combining your budget on both inbound and outbound marketing channels.

4. Set goals for your campaigns

Once you have the channels, the ideas and the budget thought out, you can dictate the goals that go in hand with all them. For example, as a newer or smaller business, you may have to spend more money up front to gain momentum in the market. But later down the line, you will need to reconsider your approach so you keep reinventing yourself.

Always remember, to make sure that your goals are attainable, and to make them as specific as they can be.

5. Test, test, test and…oh yeah, test!

Marketing strategies take time. You’re not going to be a marketing wizard the first time around, you’re going to make a few mistakes. For instance, you might target the wrong audience or focus on the wrong channel for your product, but that’s ok because it is part of the process. Great marketing campaigns are often born from repeated failure.

You should always keep testing and modifying your strategies until you lock down one that works well for your business. Yes, this will cost you money, but the effort will be worth it when you start reaping the fruits of your labor.

Eventually, you’ll develop a great strategy that achieves your goals and puts your marketing budget to effective use.

What should be included in your marketing budget?

After you follow all the steps above, it is time to go back through each tactic you’ve thought of and break out each part that will incur cost as a separate line item. Some common expenses to include in your marketing budget are the following:

  • Marketing Software: From specific tracking, CRM, editing or design software, you may want to include this in your budget, especially since these can make or break your success tracking.

  • Online Expenses: These can include website hosting, domain renewals or paid advertisement.

  • Contracted Marketing Services: Sometimes you need outside help, and you need to take into account the costs for graphic design, web development, copywriting, and more.

  • Printing: Always budget for initial and reprints to keep your inventory stocked

  • Salaries: This can sometimes be forgotten to include here, but you should include your marketing coordinator or marketing staff salaries.

  • Content Creation: If you have ongoing photography, video, blog or social media needs for your campaigns, make sure to include that service.

  • Gifts: Client referral gifts are quite popular, and can be considered part of your marketing budget, especially in a B2B sales driven organization.

  • Events: You can include any new endeavors for marketing campaigns such as conferences, trade shows, or in-store events.

What are examples of marketing expenses?

Let’s try an example. Let’s assume your business has a marketing budget of $10,000. The budget allocation could look as follow:

  • $7,000 towards software that helps with PPC, paid search campaigns, social media marketing and SEO.

  • $2,000 towards marketing freelancers for photography, video and copywriting.

  • $1,000 towards testing different sponsored content online.

Next up, let’s say for social media, you have set a target of 200 new leads. Based on prior experiences, you know that your average cost per lead on social media is 50.

Goal (200 leads) x cost ($50/lead) = Estimated spend ($10,000)

You must now allocate the appropriate amount of the budget to reach your goals. But, if the cost to achieve your goals exceeds your budget, you have to evaluate the other marketing activities and change the budget or adjust the goal target.

Make the most out of your marketing dollars

Now that you have a general idea of what your marketing budget will be, let’s focus on fine-tuning your strategy to improve your general long-term spending. As time goes on, you’ll continue to tweak your strategy until you hit a home run. Let One Park Financial help you get your marketing campaigns off the ground. We can help owners of small and mid-sized businesses to access funds fast. Apply today and get pre-qualified! Allow yourself to focus on expanding your business through your super charged marketing budget.