For any small business owner, it’s important to have a strong plan. Of course, being able to adapt on the fly is also important, but no business will be able to succeed without planning ahead, and that includes budgeting. Small business budgets can be tricky, since there may be a small number of employees working in multiple different departments.
Of course, every business is different. Depending on your company’s audience, products, or other specifics, your marketing budget might be vastly different than that of another small business, even in the same industry.
For example, if your company’s main customer demographic is elderly consumers, then spending a high amount of social media campaigns would be a waste. It might be better to focus on email marketing or even direct mail campaigns. But that doesn’t mean you’ll want to ignore social media entirely. As you’ll see in this article, marketing is a complex operation that involves many moving parts all working together.
The best and most effective marketing strategists take a holistic approach to marketing. It’s not a one-size-fits-all proposition, and it isn’t always as simple as identifying your demographics and targeting them exclusively. Depending on the size of a company, the industry in which that company operates, the upcoming goals and objectives for the business, and other considerations, marketing budgets can vary widely from business to business.
Even with the myriad factors to consider, it’s still essential to draft a solid budget for your small business marketing. Having a plan will help ensure you are spending your company’s funds efficiently and effectively.
Here are a few things to keep in mind that will help you chart a course for your small business budget:
Consider Your Overhead
One of the most important things you’ll need to keep in mind when forming a small business budget is how much your business costs to operate. There are a number of different costs you’ll need to consider.
- If your business sells a physical product, how much does it cost to make a single unit of each product?
- How much does it cost for you to ship the product to customers?
- How much is the rent at your company’s office space, and what are the costs to keep the building operational?
- What are your overall payroll expenses, including employee benefits?
These are just a few of the various costs that come with running a business, but you’ll need to keep track of them to form an accurate budget. And while you calculate your overhead costs, you may even find potential avenues to save money or reduce spending.
Of course, the cost doesn’t just refer to actual money spent. It can also be thought of as the general use of resources. When thinking about your company’s marketing initiatives, it’s important to focus on all the necessary resources that it will require. Does your workforce or staff have the capacity to perform the marketing work you need to be done? Would it be better to outsource this work to a third-party agency? Can your business afford such an agency? It’s also important to consider the opportunity cost of not performing any given marketing initiative. Weighing the pros and cons, the costs and potential benefits is important for any budget, and marketing is no different.
Use Your Available Data
In today’s business world, there is a treasure trove of data at your fingertips. It’s easier than ever to keep track of:
- Conversion rate
- Cost per acquisition
- Click rates
- And many more metrics
These are important data points to consider when you build out your marketing budget. You may discover that some areas of your marketing efforts are already more effective than others. For example, if your business is generating a fair amount of leads but you aren’t seeing the desired amount of conversions, then you know you need to focus your attention on turning those leads into revenue.
Conversely, if you have a high conversion rate but you’re struggling to get leads, then lead generation is an area where your money would be well spent. It’s also important to understand the math behind each sale or acquisition. What is the average value or revenue generated per lead, and what is the average cost of those leads? Knowing the data behind your sales funnel is crucial to knowing where to spend your marketing budget.
Before you can determine where you want to focus your marketing efforts, it’s a good idea to consider your company’s overall goals and objectives. Are you looking to increase revenue? Or are you hoping to grow your brand’s exposure? Understanding the tangible goals for your business is essential to making an effective budget.
If your goals are more related to generating active users, as opposed to revenue, then your marketing budget may be best focused on outreach campaigns that entice your potential audience with free content or inexpensive services. Or maybe your business is in an earlier stage of development, and you want to use marketing resources to discover who your potential audience even is. Of course, if you already know your target demographic, then you can more accurately focus your attention on those consumers with your marketing. One potential pitfall to be aware of, however, is spending too much trying to target a limited set of consumers.
Know Where Your Company Is Currently
Is your company at a stage where rapid growth and revenue is the most important metric? Or are you in more of a planning stage, where you’re looking for slow and steady revenue growth instead of dramatic spikes? Identifying what stage your company is in will help you better focus your marketing budget, so you don’t allocate resources to an area that ultimately won’t help your current situation. For example, if you’re in a growth stage, it might be wise to consider allocating a good portion of your marketing budget towards internal developments, like website improvement. But if you’re in a steadier phase, it might be worth investing in some branding efforts that are more long-term and could pay dividends over time.
Depending on what stage your company is in, the most effective marketing may be focused on one of three different forms of media – owned media, paid media, and earned media. Owned media refers to properties that your business can control itself. This includes the company website, email newsletters, blogs run by the company, and social media channels. For tighter marketing budgets, improving owned media can be a relatively cost-effective place to start.
The only cost might be man-hours, assuming a business has the in-house team to execute owned media improvements. Otherwise, if a business seeks to use a third-party agency for these tasks then it will require capital to fund the initiatives. But for a business just starting out, or looking for inexpensive ways to ramp up their marketing, owned media could be a good place to start.
Paid media, by contrast, could be an avenue to pursue a company that is in a rapid growth phase. For businesses concerned with generating top-line revenue as fast as possible, paid media could offer some advantageous opportunities. Paid media refers to things like:
- Pay-per-click campaigns
- Paid social media ads
- Retargeting efforts
- Display ads
- Paid influencers
This type of marketing can be a huge boon to businesses who are looking for rapid growth. Plus, they offer easy short-term tracking. If you aren’t seeing the returns you’re looking for on paid media, it’s easier to assess and scale back these efforts. As opposed to earned media, which is a longer-term game for which the rewards may not be so obvious.
Earned media refers to organic actions like shares, reposts, mentions, etc. These types of marketing milestones may be harder to come by, and they generally take longer to generate, unless something gets lucky and goes viral. Aiming for earned media might be a good strategy for a business that isn’t looking for win-now revenue boosts, but it might be a wasteful cost if your business is looking for rapid growth.
Keep an Eye on Industry Trends
It’s important when you sit down to create a marketing budget that you try to plan for and anticipate marketing trends in your industry. For example, social media marketing is a much different arena now than it was even a few years ago. There are many industries in which social media marketing is the primary focus, but this may not apply to your specific business.
Depending on your customers, email marketing may be the best way to spend your marketing budget. Or
For certain industries, radio continues to be a very viable place for effective advertising. You should leave no stone unturned when considering how to plan your marketing budget. The last thing you want is to realize that you could or should have spent some time or resources on an avenue that you neglected to pursue.
Perhaps the most important thing to keep in mind as you begin planning your company’s next marketing budget is that marketing should be viewed as a holistic process as well as an investment. Too often, businesses view marketing as simply a cost, and they look for ways to cut corners or keep things less expensive. The better way to think of marketing is as a long-term investment that is necessary but can pay big dividends down the line. And again, it’s not as simple as picking one single avenue and dumping a bunch of time or resources into it.
Email marketing might be one of the most effective tools for your business, for example, but that doesn’t mean that social media should be completely abandoned in favor of email. For successful businesses, their marketing efforts all work together to strengthen the brand, generate leads, and drive revenue. It’s not as easy as flipping a switch and watching the clicks, likes, and purchases come rolling in. That’s why having a detailed roadmap in the form of a marketing budget is a must-have for small businesses at any stage.
Luke Loftin is a blog writer and an award-winning indie filmmaker. When he isn’t writing about himself, he specializes in finance and health, blogging about all sorts of topics including credit cards, personal loans, bank accounts, and the digestive system. He currently writes for LeadsMarket among other sites, and his articles are scattered all across the information superhighway.