Building Your Marketing Budget for Small Businesses and Organizations

Deciding what your marketing budget will be is a big decision and can feel like a lot of responsibility. How much? Where to spend it and on what? Is this the amount that will help me make more sales? What if I invested another $500? Would that get me past the tipping point? All of these questions come up commonly as business owners evaluate their marketing efforts. If you’re setting up your budget for the first time, or taking a good hard look at where your marketing dollars are going, this process can help you make sure you are focusing on the best opportunities for return on investment.

  1. Know Your Operations Costs

    When we start talking about marketing, it can be a welcome break from the logistics and deliverables of the operations side of your business, but unfortunately even marketing is tied back to operations! It’s important to know your operations costs and be really familiar with those numbers before you start thinking about your marketing budget. This means that when we go to set your marketing budget, it feels comfortable instead of like watching dollars fly out the window that were needed to make improvements in your equipment or were going into labor costs or something else. You want to know that your marketing budget isn’t going to make you bankrupt!

  2. Understand Where You are Losing Traction

    Once you understand your numbers, the next step is to evaluate your customer journey and identify where you are losing traction. I talk a lot about customer journey in this blog post: 5 Things Your Customers Need to Hear From You. You can see what stage your customers might be in and where they are getting stuck between the five stages: unaware, problem aware, solution aware, product aware, and most aware.

    But we can break one important stage in that journey even further. The product aware stage actually has four substages:

    • Aware

    • Interest

    • Decision

    • Action

      You can also define which portion of the buying process your customers are getting stuck in. This category or subcategory is where you want to focus your marketing dollars.

  3. Brainstorm Ideas to Move Your Customers Forward

    Now that you have figured out where your customers are getting stuck, it’s time for the fun part! Brainstorming ideas for how to reach them! This is a time to let your creativity fly and no idea is a bad idea (that part comes later!). Think about what is missing that will help move your customer to the next stage. Is it that they don’t clearly understand how your product or service adds value to their life? Are they unable to find where to checkout on your website? Maybe they need a reminder to re-stock up on something they previously bought. Whatever it is, you have identified the problem in step 2 and now we’re solution sourcing in step 3.

You may be thinking - hey I thought we were building a marketing budget….when does that part come in? It’s coming I promise! But this pre-work is what will help you build out a budget that serves you instead of digging a money pit that you constantly have to pour into.

4. Set Specific Goals

In this step we need to know what change we would like to see regarding the movement of customers from one phase to the next. We need to be specific here so we can determine if our marketing is working or not. Unfortunately “getting more sales” isn’t measurable or specific and we won’t know how successful our marketing campaigns were. So instead use something like “get 15% more people from our email list to complete a purchase.” This is very easy to determine if you were successful or not.

Your goals should also have a clear timeline. For companies and organizations who have been in business for awhile, I would suggest setting quarterly goals and working a year at a time. But if your business is just getting started or still growing a lot, I would suggest setting monthly goals and working three months at a time. The reason for this is because when your business is new, it doesn’t really make sense for your to set a yearly goal on sales because you don’t have enough foresight to predict trends in your business and know what to expect. Things are still changing too fast. Set monthly goals, a couple months at a time, then use the information you learn in those months to set the next few months goals. For businesses that have been around longer, you likely have more data and information to work with to lay out your year and have clear expectations about what is coming.

5. Compare Your Goals with Your Idea List

Lastly, it’s time to mesh your marketing brainstorm ideas with your goals. Which ideas will be the best at helping you reach your goals? Some of them you will immediately throw out now because while they would solve your customer journey sticking points, they don’t align with your goals at this time. When you have narrowed your ideas down to a few you believe will help you reach your goals, it’s time to start getting some prices on them. What would it cost to implement those ideas? This could include some pricing out of different advertising opportunities, getting rates for content creation, or checking out what your expenses would be to attend a new event this year. Once you have the price research done, it’s time to narrow your options down to just the ones you can afford. Not sure what you can afford? Go back to step one and compare your revenue with your operating expenses. This will tell you what amount you have to invest in your marketing and which ideas you can pursue to move towards your goals.

