Creating a small business marketing budget is no easy feat. Trust us, we’ve been there. Small business owners know that marketing is a crucial tactic of success, but figuring out the right amount to spend and what services to spend it on can be challenging. Where do you even start?
The important thing to remember are the goals and purpose behind why you exist which is usually to provide a net gain, establish new leads, and drive conversions, while increasing brand awareness. The best step to getting started with a budget that makes sense and is sustainable is to first make a plan.
Below, we detail practical and useful ways your small business can get started in the right direction.
Setting SMART goals (Specific, Measurable, Attainable, Realistic, Time-Based) is the best first step to get your marketing plan and budget off the ground. This is largely because it casts vision and provides a roadmap for you and your team so that you don’t get off-track. Determine your budgeting goals by asking yourself the following questions:
After asking these questions, write out some basic, actionable goals that could help contribute to an influx of new leads for the business, such as:
Then, follow the SMART guidelines to enhance them. For example, increase search traffic on our website could be changed to: Increase weekly search traffic on our website by 15 percent (from 10,000 to 11,500 unique visits per month) over the next four months (by November 15) using 10 percent of the overall marketing budget.
Give your budget a sense of direction by taking time to outline at least 2-3 SMART goals related to your purpose. Write them out and discuss them with your internal stakeholders to ensure that everyone agrees with both the purpose and the relevancy of the goals. For more on setting SMART goals, see how to establish a marketing strategy in one week.
Before creating a marketing budget, a small business owner needs to know which channels are right to use to reach the right audience. This means you need to understand your buyers — really understand them. It’s not enough to assume how they’ll interact with your product or service. It makes the world of a difference to sit down with examples of ideal clients and talk with them about life.
Some questions that you should be asking before meeting with your audience include:
We here at Keyhole Marketing walk through a process of how to create a buyer persona that we highly recommend to get your started! Once you understand your potential customers, you can figure out how to best guide them through the sales funnel.
After outlining your buyer personas, you’ll want to create a basic outline for how they’ll move through the sales funnel. A sales funnel is a series of steps your buyer has to take in order to purchase your product or service.
Outlining your sales funnel will help you understand:
If you’re an already functioning business, map out each sales funnel that buyers have the possibility of entering through to make a purchase (ideally it should look different for each persona — maybe even more).
Take notice of which sales tactics are working and which ones aren’t. How much do you currently spend on these tactics? Are there sales funnels that get 0 traction at all? Are you wasting spend on a process that doesn’t get touched? Ask yourself these questions as you assess your sales funnels and build out new ones to suit your audience.
Many small businesses allocate a percentage of their revenues to marketing (5-7 percent is a good benchmark). In total though, the correct allocation depends on several factors, including your industry, business capacity, amount of growth you can handle, and speed of impact.
For example, during the early building years, retail businesses often spend up to 20 percent of revenue on marketing in order to establish themselves in the marketplace.
Keep in mind, the 5–7 percent assumes that your business will have revenue margins of 10–12 percent after expenses, which will include your marketing budget. If your business margins are lower than that, you might need to consider lowering your overall margins and using additional spend for marketing purposes. It’s a tough call early on, but small business owners should never base marketing budget on what’s left over.
It’s highly important your small business have an understanding of current and future marketing trends in order to navigate budgeting.
When setting a marketing budget, marketers should adopt and apply different technologies to their marketing stack to keep up with the pace of industry changes. There are many useful and wise investments to be made in differing marketing technologies and processes that support the sales cycle.
However, it comes with a warning.
Many times companies react to the latest trend without validation and research to back it up. A marketing budget should include traditional market approaches, as well as the emerging marketing ideas. What is your guiding light when it comes to trends? Focus first on your audience, what form of communication they are likely to respond to, and what your message to them should be. Execute and assess from there.
Knowing how much you have to spend on marketing is important, but even more important is knowing exactly how to spend your marketing dollars. You need to have a strategic plan in place.
To get started you need to research what marketing channels will cost. Some marketing resources are available with no cost (e.g., “free” low volume email marketing through a platform like MailChimp), but even free services eventually will need to be upgraded to keep up with a growing demand. You may also look to advertise through digital platforms, like Facebook and Google AdWords. In most cases, these platforms can be tailored for small businesses by adjusting your budget for each campaign. These avenues are nice because you control how much you want to spend and set the limits.
The same thing applies to social media advertising. These platforms allow you to experiment without spending too much money. Start small by promoting a tweet or boosting a Facebook or LinkedIn post to increase your reach without breaking your budget. See how they perform and iterate from there.
Once you’ve researched all of the marketing channels and determined an approximate cost for the year, you’ll need to re-examine your marketing plan as a whole. Can you afford to do everything you would like to do, or do you need to pull back in some areas to maximize your ROI?
Some costs can be fixed and recurring:
Finally, most small business owners need to decide whether to outsource marketing activities, depending on the amount of staff and time you have available. When considering whether or not to outsource, small businesses must decide what they have more of — the time and expertise to handle tasks in-house, or the money to hire someone else? Many small businesses strive to find a balance between the two.
And as always, don’t forget the power or using free content to drive engagement. So many small businesses forget the impact that can be made simply by addressing their target audience’s problems through unboosted social posts, regular blog posts, or downloadable resources. Draw them in where you can, and build their trust over time.
Marketing doesn’t have to cost an arm and a leg. Start small and start with what you can handle.
Times will come where you need to adjust your budget. This can happen if a specific marketing channel does not provide the expected payoff after a few months, necessitating scaling back your use of it. You may also discover the jazz and sparkle of the latest trend didn’t last very long and it’s time to move on to something bigger and better. Alternatively, you may realize a certain method is even more beneficial than expected, so it makes sense to devote more money to it.
It’s natural and understandable to make these kinds of decisions as your budget never has to remain fixed. However, you should avoid drawing conclusions without having the data to back it up. For instance, don’t assume that now is the best time to ramp up your Facebook marketing efforts unless new information or data supports this move.
Steer clear of listening to gut instincts or assumptions. Otherwise, you could get carried away and end up spending too much on an empty promise. Encourage anyone involved in making marketing decisions to take the same data-backed approach.
Maybe you’ve created a budget before, but never with a strategic approach. Whatever your experience, we hope these suggestions will help you start thinking of your marketing plan in manageable chunks. Performing this exercise will help you see the components of your marketing budget as related pieces that support each other.
In closing, remember you do not need a massive budget or a huge team to succeed in marketing your small business. The key is to stay open to opportunities that are best for you and your small business.
Want to talk more in-depth about your strategic marketing plan? We’d love to talk.