Before you can evaluate how much you should spend on any particular aspect, you have to figure out your communication budget overall. How much can you spend?
Most successful businesses spend between 1 and 15 percent of their gross revenue on marketing. The newer and less well-known your company is, the higher you need to be in that range (even though it might be a little uncomfortable).
It’s common knowledge that most small business owners cut communication before anything else when they’re in financial trouble. It seems the easiest: it’s hard to evaluate the return on investment with some strategies, and it’s not like you can just stop paying rent. However, if you eliminate marketing completely (or even mostly), how will new customers find you?
Why have a budget?
A budget – rather than spending as you go – will help you evaluate the return on investment (ROI) of your strategy. If you’re a small business, and you spent $10,000 on marketing but only made $20,000 in sales, you have a problem. Something isn’t working. But if you spent $10,000 on marketing and made $100,000 or more in sales, you’re on the right track.
Budget types
Your budget could be based on:
Most successful businesses spend between 1 and 15 percent of their gross revenue on marketing. The newer and less well-known your company is, the higher you need to be in that range (even though it might be a little uncomfortable).
It’s common knowledge that most small business owners cut communication before anything else when they’re in financial trouble. It seems the easiest: it’s hard to evaluate the return on investment with some strategies, and it’s not like you can just stop paying rent. However, if you eliminate marketing completely (or even mostly), how will new customers find you?
Why have a budget?
A budget – rather than spending as you go – will help you evaluate the return on investment (ROI) of your strategy. If you’re a small business, and you spent $10,000 on marketing but only made $20,000 in sales, you have a problem. Something isn’t working. But if you spent $10,000 on marketing and made $100,000 or more in sales, you’re on the right track.
Budget types
Your budget could be based on:
- Projected sales/revenue
- Past sales/revenue
- Seasonal events
- Industry standards
- Similarly sized and positioned competitors
You DO NOT want to have a budget based on:
- Just whatever the consultant/friend/nephew recommends
- Whatever seems like a good idea at the time
- An arbitrary number
- A company of a different size/industry/target audience
- What you dream your revenue will be
- However much you can afford this week (but it’ll change next week, and the week after…)
- The cheapest marketing proposal you received last year
- The most expensive marketing proposal you received last year
Five P’s of your Marketing Budget:
- Planning (consumer research, strategy, education, etc)
- Physical materials (fliers, business cards, promo products)
- Payroll (to a consultant, in-house staff, or yourself. Someone should get paid for the time!)
- Projects (anything special – a trade show, new product, seasonal specials, etc)
- Permanent (routine marketing, long-term campaigns)
Your budget should include all the elements in your annual marketing plan so you know how much they’ll cost.
Adjusting the plan midstream
Sometimes it makes sense to adjust your plan before the year is over. Do this with caution – many marketing plans rely on a build-up effect to work, so changing your tactics every month is counterproductive. Evaluate your marketing budget quarterly.
Set attainable goals at the beginning of the annual budget. For example, if you decide you want to grow your Facebook fan count by 10 percent, track how your budget and plan is aligning with that goal. If you’re close to your scheduled goal, stick with the plan. If you’re dragging far behind or speeding ahead, adjust your plan accordingly – do more of what does work and less of what doesn’t.
Regardless of what’s working or not, you need to track everything. Keep track of your analytics. Ask every single customer how they found you. If you’re getting lots of customers from networking groups and none from Twitter, you know where to improve (Twitter), where to pump extra funding (networking), and how to adjust next year’s plan.
Allot more than you plan to spend
It feels terrible to have a great opportunity come up, but no money in the budget to take it. You end up spending money you don't have or passing it by.
To avoid that heartbreaking scenario, make sure you have some “rainy day” money built into your budget. Worst case scenario is you have a little extra money at the end of the year.
Chicken or the egg?
Which comes first — the plan or the budget?
While many people like to come up with a dream plan and then figure out how much this will cost, I find that to be unrealistic and disheartening for many businesses. It’s great to imagine having a $20 million budget including red carpet events attended by A-list celebrities, but most of us don’t have that kind of financial access.
Instead, be realistic about how much money you have to spend. If you only have $6,000 per year, for example, you can be creative with it and make it last all year. For example, I’m working with a client who has a very small marketing budget compared to their competitors. They don't have the funds to pay entry into the large trade shows (let alone the cost of creating the booth!), or money to sponsor pro athletes to use their product. So instead of drafting a $30 million dream plan, we’re creating a strategy which relies on social media and content creation.
Once you know your limits, you can create a plan that is feasible and creative!
RSS Feed