Tips and Guiding Strategies

Every business is unique and has to approach its marketing budget in a unique way, but there are some guiding principles we can use to help us know we are on the right track.

  • Budget Categories

    Break your budget into categories to help you make sure all expenses are accounted for and there are no surprise bills or investments to make. Here are some common categories for you to consider including in your budget. Some may or may not apply to your specific marketing plan

    • Advertising - this could include any publications you pay to have an ad placed in, sponsorship of local events or organizations, radio or television ads, pay per click advertising, or other paid media

    • Content Marketing - this can encompass blogs, social media, video production, basically any photo, language, or video that you are putting out without a paid strategy behind it. Costs that might be included here are a photographer, a social media scheduling service, or premium features you pay for on websites like Yelp.

    • Public Relations - While a lot of PR can be free, there are also often paid opportunities such as inclusion in featured lists that a Chamber of Commerce or Media publication compiles, or opportunities to be highlighted on media outlets may include boosted options for more exposure. You may also have a PR agency that helps bring your business consideration for opportunities

    • Software, Equipment, and Infrastructure - This includes any design software you may be utilizing, video editing software, cameras, laptops, lights or microphones, or platforms you pay to host your website

    • Services - This could be the payroll for your marketing department if you have one or the bill for your marketing agency or any freelancers you utilize to outsource parts of your marketing. Often when your business is small, outsourcing your marketing can be more cost-effective so you don’t have to spend so much of your budget on equipment, software, or content creation and can instead utilize service providers who already have access to these.

    • Events - Include every expense that is related to an event here, whether it’s transportation costs, hotel rooms, entry fees, booth spaces, equipment rentals, printing of handouts, or per diem for meals.

  • Average Marketing Budgets for Small Businesses

    If you like to have a benchmark for your numbers, it is helpful to know that on average, small businesses spend between six and twelve percent of their revenue on marketing. That can feel like a wide range though, so some factors that might mean you should be closer to the upper end would be if your business is newer, you are launching a new product or service, or if your goals include large business pivots and big jumps in sales. If you haven’t been in business for a full year yet, or your revenue has changed significantly in the past couple years, you can take an average revenue number from the past few quarters to determine what your revenue-based marketing budget should be.

  • Utilize Planning Tools

    I find it so helpful to put my marketing budget down in real numbers in a place it’s easy for me to track and reference. This could be a spreadsheet or a running document, or an account in your quickbooks, but whatever it is, writing things down helps you plan and stick to your plan. One of the best tools I’ve found comes from HubSpot and it is a comprehensive marketing budget planner that you can download from them for free. Click here to access their download.

  • Recognize the Ripple Effect

    If your marketing budget seems meager right now, don’t worry. I know it can be frustrating to have big goals while lacking the budget to reach them. But the cool think about marketing is that it is always adding up over time. Your marketing may not have a huge direct impact right now, but you will be surprised at how the touchpoints you have this month might circle back around and turn into sales a year from now. It all depends on where the customer is at in their customer journey and if they are ready to buy right now. Remember that all your marketing efforts are like adding coins in a bucket. Eventually, you’ll have a whole bucketful of coins!

  • Take Competitor Strategies with a Grain of Salt

    Lastly, I encourage you to not pay too close of attention to what your competitors are doing. It can be helpful to have a general idea of their efforts, but the bottom line is, unless we get invited to their marketing meetings, we simply don’t know which efforts are working well for them and which aren’t. Just because they’re advertising in a particular place or investing a big budget into a particular social platform does not necessarily mean it’s turning into sales for them. Focus on discovering methods that work for you and expanding there.

More Content for You:

How to Make Marketing Part of Your Routine as a Business Owner

2 Questions to Ask Before You Do ANY Marketing

Attracting More Customers with Multiplied Messaging

Why Money is Relative in Your Small Business

How to Track Your Marketing Results for Small and Growing Businesses

Easiest Way to Increase Your Sales for Small and Growing Businesses

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