This article was written by Jared Hecht, co-founder and CEO of Fundera.
Creating a marketing budget can seem incredibly daunting for small business owners.
Marketing can feel like a great unknown, and many owners and managers aren’t sure how much to spend and how to know if the money they do dedicate to marketing will even be worth the investment.
Let’s break down the process of how to craft the perfect small business marketing budget, so you can feel confident that your marketing dollars are going toward your business goals.
Getting Started: Gather Data to Drive Your marketing Strategy
The first step to understanding how to build your budget is understanding your where your clients are coming from, how digital marketing strategies can support your efforts, and identifying key goals.
Understand how clients find your business
One of the best ways to gather user data is through analytics.
- Most platforms that allow you to build a website will also provide you with site data, such as monthly unique visitors which search terms are leading traffic to your site.
- Online advertising will often provide you with insight into how people are interacting with your ads.
You should also go straight to the source: ask your customers! Include the question “How did you find out about us?” on interest forms that you provide to new or prospective clients. You can also have your team ask those who call in, or even add a pop-up survey to your website. If people keep telling you they saw your print ads in the local newspaper, that means you should focus more money there in the future.
Understand online marketing
If you’re a business owner, you’ve likely heard that you must have an online marketing presence. But the online marketing landscape is vast, and includes Search Engine Optimization (SEO), social media (which encompasses a number of platforms), review sites, websites, and paid advertising through AdWords, social media, and more.
It’s unrealistic for a small or mid-sized business with limited resources to compete in all of these arenas, so again, it’s about being strategic about what works best for you. It’s better to focus on doing well in one or two areas, rather than trying to do it all and having an Instagram account that lies dormant or review pages where no one from your team responds to customer complaints.
Additionally, there are certain types of businesses that lend themselves to certain types of online marketing. If you run a restaurant, you need to be on Yelp, but a Snapchat account might not serve you as well.
Understand your goals
The goal of any marketing campaign is to drive leads, customer engagement, or sales, and to make more money. But you need to be more specific to really understand your needs and tailor your budget accordingly.
A goal like “I want to increase my revenue by 5%” or “I want to establish 2 new accounts per month” is going to give you clear direction when determining your budget, as well as the KPIs needed to measure and adjust your efforts.
Other factors to consider will depend on your business model, but can include things like increasing units sold, market share, share of customer’s business, or sales conversion rates.
Step 2: Create Your Small Business Marketing Plan
Now that you’ve identified who your customers are, how they’re finding you, and how you want to grow your business, you can put together your marketing plan.
The plan should cover the entire year, and should detail your strategy, your goals, and the specifics of what you’re going to do to achieve your objectives as well as how you’ll measure success. The plan should be something that you reference frequently throughout the year, and everyone involved in sales and marketing should track performance against the plan.
For example, if you plan to roll out a big radio campaign on a local station in May, will you see results on your bottom line in June and July? What will be the customer actions, website performance data, or sales figures that you’ll use to measure the success of the campaign?
Understand your budget (and your limitations)
Once you have an outline for an annual plan, it’s time to allocate resources accordingly.
Your business’ stage of growth will determine how much you can and should spend on marketing. Many businesses will allocate a percentage of their gross revenue to marketing costs, but if you’re just starting out you’ll likely need to spend more than a company that’s already established to build brand awareness and put your company on the map.
As a part of your overall small business budgeting process, you should have created projections for your sales for the year. Looking at these numbers will allow you to settle on a marketing figure that feels reasonable for your company. According to a recent survey from Gartner, most small businesses spend around 10% of their annual revenue on marketing.
- Identify areas where you want to spend more vs. where you can focus on organic efforts, such as onsite SEO and social media amplification
- Consider how different seasons will affect your spending – if you like to do a major advertising push leading up to Small Business Saturday to kick off the holiday season, reserve a larger amount of your budget for that time.
Your marketing plan should make it easier to spot these necessary spending ebbs and flows.
Some companies opt to apply for small business financing to rapidly expand their business and drive growth with digital marketing. Term-loans are a sought-after type of business financing due to low rates and long repayment terms. You can use this money to help fuel your business growth over time — just make sure to be responsible with payments.
If the prospect of creating a marketing budget still seems overwhelming, there are resources that can help to point you in the right direction. Smartsheet has 12 free marketing budget templates, and SCORE also provides a free online marketing budget template.
Putting together a marketing budget will not only keep your spending on track, it will also allow you real visibility into what works and what doesn’t in your marketing efforts. This way you can adapt and tweak your plan as your business and customers change and grow.
Jared Hecht is the co-founder and CEO of Fundera, an online marketplace to help business owners secure financing. Prior to Fundera, Hecht co-founded group messaging app, GroupMe.