Planning Your Marketing Budget for a Small Business
It takes a lot of work to build up a profitable small business. You’ll wear every hat possible as you change and grow, yet some tasks will feel more like guesswork rather than following a step-by-step guide.
Planning your marketing budget is one of those jobs. It can be trial and error that’s both expensive and ineffective at best. Getting your name out there sometimes feels as successful as flinging spaghetti at a wall because you’re never sure what’s going to stick.
With all the resources available today, there’s a better way. Before you start flinging money at marketing tactics to see what sticks, take the time to create a better budget instead.
Why Small Businesses Need a Marketing Budget
To strategically grow your small business, you must create and formalize a marketing budget that helps you account for your spending and hold each dollar accountable for driving sales and profits. This enables you to minimize waste and get better at establishing your return on investment.
It’s all about establishing a plan that’s built for longevity. One that will continue to work through the ups and downs of the economy.
Step One: Look at the Big Picture
You can’t establish direction if you don’t clearly understand where you currently are. This is the time to lay your entire business strategy on the table to learn where you stand.
There are two stages a business can be in: startup or running. A budget for a startup will most likely be higher to get your name and brand out there. Traditional marketing textbooks recommend startups spend around 25 percent of their planned annual income on marketing. This will get lower over time as you gain more exposure and experience.
A marketing budget is simply an estimate to establish your foundation. You carefully monitor your progress as the weeks and months go by, and discover what works and what doesn’t.
Step Two: Outline Your Sales Funnel
Every product and service has a different sales process. It takes less time to convince someone to try a restaurant for dinner than to settle on a car purchase. The larger the item, the longer the sales cycle.
That also helps you determine the size of your sales funnel, and the overall process you’ll use to convert a lead into a sale. Outlining your sales funnel requires you to answer questions like:
- How will clients find me?
- What do they need to know before they complete the purchase?
- What factors contribute to finalizing their decision?
This, too, will be different for startups and fully operational businesses. Start small – the initial goal is to get people through the door. The more you learn about your customer base, the stronger you can make your sales process.
Refinement is everything because it makes your marketing more effortless and allows you to give more personalized service to your prospect and customer base.
Step Three: Outline Your Operational Costs
While your marketing budget is guesswork initially, your operational costs are fixed. These costs exist no matter if you’re bringing in customers or not:
- Web hosting
- Professional fees
- Rent or mortgage for office space
- Sales tax
- Outsourcing costs
Create a spreadsheet and outline all of your fixed costs to give you a number to keep in mind as you build your marketing budget. It’s a clear picture of what it costs you to do business.
Step Four: Set Goals
As your business becomes clearer and you start to see what you need to bring in to survive, it gives you a chance to dream a bit and set goals for your future. Again, questions can help you establish how your business goals will interact with your marketing budget:
- How much revenue is needed?
- How many sales does it take to meet revenue goals?
- How many leads does it take to convert to a sale?
With goals in place, you can start to experiment with the numbers. Make adjustments to see what it takes to bring in more leads, more sales, and more growth.
This can be the fun part. This is where having a firm understanding of where your business is and where it can go can help you plan. Use this information to outline your marketing budget and your overall marketing strategy.
This is a running plan you should check back with throughout the year. It helps you determine:
- How much money to spend to achieve your goals
- What marketing tools make the most sense for growth this year
- A clear understanding of how your customers want to be marketed to
Continue working with it throughout the year, making adjustments as necessary.
Step Five: Evaluate, Test, and Do It Again
Consistency is critical. Too many small businesses treat marketing as cyclical, bumping up marketing dollars when sales aren’t coming in and letting it fall off during busy times. When you think of it as an ongoing business tool, you’ll reap the rewards consistently as you succeed with your plan.
We suggest starting small. Spend small amounts to test new projects. Steer clear of big spend items until you succeed with lower-level tools. With so many inexpensive advertising options, you can experiment with resources, test, evaluate the results, and get good at your strategy before moving forward with more significant spending.
Tracking your results helps you make better decisions. Use marketing analytics to gauge each campaign’s ability to drive ROI. Rely on the data, not on your personal preference. Numbers don’t lie and will always guide you toward what your customers really want.
Then use that to determine your next steps. If it resonates well with your customers, it’s worth putting more money into it.
Closing Thoughts
It’s easy to get overwhelmed by marketing prospects. Every guru online offers a unique piece of advice, yet marketing doesn’t have to be complicated. With today’s resources, it takes a little foresight, planning, and follow-up. It takes a strategy to succeed.
Have you created a marketing budget for your small business? Let the team at Innovision help you figure out how to get the most bang out of your marketing buck!
