How To Set a Marketing Budget for a Small Business
⏱ Reading Time: 10 minutes
Creating a marketing budget for your small business can be a daunting task — especially with limited funds. However, as you’ll soon see, it’s possible to get impressive results without spending a lot.
These 10 steps will help you set an effective budget and avoid feeling overwhelmed in the proces.
Set a Marketing Budget in 10 Steps
1. View Marketing as an Ongoing, Long-Term Investment
The first principle to keep in mind is that marketing is something you’ll do throughout the life of your business, although the specific strategies will likely evolve. That’s why you’ll want to avoid investing too much in marketing in the early stages and realizing that such an approach is unsustainable.
You may find it easiest to plan your marketing budget for a smaller, defined period rather than a whole year at once. For example, you could try budgeting for three months at a time, then revisit things and see where you stand at that point.
Even when breaking things up like that, assess your budget thoughtfully so you’ll have marketing resources to spread throughout the year. For example, there’s no point in blowing three-quarters of the budget on a single campaign happening in January when you’ve still got to market the business during the rest of the year.
Picture 1. Marketing is a long term investment
2. Align Your Marketing Plans With Business Goals
People often feel they are starting with a blank slate when creating a marketing budget. That’s an understandable feeling, but there’s a straightforward way to overcome it. It’s to look at your business goals first, then build your marketing budget accordingly.
You may think of some broad goals first. One might be, “I want to increase the size of my customer base.” From there, consider setting SMART goals to clarify how you’ll meet milestones. That means you’d make your objectives Specific, Measurable, Attainable, Relevant and Time-Based.
One example is that you might aim to get 30% growth in the number of customers from the 18-24 demographic within the next six months. After coming up with that, you could create a marketing budget that supports that goal, complete with which channels you’ll use and how much you’ll spend on each. Matching your marketing budget to your SMART goals makes it easier to verify that you’re spending money in thoughtful ways rather than acting haphazardly.
3. Review Your Business Expenses
Business expenses generally fall into two categories. Operational expenditures relate to the day-to-day necessities of keeping the company running. Then, capital expenditures are for major goods or services your company will use for at least a year.
If you don’t have a clear idea of how much your small business makes versus spends in a given month. Figure that out before proceeding with your marketing budget. Remember you’ll need some flexibility in the calculations, too. Some costs — such as your rent — are likely the same from month to month. However, variability will exist in other areas, such as how much you spend on utilities.
Assess how marketing expenses fit into your overall budget. You may wish to break things down further by setting limits for your website, offline marketing and other needs. Consider how some marketing efforts don’t necessarily result in extra expenses. For example, you might add a discount code at the bottom of every invoice. It encourages the recipient to order again but doesn’t make you use more paper. This option could be as simple as including a new line on a template.
5. Select Cost-Effective Offline Marketing Methods
As you iron out your marketing budget’s specifics, don’t overlook how offline marketing methods could provide you with an excellent return on investment while expanding brand awareness among your target audience. There’s so much attention paid to online marketing these days that people often forget that offline strategies remain relevant.
For example, vehicle wraps are a type of out-of-home (OOH) advertising. Research suggests that such advertising causes an average $5.97 increase in sales for every ad dollar spent. Advertising on a car can also help people perceive your brand as having a strong community presence. If you offer deliveries or do service calls, such ads can help your company assume a top-of-mind position for people who may soon require whatever your business provides.
Consider how increased networking efforts could tie into your marketing budget, too. For example, you might invest in reusable signs and banners to take to trade shows or buy business cards to distribute at local entrepreneur gatherings.
6. Understand Your Target Audience
Knowing your audience’s needs, behaviors and preferences will go a long way in helping you make a maximally effective marketing budget. For example, maybe most of your sales come from people who are over 70 and rarely use social media. In that case, a direct mail campaign could prove most worthwhile. Conversely, perhaps research indicates your target audience loves TikTok and YouTube videos.
