Marketing Budgets for Businesses

MARCH 29, 2019

 

The big question when it comes to marketing is always, “how much is this going to cost?” Generally speaking, marketing services are perceived as an expensive project and many business owners are hesitant to spend valuable dollars on something that may or may not have the return they hope for.

There are some key things to consider when putting together your marketing budget and finding a marketing partner that will work for you.

Marketing & Advertising line items

Marketing & Advertising are not the same thing. Most business projections have a single category that accounts for both marketing and advertising. And, while they may be related, they are not the same. Simply put Advertising is the amount of money you need to pay to the media you place your campaign in while marketing is the planning, messaging and design behind that campaign. You need both to make a splash, but they really should be viewed as two separate expenses.

 

Average Budgets

For established businesses,The U.S. Small Business Administration recommends spending 7-8% of your gross revenue for businesses under $5 million, and closer to 10% for those over $5 million.For new businesses you should be spending somewhere between 12-20% of your revenue or expected revenue. This percentage of revenue should be split between Marketing and Advertising.

 

Marketing Only portion of budget

 

The marketing only piece of the budget is around 5% of your expected gross revenue. This 5% should be allocated towards things such as the ongoing marketing implementation of a solid foundational strategy. These are the day-to-day tactics that engage your audience, the advertisements you place with specific media and the tactics like email newsletters, video, content and so forth.  You should expect also to use more than 5% on big projects, such as website updates.

However, spending money on these day to day items will certainly be a waste of funds if you do not have a solid foundation.

 

Solid Foundation

In order for your day to day activities to perform well, you will need to invest in a solid marketing foundation, which, since it generally includes the necessary larger projects, will usually cost closer to the 10%.

The foundation includes items like Branding, Strategy, Website and Social Media. Working on these items to create a solid strategy that highlights your best target audience, the messaging and branding for those audiences and putting together a roadmap of strategy pieces paired with the big projects like a website will give you a healthy starting point. Once these things are completed, your day to day activities will have a much higher conversion rate.

 

Consider the cost of client acquisition

When making your marketing budget the most important thing to remember is what your potential ROI will be. Consider what a single new client means to your bottom line. For example: currently you have not built your foundation and you are relying on a sales person to convert customers. You probably see the direct correlation between what you pay that sales person to what the conversion of each customer is. Let’s say you currently spend $2,000 per new customer with your sales rep. and he or she can convert 1 new customer per month. Provided that each new customer is worth more than the $2,000 you spent, you are happy.

But consider this, you built your foundation and were able to add a highly converting website and social media channels in addition to your sales rep. Using the 5% rule, let’s say you spend $1,000 per month on digital media tactics, and can convert 2 additional customers per month. You’ve increased your customers by three times, while only spending a fraction of the cost, and in a shorter time period.

That’s where marketing becomes a savings vs. a spend.

The key is finding a marketing partner who can work with you on the foundational items, but also on a long-term implementation and execution process. This is where you will save the most.