Set a Marketing Budget to Fit Your Small Business Goals

Small business marketing budgets include two variables: time and money. You can reach your small business customers with paid advertising and marketing communications, or through personal contacts, which requires time but little if any cash outlay.

As a small business owner, the most important commitment you can make to your marketing program is to establish and stick to a budget. Whether you’re budgeting time, money, or both, cover these four points:

  • Establish a marketing budget

  • Spend the allocated time or funds on a planned marketing program

  • View the allocation as an important business investment

  • Manage the program well

If you cut back on marketing, you put your business on a dangerous downhill slide. Sure, you recoup some money — or time — when you make the budget cut, but following that one-time savings, look at what happens. With the reduction comes fewer communication efforts. With fewer communications, sales decline. Declining sales reduce your overall revenues, which means you have even fewer resources to allocate for future marketing.

Think long and hard before trimming your marketing budget because it’s the one expense item designated specifically to attract and keep customers.

How much should a small business spend on marketing?

How much money you spend on marketing depends on the type of business you have and the marketing tools you employ. Everyone wants a magic formula, but there isn’t one, especially today when so much marketing happens online rather than through paid advertising.

  • Mature businesses in established markets with low growth goals can get away with low marketing investments of as little as 2 to 5 percent of sales. Companies that target high growth must invest far more.

  • Businesses whose sales come primarily from subcontracting can spend almost no cash on marketing, while businesses that need to win the attention of a broad cross section of retail customers must budget enough to gain visibility through paid media ads, online communications, and promotions.

  • Businesses with customers who are active online and in social media networks can establish communication and ongoing interaction with little or no cash investment, though don’t fool yourself into believing that social media and online marketing is free. At the least, you need to allocate time, which may translate to money if you hire staff or outside resources to establish and manage a truly effective online presence.

Only a decade ago, marketing success —– especially for business-to-consumer marketers — relied heavily on how much money a business could invest in efforts to push its message into the marketplace. Today, success results not from merely pushing marketing messages but from forming two-way interactions with customers, both personally and through the Internet.

Dollars no longer make or break marketing effectiveness. Today’s marketers need to budget both money and time to communicate with and listen to customers — interacting, responding, and developing two-way relationships as a result.

Realistic talk about small business marketing budgets

As you determine how much to allocate for marketing, consider:

  • The nature of your business and your market: Businesses that market to other businesses tend to allocate a lower percentage of sales to marketing than businesses that market to a wide range or number of consumers.

    It’s the proverbial rifle versus shotgun difference. The business-to-business marketer can set its sights and reach its customers directly, whereas the business-to-consumer marketer must reach a broader audience, usually involving costly investments of time and money.

  • The maturity of your business: Start-up businesses need to invest more heavily than established businesses, in part to cover extraordinary one-time costs that existing businesses have behind them and in part to accelerate communications to gain first-time prospect awareness.

  • The size of your market area: Businesses that serve customers who are primarily located within a short drive or walk from the business location can target marketing communications into a concise market area. As a result, they can probably allocate a lower investment than businesses that have to build awareness and interest in statewide, national, or even international markets.

  • Your competition: Businesses that are the only game in town have to enhance their marketing efforts if several competitors suddenly open nearby. And businesses that are the underdog and want to take on the leaders must invest accordingly.

  • Your objectives: The most important consideration in setting your budget is to understand your growth goals. The more aggressive they are, the more time and money you need to budget for marketing.

    For example, if you’re planning to launch a new product or open a new location, you need to increase your marketing efforts to gain awareness, interest, and action and to fund the training, marketing support, and additional advertising required to make your plan possible.

  • Your money or your time? Some businesses decide not to invest significant dollars in advertising. Instead, they direct their resources at sales presentations, networking efforts, community and industry trade shows and events, and online communications, through which they can establish contact and interact with customers and prospective customers.

    That doesn’t mean they aren’t investing in marketing. They’re investing time (and supporting dollars) rather than relying exclusively on costly and traditional advertising vehicles. Here are examples of businesses that rely more heavily on an investment of time than money:

    • An attorney who wants to attract regional corporate clients may serve as a board member and volunteer counsel for a community nonprofit organization, knowing that this will generate working relationships with fellow board members who fit the target client profile.

    • A regional ski resort that wants to attract more families from the local market area may decide to offer free ski lessons and rentals to all fifth graders as a way to establish relationships directly rather than via paid marketing communications.

    • A hair salon that wants to build business may shift its emphasis from paid ads to pay-per-click search ads and social networking, aiming to reach customers at the moment they’re considering salon services. The salon can direct online interest to a landing page that features a special offer and reservation invitation, converting customers to leads with no cash investment beyond initial site setup.

Templates for creating a small business marketing budget

You’ll find many forms to help you allocate funding for your marketing program if you search online for “marketing budget templates.” The template best-suited for your marketing budget depends on the nature of your program — whether you’re marketing business-to-business, business-to-consumer, primarily through events and networking, primarily using online and social media communications, or primarily through paid advertising.

Here’s a sampling of websites that offer free templates for you to choose from:

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