In this article, we will explain everything small businesses need to know about budgeting for marketing, including how to set your goals, plan your strategy, track your results, and optimize your spending.
Small businesses are poised to lead the economic bounce back. In a single year, more than 500,000 new small businesses have opened across the United States. While this wave of new businesses is promising however, it’s also important to remember that roughly 20% of small businesses in the U.S. fail within their first year.
For businesses seeking to avoid this fate, marketing is a powerful tool that can improve revenue, brand reputation, and customer loyalty. But for your marketing initiatives to be successful, it's important to be purposeful during the budgeting phase. This way, you ensure that your money is well spent and you start off on the right foot.
To get you started, here are some things to consider when budgeting for marketing:
Reframe how you look at marketing budgets
As a general rule of thumb, small businesses should make budget allocations of between 2% to 11% of revenue for marketing. Depending on their industry, brand recall, and customer engagement, a business can choose to spend on the lower or higher side.
Regardless, for many, this money is perceived as just an added cost that leads them to cut corners. While this mindset may understandably stem from frugality, it dampens your marketing efforts. Research conducted with founders and CEOs reveals that in order for you to accurately budget, plan, and execute your marketing strategy, you have to look at it from an investment point of view. With this approach, you can better calculate how much money to put in and what your ROI should be for every dollar invested. Remember, while this investment may seem like a lot, when it’s used correctly, it can drastically improve your overall earnings.
Learn about marketer qualifications
Unless you’ve already got a trusted in-house marketer, you’ll need to consider budgeting for the services of one. Hiring a marketer affords you expert advice and strategic input that will reduce your risk. That said, you want to be careful with who you’re hiring; it’s not unheard of for “marketers” to pad their prices or try to sugarcoat their experience. Thus, it’s important for you to know which marketer qualifications and specialties you may actually need.
For reference, top-tier marketers may have graduated from programs in communications that dive into strategic theory or hands-on marketing communication development. This means that they should be able to lead your campaign execution, design dynamic strategies, and create in-demand collaterals like web designs, online content, and more. Nobody expects small business owners themselves to be pros at marketing nuance, but by familiarizing yourself with what qualifies someone as a marketing expert, you can make better budget estimations for this hire (or consultation). This way, you can also determine what caliber of marketer you can afford and what outcomes you ought to expect.
Don’t write off traditional marketing efforts
Once you’ve got your budget and your marketing lead, you’ll want to plan your execution. In today’s digital era, this often means online efforts, such as social media marketing and digital content creation. However, it’s important that you also consider traditional efforts like direct mail marketing. Contrary to what others may say, these mediums are far from obsolete. Rather, they can make for highly effective ways to reach less “tech-savvy” consumers and complement your online initiatives.
To illustrate, direct mail marketing can make it easier for your target audience to receive custom messages right where they live. This eliminates the need for them to go online, make inquiries, or scroll through mounds of content. To optimize your “old-school" marketing efforts, make sure they’re as engaging and exciting as anything you’d do online. This effort might include adding a call-to-action, creating compelling copy, providing coupons, and making contact information clear.
As a bonus, traditional marketing efforts are sometimes less costly, and will thus leave you with more of your budget remaining.
Review past marketing results
Much like how a farmer has to review the quality of their crops after planting, so should you track what your past marketing efforts have yielded before setting a new budget. By doing so, you can see how each of your actions has performed against your goals. Bear in mind that 14% of small businesses fail because of poor marketing, and that regularly checking in on your strategies and subsequent outcomes will help you to pivot budgets and approaches accordingly to avoid that fate. This will help you make more cost-efficient budget decisions. Pretty soon, you’ll be able to pinpoint which marketing efforts you should avoid and which ones you can bank on.
While many may think that successful marketing is simply dependent on the budget you can afford, it's typically more complex than that. In reality, effective marketing efforts are those that make sure to optimize every penny spent, even if the final budget is more modest. With this approach, small businesses can create a strong brand identity that attracts customers sustainably and reliably.