If you’ve not put one together before, creating a marketing budget can feel like putting your finger in the air and guessing. Maybe you’ve not had budget available before for a proper marketing budget, or maybe you’ve spent whatever needed to be spent without really keeping track. Now is your chance to put some structure around what you’re spending. Tracking what you’re spending also means that you can measure how effective your marketing is over time and what the return on investment is.
Talking about return on investment, marketing is an investment. Marketing is basically letting people know you’re out there and that they can buy from you. If people don’t know about you, they won’t buy from you.
How much should I spend on marketing?
The US Small Business administration recommends small businesses with an annual revenue of less than $5m should spend 7-8% of your gross annual revenue on marketing. If you’re bigger, you’ll be wanting to spend more!
After that, you need to decide what to spend the money on!
When should I create a marketing budget?
You should put together your marketing budget at the end of your marketing planning. Once you know your goals, marketing channels and tactics, you can work out what you need to spend to stand a chance of achieving your goals. There’s no point in assigning money to activities if you don’t know what you’ll be doing. If you would like some help putting together a marketing plan you can follow my How To series or get in touch with me!
How to create your marketing budget
Know what your existing ongoing operational costs are: Costs may include website hosting, membership fees, content outsourcing fees and whatever else you already need to run your business. These fall into your marketing budget and create a baseline cost. Subtract this from your overall rough budget amount and see what’s left.
Focus on your marketing plan and what’s important in there: Hopefully, within your marketing strategy you’ll have identified the critical marketing channels you want to use to reach your goals. This might be digital or print advertising, blogging, Public Relations or social media. Or a mix of these. Decide what your most important three channels are to spend money on and rank them in order of priority. You might want to spend money on more than that, but choosing three will help you focus.
Once you know what matters and what you want to spend money on, you can start working out how much to spend on each part. The first question is, what do you want to do in-house, or get outside help?
If you want to engage an external contractor, it is always helpful to give them a rough ballpark of what you want to spend with them, so that they can put together their best package. Knowing if you have $5,000 to spend, or $50,000 will make a big difference to the usefulness of the proposals that come back to you. Having a prospect say “I don’t know”, when it comes to budget is not very helpful. It means that you haven’t run the numbers on your business to know what you can spend. It also means that you might get proposals of wildly different pricing from different people, which isn’t helpful for you because it’s then even harder to compare them like for like.
Also, if you’re going to engage a consultant or contractor, good value doesn’t come cheap. As with most things in life, you get what you pay for. If they are very cheap, why is that? Is it a lack of experience, or they’re just starting their business? Those might not be bad things, but if they don’t have much experience, you might have to give them more feedback than a more experienced consultant, or if they’re new, they might not have worked out their processes yet and you might need to give them a bit more grace.
By this point you’ve decided what your priority areas are for marketing spend and know if you need to engage extra support to reach your goals. Now you can focus on your discretionary spend like advertising.
Test out your ad spend. If you’re doing something new for the first time, it’s a good idea to test what you’re doing, but give the activities enough time to reasonably start seeing results. Very little about marketing is instant and magically “going viral” is extremely rare. It takes time and repeated exposure for prospective clients and customers to know, like and trust you so give what you’re doing time to work, ideally at least 6 months. When you’re planning long-term ad spend, plan to be able to spend consistently for a few months. But you can test out small amounts first to see what kind of adverts work best. On Facebook, for example, spending just $100 on 10 adverts for a week each, will give you a sense of which advert type is most effective for your business.
Now you have an idea of how much marketing is going to cost, start spending the money and doing your activities.
Next comes a critical part – tracking your spend and measuring the results of what you’re doing. The biggest caveat with marketing is that it can be hard to draw a direct link from a specific activity (e.g. a radio advert) to a new client or customer. Sometimes someone will hear about you and then only call you months later when they need you. As part of your client intake/on-boarding system, do ask where they found you. That will help you spot if that radio advert you did four months ago is still bringing in leads. Equally, marketing builds on itself, so the more frequently someone sees your name and hears good things about you, the more they will trust your business and want to buy from you. But overall, you should be able to tell which activities and campaigns are generating interest and which aren’t.
If you keep track of what you’re spending and measure the results you’re getting, next year it will be much easier to set your budget and have an accurate idea of how much you should be spending to achieve your goals.