Don’t know how much to spend on marketing? Our Marketing Budget Breakdown can help.
Every time I ask a business owner, “What is your marketing budget?” this is what I hear:
Crickets. Complete and utter silence.
Typically there are two reasons for this sudden and uncomfortable halt in communication: They avoid giving a specific number for fear we may “blow the whole budget” on unnecessary marketing; or they have absolutely no clue where and how to get started.
I hope to help my fellow business owners move past these roadblocks once and for all.
To begin with, marketing is one of the few business activities that can produce a return far in excess of the amount of resources it expends. Despite this, many business owners still try to successfully operate and grow their business without a dedicated marketing budget.
If you know me, then you won’t be surprised when I say that without a focused plan and a dedicated budget, you won’t get your marketing strategy off the ground. You need clear objectives and adequate budget resources in order achieve your business goals.
I’d like to start out by saying that there is no magic solution or one-size-fits-all formula to creating a marketing budget. The trick is to understand that in order to grow your business, you need to invest wisely and determine the best channels for consistently reaching your customers.
I’m not referring to spending your entire marketing budget on an ad in a fancy magazine that your target market doesn’t read, or some other one-off marketing idea. I’m talking about knowing exactly where your customers are, how you can relieve their pain, what your message is and how best to deliver it.
Once you’ve done the baseline work, we can jump into the numbers and figure out how much you should spend each month.
1. Start with sales.
Let’s look at your sales strategy for the year. What is your company known for? Where does most of the revenue come from? Can you pinpoint top-selling services and/or products? Which areas are growing? Based on a detailed analysis of this intel, we will review your gross revenues for the year and come up with projections based on your baseline work.
The most common approach to budgeting is to allocate a percentage of your actual gross revenues to marketing. The million-dollar question is: What percentage? Well, according to the Small Business Administration, a small business with revenues less than $5 million should allocate 7-8 percent of their revenues to marketing. This percentage assumes that you have margins in the range of 10-12 percent. Keep in mind that you’ll also need to factor in the industry you’re in (if it’s very competitive, you may need to increase the percentage), your company’s growth stage and the costs of promoting your business. You can read the full article here:
2. Know your customer.
I can’t stress enough the importance of really knowing your customer. If I could ask each of my clients to literally paint a picture of their ideal customer, I would. It sounds crazy, but the more we know about who we’re talking to, the better. How old are they? Where do they live? How much do they earn? What do they do for fun? Are they white-collar professionals or working middle class families? We can’t do a kick-ass job of marketing to prospects we don’t know and understand. You may have several customer profiles, and if so, we will need to craft specific messages for each and every one.
3. Have a strategy.
This is my favorite step in the budget process. Having a strategy matters so much to your success that it can’t be overstated. At this point you have a sales strategy, clear business goals and objectives, and intimately know your client. Now you can devise a plan for the best path – or strategy – that will lead to those goals. These pathways are the marketing channels we will use to get in front of your clients. Maybe it’s direct mail, email marketing, website optimization using target search terms or in-person presentations at industry trade shows. It might be a combination of these channels that will improve your chances of increasing sales. Let’s focus our efforts on identifying those channels and establishing a process for monitoring and measuring progress along the way.
4. Create your budget.
You have guidelines in terms of determining a percentage based on your sales strategy. You know your customer inside and out. And you have a well-thought out plan as to which marketing tactics you’ll use to connect with your audience. Now, take that budget and allocate specific amounts for each channel.
If you decide to allocate more dollars toward an online strategy because most of your business comes through Google search, you’ll invest heavily in digital marketing techniques such as search engine optimization, content marketing, blogging and social media outreach. If most of your clients come from trade shows, you’ll invest more dollars in standout booth displays, marketing collateral and great giveaways. And of course you’ll have a sign-up email form so you can keep in touch with new leads after each show.
5. Violently execute your plan.
Believe it or not, that was the easy part! Now you need to stick to the plan and consistently market to your audience. In the famous words of General George S. Patton, “A good plan violently executed now is better than a perfect plan executed next week.”
Ready to get to work? I’m here to help you develop your plan, execute the plan – or both. If you can’t tell from reading this, I get charged up just thinking about the opportunities you’ll have with an established budget to fund your awesome marketing plan. Let’s do this – contact me at firstname.lastname@example.org.
Let’s work together to identify your marketing needs and an appropriate budget. I’m looking forward to hearing from you.