Most small business owners understand the value of having a business plan before launching a new business. However, when it comes to a marketing budget, many small businesses don’t establish a formal budget for their marketing efforts. While many may feel it’s not necessary if some semblance of marketing was built into an initial business plan, creating a well-thought-out marketing budget is one of the most important things you can do for your small business.
The challenge is that most small business owners simply don’t know where to start when it comes to creating a marketing budget. Contrary to popular belief, a marketing budget can be a fairly simple, straightforward effort. To create a solid marketing budget, first identify the answers to these questions:
What are your marketing needs?
Do you need more sales? More leads? Better conversions? More brand awareness? Understanding what your small business needs will help you start to identify where to spend your money, as different marketing approaches lend themselves to different results. Are your needs more immediate? You may want to invest in paid advertising such as Facebook ads or Google AdWords. Looking to elevate your brand awareness? You may want to focus on building up your reputation as a subject matter expert through blogging and articles on LinkedIn.
What can you afford to spend on marketing?
There are many different suggestions on what percentage of your overall spend should be dedicated to a marketing budget, or how to set a marketing budget that fits your business goals. Some say start-ups should invest more while more established businesses can stick with a steady maintenance plan. The fact is, there is no right answer to how much you should spend; only you as a small business know what you can reasonably afford to spend. The key is once you establish that budget, stick with it, measure it, and readjust as needed.
How is your current marketing performing?
Are you doing any marketing now? If so, what kind of return are you getting? If the return is good, does it make sense to increase the budget for that marketing approach in particular? If there are other efforts that either aren’t performing well or you don’t have a good way to measure the ROI, do you really want to keep investing in an unknown? Go with what’s measurable and invest in what yields results.
Are you looking at your marketing budget as an investment?
If not, it’s time to rethink how you look at your marketing budget. A marketing budget IS an investment; one that should deliver an expected, quantified return over time and align with your revenue cycle.
Once you’ve answered the questions above, you’re ready to take the first steps to establishing a budget. The key to an effective marketing budget is to establish an initial budget, monitor the results from your marketing spend on a regular basis, and make adjustments as necessary. Marketing budgets for small businesses will change year after year, depending on how well your business is performing, and what your goals are year to year. Analyze your revenue monthly, quarterly and annually, and understand your revenue cycles. Set realistic spending goals and be consistent with that spending. Measure the results of your expenditures on a regular basis.
There are many different marketing budget templates and examples to be found online; all have their benefits and drawbacks. The key is to use whatever format you are most comfortable with. For many small business owners, that may simply be an Excel spreadsheet, broken down by quarter, then by month, and then by line item for different marketing tactics. You can also hire a small business marketing professional to create a marketing budget for you.
While the above steps may initially seem daunting to small business owners, creating and following a marketing budget truly is one of the most important actions you can take as a small business owner.