So, you have a product to take to market. Great! The next big step is to take the leap and invest in a marketing strategy. The question that begs to be asked at this stage is how you intend to market 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 how to answer 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 five steps to keep you on the right track.
How to set a marketing budget for your small business
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 spend your money.
The length of your campaign(s).
How much money you'll need to achieve your goals.
It would be best to focus on where you want to market - with sales channels and target market; this will help you paint a clear picture as you plan your budget. In the example section, we'll show you a few ideas of what you can add to the strategy.
2. Base your budget on your revenue expectations
The central part of your budget is knowing where the money comes from and what your spending will produce. Percent of revenue is a method that bases your budget on your actual or projected revenue. Small businesses that follow this strategy 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 do 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 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.
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 of. 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 channels, SEO, website optimization, and PPC campaigns. It would help if you aimed 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 of them. For example, as a newer or smaller business, you may have to spend more money upfront 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 your goals are attainable and 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; 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.
It would help if you kept 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 effectively uses your marketing budget.
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 a cost as a separate line item. Some ordinary 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 can include website hosting, domain renewals, or paid advertisement.
Contracted Marketing Services: Sometimes, you need outside help, and you need to consider 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 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 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 is a typical marketing budget?
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 you have set a target of 200 new leads for social media. Based on prior experiences, you know 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 must evaluate the other marketing activities and change the budget or adjust the target.
Make the most out of your marketing dollars
Now that you have a general idea of your marketing budget let’s focus on fine-tuning your strategy to improve your long-term public spending. As time passes, you’ll continue tweaking your plan 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.
Disclaimer: The content of this post has been prepared for informational purposes only. It is not intended to provide and should not be relied on for tax, legal, or accounting advice. Consult with your tax, legal, and accounting advisor before engaging in any transaction.