Such insights will help you narrow down how to reach your audience. However, you’ll also need to discover what’s most important to them. Maybe they prefer whatever’s the best value for money. Alternatively, your consumers might feel willing to splurge on what you offer, especially if they perceive it as high-end or exclusive.
Once you know which channels your customers prefer and what matters to them, it’s easier to tailor your marketing budget accordingly. For example, if you discover that time-pressed customers often use their smartphones to shop at your e-commerce store, you might invest in making it mobile-friendly.
Picture 2. Define your target audience
7. Connect Your Reputation to Your Marketing Budget
When you have a minimal budget, your first instinct may be to find the cheapest options for everything, believing such an approach will help you make the most of your financial resources. However, if you find yourself gravitating toward that kind of mindset, it could damage your reputation.
For example, if you choose someone to design your website solely based on them offering the cheapest price, you could get what you pay for and end up with a dysfunctional and ugly online presence. Similarly, choosing the least expensive option for printed materials might lead to results that make your business seem unprofessional.
As you’re setting your budget, don’t skimp costs in the wrong places at the risk of hurting how current and potential customers view your organization. You’ll eventually see it’s often worthwhile to spend more than average on certain aspects of your marketing budget, even if doing so at the time makes you feel a bit hesitant.
8. Use Data to Justify Budgetary Changes
Times will eventually emerge where you need to adjust your budget. That could happen if a specific marketing channel does not provide the expected payoff after a few months, necessitating scaling back your use of it. Alternatively, you may realize a certain method is even more beneficial than expected, so it makes sense to devote more money to it.
It’s natural and understandable to make such decisions. However, you should avoid drawing conclusions without having the data to support them. For example, don’t assume that now is the best time to ramp up your Facebook marketing efforts unless internal information aligns with making such a move.
Steer clear of listening to gut instincts or assumptions. Otherwise, you could get carried away and end up spending too much on aspects of your marketing plan that don’t justify such resources. Encourage anyone at your company involved in making marketing decisions to take the same data-backed approach.
9. Consider How Content Marketing Could Offer Persistent Benefits
Content marketing is arguably one of the best options for a small business on a budget. For starters, you can create evergreen content that stays relevant to people for years afterward. Maybe you run a gardening center and can create a blog about the easiest plants to care for in a small apartment — that just happen to be among the products you sell.
Research shows people prefer to get content through a series of articles rather than traditional advertisements. You can cater to them while explaining how your products solve problems they have or offer solutions they want.
Excellent content also conveys authority, and that’s another reason to make room for content marketing in your budget. You don’t necessarily have to create a gigantic amount of content to succeed. Figure out what’s in your capabilities, including how often you could feasibly publish new stuff. Even if that means doing one blog post a week, such an effort supports your brand awareness and helps people see you as a reliable source.
10. Allow for Flexibility in Your Budget
The most carefully planned marketing budgets still need some wiggle room. Having to cover the cost of something unexpected does not mean you’ve failed. It could mean you’re boldly taking advantage of a new opportunity.
Perhaps a company representative approached you about a co-marketing campaign. You might sell eco-friendly water bottles, and the other brand makes energy-boosting mixes for athletes to add to their fluids. Such a partnership could expand your reach. It might also require funding you didn’t plan for at the start. Situations like that one highlight why it’s so smart to build flexibility into your budget.
You can certainly adopt a future-minded approach to marketing budget planning. But, it’s impossible to predict what’s on the horizon with certainty. Avoid being so precise with your marketing budget that the exactness limits how well your company can adapt to positive or negative unforeseen circumstances.
Move Forward One Step at a Time
Perhaps you’re getting ready to make your first marketing budget. Alternatively, maybe you’ve created them before, but never with a strategic approach. In any case, these suggestions will help you start thinking of the task in manageable chunks. Doing things like that will help you see the components of your marketing budget as related pieces that support each other.
In closing, remember you do not need a massive budget or a huge team to succeed in marketing your small business. The key is to stay open to opportunities and tune into what possibilities are most suitable for and accessible to you.
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