Starting and growing a business presents many strategic planning challenges, not least of which is knowing how much to spend on marketing.
Many businesses assume the traditional premise that your marketing budget should be a percentage of actual or projected gross revenues – usually between 2-3 % for run-rate marketing and up to 3-5% for start-up marketing.
But, determining your marketing budget has a lot more to do with what you are trying to achieve as a small business than what your revenue numbers tell you.
Whether you are starting a business or planning for the year ahead, knowing how much you have to spend on marketing is critical; even more critical is how you spend it.
This means having a plan.
What can a Marketing Plan do for your Small Business?
A marketing plan includes everything from understanding your target market and your competitive position in that market, to how you intend to reach that market (your tactics) and differentiate yourself from your competition in order to make a sale!
Your small business marketing budget should be a component of your marketing plan. Essentially, it will outline the costs of how you are going to achieve your marketing goals within a certain timeframe.
If you don’t have the funds to hire a marketing firm or even staff a position in-house, there are resources available that guide you through the process of writing a marketing plan and developing a market budget. This Small Business Marketing Guide from Business.gov, for example, includes marketing planning tips as well as sample marketing plan templates to get you started.
Another invaluable resource for small businesses is Duct Tape Marketing – an integrated Web site that includes articles, blogs, Webinars, newsletters, and more to help small business owners develop simple and effective marketing strategies.
Bend your Budget When you Need To and Keep an Eye on ROI
Once you have developed your marketing budget, keep in mind that it needn’t be fixed and inflexible.
There may be times when you need to throw in another unplanned marketing tactic – for example, an event or a newspaper ad – that helps you reach your market more effectively.
At the end of the day, more important than sticking to your budget is knowing whether it is actually helping you achieve your marketing goals and bringing you a return on investment.
That’s why it’s important to include a plan for measuring your spend. Consider what impact certain marketing activities have had on your revenues during a fixed period, such as a business quarter, compared to another time period when you focused your efforts on other tactics. Consider what tactics worked and what didn’t. That’s not to say you should axe the tactics that didn’t work, but try and assess whether you need to give them more time to bear fruit or whether funds are best redirected elsewhere.
Some tactics are hard to measure – such as the efficacy of print collateral (brochures, and so on), but you need to consider the impact of not having these branding staples in your market tool kit before you reign in your graphic design and print funds.
Marketing plans should be maintained on an annual basis, at a minimum. But if you launch a new product or service, take time to revisit your original plan or develop a separate campaign plan that you can add to your main plan as an addendum.
At the end of the day, the time spent developing your marketing plan, is time well spent because it defines how you connect with your customers. And that’s an investment worth making.
- How much should I spend on marketing? – From Drew McLellan’s “Drew’s Marketing Minute” this article includes tips for specific industries.
- The 7 Secrets of a Good Marketing Budget – Seven recommendations against which to benchmark how you carve up your marketing budget from Alain Thys at www.marketingprofs.com.