We all know that when you first establish your business or have a small business with a limited number of staff, marketing can be easily overlooked. This is a little bit worrying as marketing is one of the highest priority tasks you have as a business. After all, without marketing, how do you gain customers?
Marketing itself can be broken down into many smaller tasks, but it is still challenging knowing where you should start...
- Who am I going to market to?
- Where am I going to market?
- What are my marketing goals?
These are all critical questions to be asking yourself, and when we dig even deeper, they all come back to: What is my marketing budget?
Creating Your Marketing Budget
Now every single business, no matter how small or how large, how new or how well established, must invest in marketing to continue to grow! But how much should you spend on marketing to achieve growth? There is no recommended figure. It all depends on your location, your services, your products, your target market, how large you want to grow... The list goes on!
Marketing is a highly subjective practice. A marketing budget that may work for your business may not work for another - even if it is very similar. So, here is how you "cheat" the approach and gain some reliable results. There are two main steps to think about:
- Creating a marketing strategy
- and calculating an appropriate marketing budget for the year.
Creating a Marketing Strategy
It is essential to develop a marketing strategy before putting together a budget, so you know 1. exactly how much you can spend and 2. how not to waste your budget on things that do not work.
Okay, so you need to consider what your goals are going to be. Do you want more sales? More awareness? To drive traffic to your website? Be as specific as possible with this part. Try to nail your goals down so you can focus on the right strategy!
These are the people you are going to be marketing to. Again, go niche. Don't market to everyone and his/her dog. You'll waste your budget. You are better marketing to a small audience that show a genuine interest in what you have to offer. To do this, you must perform some market research (sorry more work - I know). Call or email your current customer base and find out what they like about your business. Take into consideration their demographics and boom - you have a target market. Always work on this and try new techniques...
How are you going to get your marketing in front of your target market? Do they use social media? Do they prefer printed marketing? Maybe the radio is the best way to go? Nowadays, the most effective manner for a small local business to advertise is online and through local print marketing campaigns. If you know your target audience well enough, you'll quickly understand the best methods to get your business in front of them.
With all things, business-related the key to success is to be able to measure analytics. Now don't just measure everything and anything; focus on what you can use to adjust the two methods above (target audience and distribution method). If something goes wrong, learn from it. In the world of business, there is never a bad thing to do. You should always see a perceivable failure as an opportunity to learn!
Calculating an Appropriate Marketing Budget for the Year
Now you have worked out your strategy; you can now start to calculate the costs involved. Yeah, you may have to spend a bit on this (especially your distribution method), but you are soon going to make it all back and hopefully even more!
Here are my top tips, and these are the same top tips from a lot of the industry...
Using a percentage of your gross revenue: If you are happy to allocate a portion of last year's profit on your marketing, I recommend allocating anywhere from 8% to 15% of your total profit from the previous year or previous quarter. This should be more than enough to allow a steady increase in growth through marketing.
Use your sales projections for your first year in business: You can find benchmark information all over the internet in relation to the average amount your business should be allocated to your marketing budgets. Compare your business with the sector average of other business, similar in size and offerings to yours.
What the Small Business Administration recommends
The Small Business Administration recommends spending 7% to 8% of your gross revenue - I'd recommend higher than this, though! It has been anticipated that this will rise over the coming years, so why not get a head start over your competition?
So, to round it all up
- Create a marketing budget by calculating your goals, target audience, and how you will measure any campaigns' performance.
- Use a percentage of your gross revenue or projections from your first year in business.
- And the quickest tip of all! Use anywhere from 8% to 15% of your gross revenue.
What tips do you have? How much do you currently spend on marketing? Comment below, and let's get a conversation going!