Creating a Small Business Marketing Budget in 8 Simple Steps
A small business marketing budget is an investment of both time and money that, when done correctly, can exponentially grow your customer database. As with any investment, there’s a measure of risk. So how do you know if you’re making the best possible use of your advertising spend? This post explains how to create a small business marketing budget in eight simple steps.
1. Identify Budget Needs
The first thing you should do is define your goals and priorities. The point of developing a budget is to spend wisely and keep track of your marketing dollars. Remember, your marketing budget needs to fit within your overall business budget and it should never be so high that it impinges on your business’s ability to function.
Identify and prioritize both short-term and long-term business and marketing goals. If you already have marketing campaigns in the pipeline, be specific when budgeting for the goals of those campaigns. For instance, if a particular campaign’s goal is to generate leads, it will have different spending requirements than a campaign advertising a limited-time special offer.
Be sure your marketing plan accounts for the entire buyer journey. Think about what goes on behind the scenes of a successful marketing campaign. Market and competitor research will cost money, as will hiring a contractor to set up and evaluate your different channels (e.g., website, social media). If you fail to take these factors into consideration during the planning process, you might spend more than you should in the long run.
2. Identify Target Audience
Knowing your audience is critical to your marketing budget and goes hand in hand with defining your priorities. It will help you gauge how many people you’re trying to reach and the frequency necessary to generate the desired impact. By segmenting your audience, you will be able to glean which types of campaigns are the most effective for which audience groups.
3. Identify Marketing Channels
In one regard, this is an aspect of identifying your target audience. After all, you don’t want to waste marketing dollars on a channel your customers aren’t using. However, different channels will have different costs and not all channels will need to be used in the same way for every campaign. For example, a portion of your website spend might go toward search engine optimization, which your business should continue to do no matter what campaign is running.
Researching the channels you plan on using can also help you avoid surprise costs and overreaching your capabilities. Include or exclude channels based on your market research and plan to A/B test instead of advertising on a particular channel and hoping it brings success. You should investigate all channels—digital, social, print—rather than making assumptions and choosing at random.
4. Plan Annually
Advertising success requires a long-term view, so plan your marketing strategy for the coming year, not month. While there will always be unexpected events you’ll want to capitalize on, identifying key holidays, seasons or other events that affect your business and advertising costs is important.
Take TV advertising in 2016. Competing for time slots was exacerbated by the presidential election. Political coverage drove up prices, while events like the debates drew viewers from their normal viewing habits. Sometimes buying in advance can lower your advertising costs, but this isn’t possible if you don’t plan ahead for future opportunities.
5. Research Opportunities
Go out of your way to explore what’s set to happen over the next year and how it impacts the marketing channels you plan on using. Dismiss the fear of missing out by pinpointing opportunities you can afford to take advantage of. If you jump on something last minute, it could be out of your budget or much more expensive than if you’d planned for it.
6. Advertise Based on Potential ROI
All advertising should consider potential ROI. That means taking a big-picture look at your marketing goals. What are your advertising opportunities? Which channels do you want to use to reach different audience segments? What are the costs associated with each? Compare your intentions with past campaigns and the ROI those offered so you can select the best options.
There’s no one-size-fits-all path, nor is there a guarantee of marketing success. You also can’t afford to do everything. The data you’ll collect throughout each step will help you realize which tactics are most likely to be most successful.
7. Set Total Spend
In a survey of small business owners conducted by Valpak, more than 50% appeared to be marketing on the fly. Over half cited using a “bucket” approach to budgeting, dipping into funds for marketing buys without specificity. A striking 82% used “flexible” budgets adjusted at varying intervals according to either earned revenue, market trends or, when tracked, media performance.
As a rule of thumb, you should spend between 6% and 20% of your total annual budget on marketing, depending on how long your business has been in the market. The marketing dollars you spend are often limited by other budgetary concerns. Look at how much your business has already been spending on marketing and compare that number to past results to help set total spend.
8. Set Monthly Spend
Align your total advertising spend with your marketing calendar. The amount you budget to spend monthly might fluctuate based on your needs at the time, or the needs of the calendar. Events, sales, special promotions and calendar holidays all affect your monthly budgets.
These steps are best practices to help you create a small business marketing budget that sets your business up for success. By aligning your marketing strategy and goals with your bottom line, you’ll execute each marketing campaign with confidence.
Start Building Your Small Business Marketing Budget Today!
- Review your budget-building process. Compare it to the steps outlined above to determine if there are steps you’ve ignored or haven’t given appropriate attention.
- Ensure your budget realistically accounts for ROI so your revenue is improved by your marketing and your budget reflects growth.
- Take a close look at the channels you’re using. Is your audience using them? Are you trying to take on more channels than your business can support?
- Do you have processes in place to gauge whether your marketing is working? You should be able to adjust your marketing to your planned budget if necessary to avoid wasting money.
- Do you have a process in place for handling unexpected costs? For example, will you have the flex room to capitalize on real-world events that happen unexpectedly?
This is simply the starting point for a solid marketing budget. Continue expanding your knowledge base and find more tools to refine the way you spend your budget.