How to work out a marketing budget
You run a business. It works well currently, but you know that without further investment, it is likely to stay as it is, making the same amount of money every month. You know that in order to expand your business and generate more leads, you need to invest in marketing – but where to start? How much do I spend? Where do I spend it? Do I have the time and resources, such as people and the right tools?
The first thing you need to do is set a budget. This will help you work out how much of an investment you can afford to make, enabling you to build a clear strategy.
As a business owner, you may be frequently approached by media outlets offering you print or digital advertising options for a set price. But how do you know whether this is good value to your business? Other than the ‘potential’ to reach ‘X’ amount of people that ‘might’ be your target audience? Spending on one off opportunities will often get you minimal or zero results – because in most cases, marketing is about brand building and there are few businesses that can rely on their adverts to deliver sales straight away from a one off placement.
It is a well known marketing fact that on average, a consumer is likely to see references to your business or products around 7 times before buying into them. So when planning your marketing strategy, it is about building trust with your customers and using multiple channels to target a specific audience – which is now possible thanks to the likes of Facebook and Google PPC, where you can see exactly how many people have responded to your digital ad campaign. If you have previously used a lot of print ads, because they suit your business and have worked for you in the past – try to find a way to measure your results more accurately such as adding a custom telephone number so you can see who called as a result of your ad, or perhaps an exclusive voucher with a call to action so you can measure how many people contact you to redeem it. It also helps to ask your customers where they heard about you. This will help you calculate your return on investment (ROI) to see if the spend was worth it – if not, you then know to revise your campaign strategy and try a different approach.
Your approach is important. Do you know who you are marketing to? Some business owners may know exactly who their client base are, what they do, where they live, what they like – and are able to target their marketing more specifically. Ask yourself, do I know who my ideal customer is? Where are they likely to see my adverts? What kind of style will they respond well to? What kind of language will they relate to? All these things must be considered before even placing an advert, as you could be wasting money targeting the wrong audience, in the wrong place. Or the right audience but in the wrong place and vice versa. You also need to work out what resources you need in order to develop your marketing – do you have the time? Do you need to hire a person or work with an agency? Do you need to buy subscriptions & tools in order to help you plan and measure your campaigns or gain PR for your business? What about content creation such as photography & videography to promote your brand? Or updating your website?
All of these things could affect how much you need to spend on your marketing.
How do I know how much to spend? This varies from business to business, however there is a general rule depending on whether you are launching a new business or marketing an existing one that is fairly well established. Most established businesses are advised (generally, not necessarily by us!) to budget between 6-12% of their gross revenue on marketing, allowing a little bit more for new businesses as opposed to an existing well established business to help give it that initial push. For new businesses, it’s around 12-20%. You should also calculate how many sales you need in order to justify each amount from your budget that you spend, and if your return does cover your investment – you may need to change your approach.
Having a clear marketing strategy that is measurable will help you grow your business. Set a budget, make a strategy plan, define your audience, get the resources and/or people in place, measure and refine, get more customers, make more sales. Sounds simple, right…?