You know you need to market your small business but the question is how to set your marketing budget. Here’s our guide.
How to Decide a Budget for Your Small Business Marketing
Setting the right budget for your marketing is an essential piece of your business strategy so getting it right is important. Here are the steps for deciding your marketing budget.
- Consider Your Big Picture - No matter what stage your business is at, a marketing budget is a key piece of your strategy. Knowing what stage your small business is in can help you make important decisions about your marketing budget. There are two basic categories your business can fall into, start-up or running. Whether you are either a start-up or an expert will factor into how much you’ll need for the marketing budget for your small business. Generally speaking, you should plan to spend more on marketing when you’re in the start-up phase than once you’re up and running.
- Outline Your Funnel - Prioritize your spending and focus on what would make you more competitive now, not later. Your sales funnel is the series of steps prospective customers need to take in order to purchase your product or service. By outlining your sales funnel, you’ll be able to understand:
- How your clients find you
- What they need to know before they decide to buy
- The major factors that determine their final decision (and your marketing plan)
If you’re up and running:
- Map out each possible sales funnel that current clients take to purchase from you.
- Notice which sales and marketing tactics are working.
- How much do you currently spend on these tactics?
- Where can you trim the fat?
- List Your Costs - No matter whether it’s social proof or free resources, knowing what your customer needs during their journey is what will determine your marketing budget. This step in the process of setting your marketing budget is fairly straightforward. It’s just a matter of creating a spreadsheet or template with all your current or anticipated operational costs. The costs that you’ll want to account for may include items such as web hosting, sales tax, professional fees, content outsourcing fees, and whatever other expenses you’ll need to cover to run your business. Once calculated, these business expenses create a guide for what you have to work with, in terms of your marketing budget.
- Set Your Goals - To effectively create and live by a marketing budget for your small business, you need to know how much money is going out and how much is coming in. Once you know what stage your business is in, your sales funnels, and the cost of running your business, it’s time to set goals. To figure out how your marketing budget and goals work together, you’ll need to know:
- How much revenue you need
- How many sales you need to meet your revenue goal
- How many leads you need to convert the right number of sales
- What percentage of your leads typically convert. (If you’re just starting out, research typical sales conversion rates in your market to set a realistic target.)
Setting goals is important but it’s not enough. You’ll also need to track your progress in order to know if you’re successful or not.
- Research Your Competition - One of the most important things you’ll need to do when setting a marketing budget for your small business is to understand your market. This means tracking your closest competitors and studying their marketing techniques.
- Who are the leaders in your industry?
- What marketing methods do they use?
- What do they have in common?
- Do they do more traditional marketing or digital?
- Are they everywhere or only in a few places?
- Create Your Plan - Start with what your competition is doing well and see how you can use that for your business. Now you know what you want to do and it’s easy to figure out how much it will cost to use these marketing methods for your own business. At this point, you have a good understanding of where your business is and where you want it to go. Use the information you have to outline:
- How much money you’ll need to spend to reach your goals
- The marketing tools you’ll need
- How your customers want to be marketed to
Once you have the plan, deciding on a marketing budget for your small business will be easy.
If you want to know more about small business marketing, read our article, “What Is Digital Marketing?”, or contact us.
Tags: marketing, budget