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How to create a marketing budget
Use these tips to create a better small business marketing budget for your company’s needs.
Use these tips to create a better small business marketing budget for your company’s needs.
Startup founders often focus a healthy portion of their budget on marketing so they can grow their client base. They set aside funds for things like billboards, magazine ads, trade show booths, sponsorships, and paid social media posts.
Between the thrill of launching new promotional initiatives and the routine of repeat marketing campaigns, founders and management teams have an underlying assumption that their advertising dollars are being spent wisely. However, this may be a misconception about how marketing works. Some small business owners place blind trust in marketing campaigns that produce an unknown return on investment (ROI).
It’s easy for well-intentioned entrepreneurs to arbitrarily allocate some of their earnings toward marketing. However, marketing spend is best done with a lean and concrete marketing strategy and a budget based on that strategy. With these pieces in place, money put toward your marketing tools and efforts will increase your growth and long-term potential, and will provide a better-documented ROI.
To strategically grow your business, create and formalize your small business marketing budget while also keeping each ad dollar accountable for driving sales and profits. You may ask fundamental questions, such as:
This will help minimize waste and establish a healthy marketing budget for a small business like yours.
This article will help you figure out how to create a marketing budget for your small business. To answer these questions and start budgeting correctly, you need to take multiple steps:
The following tips will set you up to create a better small business marketing budget for your company’s needs.
First, take stock of your current marketing spend. Here are four steps every company should follow.
In most cases, you can use your newly optimized budget as your foundation. Now you can build additional marketing investments into the budget. With these steps, you identify the promotional channels that perform well, based on data, which then helps you set your marketing priorities, and you can invest more in campaigns and channels that already generate a positive ROI.
- On average, B2C brands that provide services spend 15% of their revenue on marketing. Their marketing budgets are 14.9% of their overall budgets.
- B2C companies that sell products spend 13.9% of their revenue on marketing, and their marketing budgets are 17.3% of their budgets.
- On the other end of the spectrum, B2B companies that sell services allocate 12% of their revenue toward promoting their business.
- B2B companies that sell products invest 8.3% of their revenue toward marketing.
- For both B2B product and services companies, 11.3% of their overall budget is for marketing.
Additionally, the survey’s Report of Results by Firm and Industry Characteristics shares the following statistics in response to the question, “What percentage of your firm’s overall budget does marketing currently account for?”
Consider these small business marketing budget statistics to be interesting reference points. Even though the average marketing budget for small businesses can go up to nearly 50% of the total budget, you don’t have to let that dictate your company’s budget.
Smart business owners should instead look to find ways to profitably manage and grow their marketing budgets without setting arbitrary minimums or ceilings on their spend.
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Beyond doubling down on marketing channels that consistently drive positive ROI for your business, further growth can also come from strategic experimentation. Without taking budget away from existing marketing initiatives, small business owners will want to allocate new marketing dollars to additional customer acquisition channels.
Below is a simple four-step playbook to do this right:
Ultimately, you want to curb underperforming spend. At the same time, you want to be aggressive in trialing new initiatives. There are always more opportunities to tap into new audiences you may not otherwise have access to with your existing marketing spend.
In addition to optimizing your marketing budget, investing more into ROI-positive channels and campaigns, and experimenting with new opportunities, you also want to consider how your marketing budget impacts other aspects of your business.
As you get a better handle on your marketing budget, the best investments you’ll make will include analytics tools and marketing automation solutions that help you analyze your overall marketing performance and streamline repetitive tasks.
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Many small business marketing budget statistics, such as those from The CMO Survey, offer a very broad view on how companies of different sizes in different categories spend their hard-earned dollars on marketing. In some industries, social media and influencer marketing is a primary focus. In others, traditional advertising — television, radio, newspapers, magazines, and billboards — still thrives. Then, there’s a whole range of companies that allocate all their budget toward digital advertising, such as display ads, pay-per-click (PPC), social media ads, and more.
While those data points are nice to know, smart business owners understand that their product or service and target customer base may cause them to be an outlier. Rather than establishing your marketing budget based on broad benchmarks, you can instead start with a modest marketing budget that already generates a return on investment and leaves room for experimentation with new channels.