Most people have an idea of how to set up a household budget. First, they determine how much money they make each month. Then, they analyze whether they’ve spent more or less than that amount in recent months.
To help turn a profit, they then figure out how to allocate their monthly income. This standard process also applies to creating a marketing budget.
The trouble for many companies comes when deciding where to allocate their funds. This problem especially impacts a company’s marketing budget.
The old saying remains true: “you have to spend money to make money.” However, how much money do you have to spend to get the revenue you need?
Whether you’ve had a business for a few years now or you’re just starting, this question is crucial. Fortunately, we’re here to help you find the answers. Check out our guide below to craft your best marketing budget for small businesses.
Defining Marketing Budget
Before we get too deep into the weeds, let’s clear up what we mean by “marketing budget.” Your marketing budget relates to any cost used for marketing, advertisement, publicity, and similar work.
Essentially, your marketing budget includes the money you spend on getting people to notice your brand. These may range from your social media team to print ads you publish.
If you have a large business, you probably have more resources devoted to marketing. However, a smaller business may only have social media accounts and printed advertisements for a specific region.
However, as a general rule, businesses can get by with roughly 5% of their gross revenue going to marketing and advertising. In some circumstances, companies may need a little more.
For example, the Business Development Centre recommends spending 5%-10% of your gross revenue on marketing. However, this recommendation only applies if you make less than $5 million/year in sales and your net profit margin reaches 10%.
What Should Be in Your Marketing Budget? Building a Foundation
To get a more precise idea of how much money you should allocate to your marketing budget, you first need to build a marketing foundation. This foundation includes the day-to-day marketing activities and concerns of your business.
Generally, your marketing foundation includes the following:
- Marketing strategy
- Website design and development
- Similar concerns
If you lack a robust marketing foundation, your marketing activities won’t amount to much. If you’re just starting, you’ll need to spend more to establish each of these factors in your foundation.
However, if you already have a solid foundation, you won’t have to spend much money on maintenance. Instead, you can focus on using these resources to reach customers.
For example, instead of spending money to establish a website, you can focus on getting customers to your website with your marketing strategy. In this way, you’ll spend less on your marketing.
As you look at the four features above, you may wonder which is the most important. Many experts would probably agree that the most important part of your marketing foundation is your website.
Your website is both a way to market your services and a place to sell your products. For this reason, a well-designed and up-to-date website is essential. Make sure you prepare to spend money on website updates and maintenance every three years or so.
Set Clear and Measurable Goals
Once you build a durable marketing foundation, the next step is to set clear goals for your marketing that you can measure. Remember, the key to making these goals is specificity.
What do you want your marketing to achieve? Do you want more people to visit your website each month? Each quarter?
If so, how many more people? Do you simply want them to give the website traffic, or do you want people to make a purchase on the website?
Setting goals like these allow you to plan a course of action. From there, you can determine how much money these steps will cost. This knowledge lets you decide on a budget that will allow you to afford these measures.
As you set your goals, keep your customers’ needs in mind. Your marketing efforts should demonstrate how your product or service can meet their needs.
Monitor Your Costs and Adjust Them Regularly
When you work through your marketing budget, you’ll begin to see what you can afford. Likewise, you’ll see what items stretch your budget.
With this knowledge, you can decide what to invest more money in according to your priorities. To help you decide what to prioritize, keep a close eye on your web analytics.
From there, assess your marketing budget each quarter and at the end of the year. As you examine your finances, determine how your projections align with your business’ actual spending.
If your spending isn’t meeting your goals, you can adjust your spending to bring the two into greater alignment. If you find this isn’t working, it may be time to change your goals.
If this process feels frustrating at first, don’t worry about it too much. Over time, you’ll learn to generate more accurate budgets based on your past experiences and goals.
Enlist Help in Building Your Marketing Budget
Following these steps can help you decide how much to spend on marketing. Over time, you can develop the expertise to build an accurate and affordable budget for your marketing.
However, gaining this expertise can take lots of trial and error. If you find yourself struggling to make your budget, consider working with outside experts!
We offer top-notch SEO advice to help your business thrive. Show us your marketing budget, and we’ll show you how to make the most of it through SEO services. To get started, contact us today!