Every small business needs to market their brand to grow. It’s especially crucial to focus efforts on online marketing today. Currently, there are over 500 million daily active users on Instagram alone. On Facebook, there are 2.32 billion monthly active users. More and more people are engaged on social media than ever in 2019, so it’s important to concentrate your efforts where your customers are. With so many factors, it can be challenging to narrow down a marketing budget. Commonly there is not a “one fits all” budget.
Every small business is unique and will require different things. According to the Small Business Association, small companies with revenues less than $5 million should allocate 7-8% of their incomes to marketing. They recommend that this marketing budget should be split between brand growth costs such as your website, blogs, sales collateral and the charges of promoting your business like campaigns, advertising, and events.
Your marketing strategy informs your marketing budget. This means developing a small business marketing budget is a significant step. We break down essential components in creating a marketing budget that will benefit your small business. Here are 5 steps to establish a marketing budget for your small business:
1. Determine Your Goals
Firstly, before you can get started on developing a marketing budget, your company has to have a full understanding of its goals and what you hope to accomplish through marketing. With such a broad scope of business potential, this can mean many things such as:
- Increasing your sales.
- Driving traffic to your company website.
- Rising engagement on your social media posts.
You can get a more in-depth comprehension of your marketing goals by asking yourself the following questions:
- What are your business aims for the quarter?
- What are your company objectives for the entire year?
- Are you looking far ahead? 5 years, 10 years?
2. Identify your customers
It’s crucial to know who your customers are. Once you have a set goal, your business needs to identify who your audience is, so you can determine HOW to market to them. Some questions that you should be asking include:
- What is your target age group?
- Which brands does your target audience engage with regularly?
- What is your target geographical area?
- What is your target income level?
You can research your industry online. Here are some current social media statistics to show where specific demographics are active:
- On Instagram, 59% of U.S. users are under 30
- 35% of online adults use Instagram
- 39% women, 30% men, for U.S. Instagram users
- 68% of Americans are on Facebook
- The number of American Facebook users aged 65 and older has doubled to 41%
- 80% of Twitter users are affluent millennials
Once you understand your potential buyers, you can calculate out how to best guide them through the sales funnel.
3. Understand your sales funnel
Sales play a significant role in your marketing budget. Increasing sales is one of the highest priorities for a small business. Building a sufficient marketing budget requires a dive into your sales funnel, where you’ll track results throughout the revenue cycle, from prospect to the consumer.
Here is data you will need to examine to get a firm understanding of your marketing needs:
- Number of website visits per month.
- Number of leads produced per month.
- The cost to generate SQL.
- Amount of leads converted to sales qualified leads.
- Number of leads turned into opportunities.
- Average revenue for a new deal.
4. Know Your Costs
Now that you have an understanding of your sales funnel, it’s crucial to get an idea of costs and budget limitations. It’s vital to allocate resources appropriately. Knowing how much you have to use on marketing is critical, but even more critical is understanding exactly how to spend your marketing dollars. You need to have a plan, and every aspect has to be measured. Your small business marketing budget should be an aspect of your overall business plan, outlining the costs of how you are going to accomplish your goals within a specific period. Some questions to resolve:
- How much would it cost to deliver contacts?
- Does your staff have the bandwidth required for this work?
- How much would it affect your budget to hire an agency?
It’s also essential to determine:
- Areas where you want to spend more money compared to where you can focus on organic efforts.
- Consider how different times of the year will affect your spending time.
5. Analyze & Revise
A marketing budget and strategy are not set in stone. It’s important to review your budget and make changes when necessary. The key is to monitor your marketing endeavors consistently. If your efforts are generating the appropriate return on investment, then you can continue to invest that amount, or even increase it if you can and see value in doing so. If the platform of your choice is not performing, you can decrease that cost to save money.
You may need to switch things, such as running another campaign, switching platforms, or revising budgets. Knowing whether your spending is helping or hindering your business is more important than sticking to a budget that is not effective. A small business can test new outlets such as social media advertising, and examine the results. After reviewing the results, you can make the appropriate decision.
The main takeaway here is that marketing is an investment for your business. These efforts will bring a quantitative return on investment over time so it’s essential to develop a marketing budget that will directly accomplish your goals as a small business. By determining your goals, knowing your costs, and understanding the components of your small business, you will be on track to develop a marketing budget that will prove successful.