When you run a small business, every single dollar matters. It’s commonly believed that the smartest thing is to invest as much of your profit as possible into further production, modernization of manufacturing tools, or recruiting of top-class professionals that will give a competitive edge to your company.
While there’s a lot of truth in this approach, it usually leaves marketing activities on the sidelines. But the fact is that sometimes, even the best product or service won’t reach enough people to keep the small business alive and that’s why you shouldn’t underestimate the importance of investing in marketing. The success of your company doesn’t only depend on the quality of your product. You need to make it visible enough for the consumers and build a strong brand around it in order to maximize its potential. Hubspot has an excellent article on how to develop a unique brand.
Therefore, marketing spending needs to be a substantial part of the budget for any small business. Here are a few tips on how to properly structure your marketing budget to get the most out of it.
There’s no definite answer to this question as it will depend on your business approach, your industry, and the size of your business. Most small businesses choose to allocate around 11% of their gross annual revenue for their marketing efforts, but this number should be used only as a rough estimate of how much you should spend for this purpose.
The common opinion among marketing professionals is that newer and smaller companies should spend more than that. Simply, it’s easier for firms that have already crossed a certain threshold of visibility and good reputation as they already have something to build on. Businesses that are still really small, that have no well-defined marketing strategy and routines, that have little digital presence, and whose brand image is underdeveloped, have to basically start from scratch, and this usually costs proportionally more money.
To determine exactly how much you should spend on marketing, it’s crucial that you set clear and quantifiable goals. You need to know precisely what you expect to achieve marketing-wise, whether it’s the growth of your social media channels, generating qualified leads, or boosting your brand’s overall reputation.
Secondly, you need to know your customers – who they are, what they’re interested in, and which channels and methods you can use to reach them. These factors can change your marketing costs dramatically. For starters, it’s not bad to use some basic online calculators that can give you a ballpark estimation based on some of the mentioned parameters.
An average marketing budget can sometimes contain a discouraging number of components. A layperson may expect to have something like two items on the list: the costs of content production and buying media time and space. In reality, there’s much more than that and even these two have to be further broken down to an endless number of elements.
For instance, content production can contain items such as:
And these are just the most basic ones. On the same token, planning the budget for “buying ad space” includes PPC ads, banner ads, TV minutes, native advertising, product placement, and much more. And then there are other expenses: technology (automation software, CRM software, research tools), event organization, search engine optimization, or general PR activities, to name just a few.
Obviously, as a small business, you probably don’t need to employ all of the mentioned tactics. But you need to consider all of these and prioritize methods that will help you fulfill the goals you previously defined. And of course, you’ll have to make sure these methods are affordable.
You ought to go even further and check which aspects of your business and marketing need just a little push in order to bring substantial improvements to your bottom line. This is exactly where you should aim to focus your investments.
A thorough analysis of your sales funnel can be very useful in this context and can uncover some of the weaknesses you weren’t aware of. For instance, a reliable CRM system can identify at which part of the buyer’s journey people tend to leave your website. If it turns out you have trouble getting visitors from the decision stage to actual conversion, that means you need to invest in more in-depth content that can help you encourage people to buy, such as case studies, product demo videos, or detailed features comparisons.
Therefore, planning your marketing budget depends on numerous factors and details, so you’ll need to do meticulous research regarding your own strengths and weaknesses, your customer base, your competition, your financial capabilities, and possible methods you can use to achieve your goals. There’s no universal formula and every company has to figure this out for itself.
But one thing is for sure – making use of online tools at your disposal is a must for all small businesses. Going for some more traditional methods, especially in the case of local brick-and-mortar stores is perfectly fine, but you’ll have to reinforce these offline activities with a sound digital strategy. Investments in digital advertising make up more than half of global advertising spending and it’s only going to grow further.
It makes perfect sense for small businesses to take advantage of inexpensive tools that ensure laser-focused targeting of the exact right population they wish to attract. So allocating a few extra dollars to social media marketing and paid online ads can certainly have a very positive effect.
A lot of small businesses can’t afford to have their own in-house marketing teams. Thus it’s quite reasonable to hire an agency, and if you decide to go down this road, go for a single reliable solution and try making a long-term contract.
If you entrust a single agency with all the work you’ll probably get a better deal and save a few dimes. In addition, they’ll have a chance to lay out a stable strategy and build a consistent and recognizable voice for your brand in the long run.
The best way to make a real difference with your marketing is to be innovative or simply recognize trends that are about to make a significant long-term impact on the industry. Being the first one in your branch to utilize a method or a concept that will get big soon can mean great things for your visibility and your brand image.
This, however, means getting out of your comfort zone and allowing your marketing team or agency to take chances. If they’ve already proved to be trustworthy, let them try what seems like a weird-ish idea from time to time as benefits from this can be much greater than potential risks.
Of course, you’ll need to continually analyze the results of your marketing efforts and revise your budget whenever you see fit. You do need to have some patience though since some marketing methods simply need time to bring tangible results. You should always have the bigger picture in mind.
On the other hand, if something simply doesn’t work, it’s better to admit the mistake and modify your strategy and your budget than to keep wasting money. It’s perfectly normal to restructure your budget mid-way if necessary, the same way it’s perfectly normal to change your marketing approach if your campaigns aren’t performing well. Accept your mistakes and learn from them as it’s the only way to truly evolve.