Launching a business comes with a myriad of tasks to handle. One of the essential tasks that is often overlooked is marketing the business. How will the customers know your business exists if you do not get the word out? Marketing includes many other additional tasks and concerns, such as who will be marketed to, where to market, and the marketing goals. The answer to “what is my marketing budget” addresses all other marketing concerns a business might have. The small business marketing plan largely influences the marketing budget. This shows how critical it is to develop a marketing budget for a small business. Without a well-thought-out budget, you may end up overspending and consume funds meant for other business operations or underspending and deprive the business the much-needed exposure.
Formulating a Marketing Budget for a Small Business
While it is paramount that a small business invests in marketing for sustainable growth, it must be clear from the onset how much should be directed to marketing and what it should be spent on. Determining this is not always easy for new business owners with no prior experience in formulating a business budget. Although there is no correct amount to spend on a budget, there are generally accepted marketing approaches that are of value when time and money are invested. Beginner entrepreneurs can seek help from UpSwell on the appropriate techniques to employ in devising a budgeting plan for their small business.
A marketing plan should precede a marketing budget. You can create effective marketing techniques by examining your sales process and researching your customers. Start by doing data analysis from each step of your sales funnel through website analytics, such as Google Analytics or any other customer relationship management software to determine:
- How many site visitors you have per month?
- The number of leads generated, and
- How many leads converted into sales?
The various marketing methods used should spread awareness of your business, stimulate interest, and incite action. Also, examine the time and money spent on each method and how successful each channel is. That way, you will identify the strategies hindering or spurring the business’ growth. Consider also conducting market research to determine the target audience’s location, age range, average income, and the most preferred brands.
Set Marketing Goals
Besides providing a framework for the marketing strategy, marketing goals also dictate the marketing budget. Consider your revenue history, future sales projections, and the current stage of the business to set proper goals. If the business is relatively new, consider allocating more marketing funds to give traction to the business. For an established business, you may scale back on some marketing strategies. Generally, small businesses with profits under five million dollars should set aside around seven percent of the total revenues to marketing, splitting between advertisements, campaigns, and brand development costs such as websites, blogs, promotional expenses, and sales collateral. You should avoid basing the marketing budget on what’s left after other expenses are covered.
Know Your Financials
Knowing your profit margins and operational costs will help you determine how much money can realistically be committed to marketing. List all your existing business costs, including both fixed and variable costs. Fixed costs include predictable expenditures such as rent, insurance, and payroll, while variable costs describe monthly fluctuating costs such as utilities, equipment maintenance, and supplies. A profit and loss report will give you an accurate account of the business profits. If your business sells products, you need to know the total cost of goods sold and the total cost of making and selling the products. Also, calculate the cost of raw materials and all the associated costs in packaging, shipping, and storage. Generally, the financial commitment to marketing should depend on factors like your goals, industry, competitors, financial status, and the intrinsic ability to handle growth.
Determine Your Distribution Methods
The budget breakdown will depend on the marketing strategy. The distribution methods can either be inbound or outbound marketing. Inbound marketing consists of creating helpful content that your target audience may be interested in. This strategy encourages potential customers to make the first buying decision. Costs incurred with utilizing this strategy are maintaining a website, running a blog, improving SEO, doing infomercials, and conducting a case study that promotes the small business. On the other hand, outbound marketing directs the message or products to potential customers. It uses strategies such as billboards, promotional events, advertising campaigns, and the promotion of printed materials such as postcards. MyCreativeShop has a great step-by-step tutorial on how you can take advantage of the low-cost yet effective marketing strategy of postcards. It runs you through everything from how to fill out a postcard to effectively creating one!
Test and Modify Often
The more you know your customers and experiment with different strategies, the more your marketing plan and budget will evolve. Regularly evaluate the marketing efforts to ensure a wide customer reach cost-effectively. You can conduct a quarterly assessment of what works and what doesn’t, and why. Some of the tools you may use to measure the effectiveness of the marketing efforts are:
- Google Analytics. Track the traffic of your business website, where it is coming from, and measure its effectiveness in bringing business.
- A/B testing tools. A digital tool such as Optimizely will help you A/B test copy, images, etc., to see what works in your marketing campaigns.
- Social media marketing tools. Most social platforms have their integral analytics tools, like Facebook Insights for the business pages. Other tools you can use to track your marketing campaigns are Sprout Social and Hootsuite.
- Email Marketing. Use platforms with in-suite reports like Campaign Monitor and Mail Chimp to send marketing emails to prospective customers and see their performance.
With the findings gathered, consider abolishing marketing strategies that show little to no return on investment (ROI) and dedicate more money to those with positive results.
Ideally, a marketing budget is a portion of your revenue. Creating one does not have to be a daunting task, as should be clear now. Take advantage of the guidelines provided here to scale your business. A proper marketing budget will enable you to spend money wisely as you build a small business.