Estimated reading time: 7 minutes
Small businesses are seen as the quiet engines of the U.S. economy. They employ close to 60 million people, generate 70% more local economic activity than big box stores and donate 250% more than large businesses to community causes.
For these reasons, more and more people want to take action in supporting small businesses. In fact, in 2022, more people planned to shop on Small Business Saturday than on Black Friday. How can you capitalize on this trend? To start, you can set the right small business marketing budget to ensure your short- and long-term success.
What is a marketing budget?
Your marketing budget is the total amount of money you intend to spend during a specific period of time on marketing technology and marketing-related projects, like ongoing advertising and events. Planning a marketing budget for small businesses is essential — especially when you’re just starting out. Doing so will help you keep an eye on your spending and proactively track which tactics are most successful.
When you plan how you’ll spend your small business marketing budget, you can put your money toward the most effective channels and try creative new tactics to build your brand and win over customers.
How do you determine your overall marketing spend?
Not sure how much you should spend to be wise but effective? Companies typically allocate anywhere from 6% to 11% of their total revenue toward marketing. Consumer-facing companies tend to be at the higher end of that scale, whereas business-facing companies typically land at the lower end. Of course, other factors can affect the amount you spend, too. For early business owners with very little spend, there are a number of creative strategies that are affordable — or even free. For instance, consider cross-promotion partnerships with other small business owners who offer complementary products or services. You can each feature the other on social media or share promotions and samples with each other’s customer base.
As you consider your overall budget, take the following variables into account (and, if you haven’t yet, start to formally track them):
- Ongoing operational expenses (the cost of running your business)
- Incoming cash flow
- Margins (the percentage difference between the price of your products and the cost of making and selling them)
- Customer acquisition cost (how much it costs you to acquire a new customer)
- Length of your sales cycle
- Average value or revenue per customer
- Average sale
Now, it’s time to consider your target customers. Where are they most likely to find your business, and when are they likely to discover or search for it? Are those channels typically more or less expensive than others? After getting to know your own business, look around. Research what your competition is doing when it comes to their marketing messages and advertising tactics.
Take the time to define your ideal customers and determine the best advertising channels, messaging and targeting for them. Include relevant categories from this list:
- Pain points
- Favorite channels/content types
When you’re first starting out, you may want to test the waters with a conservative number for your marketing budget. As you see what works, you can more confidently scale it up. Keep in mind that some marketing and advertising strategies need more time to determine ultimate success. Once you land on an amount you’re comfortable with and start to get an idea of what works, you can divvy up your small business marketing budget using the 70-20-10 rule:
- Spend 70% on tactics that have proven to work well.
- Spend 20% on new tactics to help you grow, like expanding into a new customer base.
- Spend 10% on experimental tactics to help you continually innovate.
Wondering why you shouldn’t just spend your entire small business marketing budget on what you know works? Trying new things helps you take advantage of novel marketing opportunities before they go mainstream, giving you a leg up on your competition.
What should small businesses include in their marketing budget?
Once you’ve determined your overall marketing spend, you need to decide what to spend it on. Consider your current business goals. These could include educating a wide base of customers about a problem your company solves, targeting your ideal customers’ specific demographics and boosting their awareness of your solution, increasing sales with your existing customer base and growing your referral program. Identifying your goals will help you get the most out of your small business marketing budget by allocating your money to the most relevant tactics.
Most businesses, big and small, find success using a mix of digital marketing and traditional marketing. The key is to keep a consistent brand message and visual look across channels. Ultimately, your tactical mix will depend on your business model, your audience and, as you test channels, what works best for your business. Keep in mind that your marketing budget should include any outsourced help as well as the marketing technology you plan to use.
Technical tools and outsourced help
Most small business owners can’t do it all. They need help, and that’s OK! Today, there are many tools to make your life easier, and specialized professionals are available to help. Consider whether your marketing budget should include:
- Design services
- Freelance writers
- Specialized marketing consultants (social media, pay-per-click (PPC), integrated strategy, etc.)
- Marketing software (marketing automation, social media scheduling, email marketing, etc.)
Looking for design help with your logo, website, business cards and more? A professional designer can help your brand stand out in any medium.
Digital marketing channels offer a low-cost, high-impact way to interact with your target customers. Plus, you can often make adjustments as you learn new things to increase the success of your digital campaigns. These channels include:
- Social marketing
- Digital advertising (social media ads, paid search, PPC)
- Website and search engine optimization
- Mobile marketing
- Email marketing
Produce high-quality social images in a snap. Use VistaCreate’s social media templates to design attention-grabbing images that can boost engagement and drive web traffic from your social channels.
While digital channels have taken over more share, that doesn’t mean traditional marketing tactics aren’t effective. For certain industries and demographics, they can even be more effective and personalized. Either way, they nicely complement digital awareness and give customers a tangible way to connect with your business.
- Print ads in local or trade mailers, newspapers and magazines
- Free samples
- Print materials (brochures, promotional coupons, stickers, business cards, flyers, etc.)
- Event marketing (trade show booths, promotional materials, etc.)
- Radio ads
- TV ads
Let your business cards multi-task. On the back, print a punch-card design for in-store rewards or a QR code that leads to your website or social media channels.
How do you track the success of your marketing efforts?
Track your marketing spending to ensure you’re staying on track and not going over budget. You may even realize that your budget, especially toward certain digital channels, isn’t being spent as quickly as you thought and that you can be more aggressive. So, keeping track of your budget empowers you to make adjustments along the way.
Beyond tracking money out the door, track the success of each channel and tactic to make sure your marketing dollars work their hardest. Key performance indicators you should regularly track per channel include:
- Brand awareness channel metrics, like social media followers, social post impressions, website visitors and cost per visitor
- Customer nurturing metrics, like social media engagement (comments, likes, reshares), email opens, email clicks, pages per session on your website, time on page and advertising cost per click
- Conversion metrics, like closed sales, average sale, cost per sale and customer lifetime value
Tracking these metrics helps you determine which channels drive the most awareness and, ultimately, sales for your company and at what cost. Use this knowledge to determine where your marketing dollars are best spent so you can plan the right mix. Remember that as customers move from learning about your business to considering your products (aka the sales funnel), different channels may be more effective but that doesn’t discount the value of the early awareness channels.
As you close out your first year in business, these metrics will also deliver valuable insights into how certain events or seasonal trends affected your business. You can use this information to strategically plan the cadence of your marketing spend next year — setting yourself up for long-term success.