One of the most daunting tasks as a small business owner is properly setting up an accurate and comprehensive marketing budget that will create entrepreneurial success. Unfortunately, establishing a customized marketing and advertising budget that is fine-tuned for the specific needs of your organization isn’t a one-size-fits-all opportunity. Careful thought, planning and goals need to be taken into account. Small businesses with differing goals can have wildly different marketing budgets, even within the exact same industry.
Sadly, many small business owners aim high for quick results and growth but invest very little in how to market, influence consumers and ultimately create effective competition against more well established brands. Let’s face it and you heard it before “you have to spend money to make money.”
Critical Components of a Marketing Budget
There should be two main areas of focus in marketing budgets:
- Brand development or refinement and the different mediums that will be used to market the brand. This could be anything from a logo, brochures, website, vehicle wraps, ads etc.
- Continuous expenses of these marketing promotions to prospects and customer base.
The further along in the development stages your brand is, the less it will cost to encourage brand awareness and building your brand identity. However, even long-established, strong brands need ongoing promotional and advertising attention. Ongoing expenses will vary, but with a little careful planning and homework, each of those costs can be anticipated and accounted for.
A Simple Starting Point
The good news is that setting your small business marketing budget can be fairly simple. First, start with your current annual revenue and if you happen to be a newer business, then your projected revenue for the year will suffice. While larger business can sometimes get away with a smaller percentage, we have put together a fair table based on reliable sources:
Annual Revenue Budget Allocation
below $5 million 7-8%
$5-10 million 6-7%
$10-100 million 5-6%
$100-300 million 3-5%
over $300 million 3-4%
Of course, this is only a starting point. You often need to verify what your competitors who dominate the market are spending and adjust accordingly up or down.
Marketing Mistakes That Can Cost You:
While there are individual situations that can increase or decrease your marketing budget, one of the most common mistakes small business owners make is using profits rather than gross to properly invest. Many reliable resources like www.score.org, www.inc.com and www.entrepreneur.com will tell you its a very bad idea to consider salaries, cost of goods, insurance and other expenses and then use whatever is left over for marketing. Especially if you are a new business trying break into the market or in a very highly competitive industry.
Another common mistake made is cutting marketing budgets when economic times are tough. Many people consider marketing as an expense rather than an investment in the continued success and existence of your business. If you Fail to devote enough of your funds to your marketing it can cut off the blood flow to your business, bleeding it to death. Whatever you ultimately decide for your budget, insure that it’s sustainable and a realistic.
As a Tampa Internet Marketing Company we often get asked for advice on the proper allocation of marketing dollars. While internet marketing like web design, SEO, PPC, Social Media and email campaigns are a good start for your marketing investment, it is not always the only place. A well rounded marketing plan should be implemented using 15-40% (depending on the industry) for internet marketing. Then dividing the remaining portion on other advertising mediums to help effectively build your brand and audience.