Marketing is critical for growing your business. But how much should you put toward your marketing spend on content and advertising? What does a healthy budget look like for small business marketing?
If you don't have a strategy your spending can quickly get out of hand. You may find that website traffic goes up, but it doesn't result in leads.
In this guide, we'll take you through how to create a marketing budget, what to include in your marketing budget template, and go over examples of normal marketing costs.
Marketing Budgets for Small Businesses
Like any other budget, a marketing budget is a plan for how to spend money on marketing efforts over a certain amount of time. The goal is to get the most return out of each dollar spent.
For small businesses that don't have a CMO, it’s best to have a smaller marketing budget and experiment with different strategies over time. If you do this, you're in a better position to see what methods and techniques work best for your business and grow them with it. It goes without saying that you should abandon techniques that don’t work.
Marketing budgets are hard to create the first time. But a smaller, well-spent marketing budget will outperform a larger budget with no plan. After you've gathered information about what works for your business, you can use that to adjust your marketing investment budget for what works best.
What Are Marketing Costs?
Now that you're putting together a plan for your marketing budget, what exactly are you spending this money on and do you have your marketing goal setup?
Marketing costs are spent on anything that advertises your business. It's your website domain and design, headshots and team photos, traditional marketing, copywriting and printing - the list goes on for things you can spend to get revenue growth with marketing.
Here are more costs you might need to consider when making your marketing budget.
Content Marketing Writers
Whether it's content or copy, quality writing can take a lot of time and mental energy. That said, have some budget allocation for a professional writer. Ask yourself if your brand's tone is casual and friendly or professional and authoritative. After that, hire someone who has writing samples that sound similar to the way you want your business to sound.
Professionally written blog content can be anywhere from $.10 per word to $1 per word. Sometimes it's even more. Landing pages for your website, on the other hand, can cost a couple hundred to tens of thousands of dollars. Get the best writer for your budget.
Good writing and content is the first step to finding success with paid advertising.
Website and Content Design
It's okay to use WordPress as a placeholder, but a reputable business needs a professional website. Find a designer that has done work in your industry before and knows what a good website in your industry looks like. This includes the features that customers, clients, or patients expect it to have.
Websites can be pricey, but they don't need to be updated every year. A basic website usually costs around $5000, but it can easily go up from there. Make sure the designer includes training and website maintenance in the package. A good website will be core to improving your marketing ROI and will be a big piece of your brand strategy. A website is a gateway for people to see who your company is and why a customer should choose you.
This is your budget for paid advertising with a Facebook ad or Google Ad with digital marketing or print ad for traditional marketing. This amount can vary wildly from industry to industry - even from business to business. Pay attention to your competitors and businesses you want to emulate and see what they're doing for ads. If they don't do paid ads, ask yourself whether you ought to have your own.
Do your research so that you know what's going to be cost-effective and brings you closest to your goals. If you're hoping to increase your online presence, starting a Facebook Business Page may be a good place to start.
Some software, like trackers and analytics, helps make marketing easier. Others are required to do the actual marketing. Website builders come to mind.
Google Analytics is an example of marketing software you can use for free. There are paid versions, though, that might make your life easier. Besides having everything you need all in one place, these usually also provide extra information that you won't get from the free versions.
Software rarely comes with a one time payment anymore. Determine whether they're monthly, quarterly, or yearly payments and make sure to budget accordingly.
It can seem overwhelming if you're looking into marketing your business for the first time. You may not have marketing teams or even know where to get started By investing in additional guidance, you'll be able to jump ahead months or years compared to what you would learn on your own. It may cost money upfront, but your income and sales will increase faster than they would otherwise. More money earlier means faster growth and stability for a new business.
If you choose to go with a mentor or expert, make sure they have experience in your industry. Ask for testimonials and success stories from previous clients. Even if an expert seems perfect, they aren't the right expert for you if they can't fit in your budget.
This is the most important cost to consider. The stakes are high for small business owners - not only does your time translate directly into sales and money, but time is something you can never get back.
If you can afford it, don't waste your time and skills on learning something you'll only do once or twice. If you're a dentist, for example, your time is better spent with your patients as opposed to struggling with WordPress for eight hours.
How To Create a Marketing Budget
Having a clear direction in mind will translate into an effectively drafted and managed marketing budget. Here's what this looks like.
Define your marketing goals
Are you trying to create a brand or introduce a new service? Or are you trying to get a little extra work in a slower season? Reaching these goals requires different techniques and amounts of money. Define your goal first so that you aren't tempted to adjust it based on budget.
Set a nonnegotiable maximum amount for spending
Choose an amount that's comfortable and don't let yourself spend more than that. This may mean turning off some ads or subscriptions. If they're costing you more than they're bringing in, they aren't worth it.
Pick a technique or strategy
Pick one or two marketing techniques are strategies at a time. When you're doing too much at once, it's hard keep track - you won't know which ones are working the best for your business.
An example of two techniques in marketing is search engine optimization and paid advertising.
Consider SEO the ultra marathon run and paid advertising the sprint. With SEO you will need 6-12 months to develop content and links to your website to make sure you show up on search engines. With paid advertising you will be running paid ads on Facebook or Google focused around your ideal customer to get traffic now.
Many businesses will use both of these strategies at the same time. Paid to keep the lights on and SEO to build for the future. These guides may help you to understand more.
Prepare to track and analyze
In the world of marketing, tracking and analyzing is necessary. You want to know what ads work best for your business so that you can funnel your marketing money into there. Cut techniques that don't pull their weight.
You can use marketing budget templates that you find online to help with tracking and analyzing. If you're investing into help with your marketing, you'll likely have access to samples that way as well.
Marketing Budget Sample
Here's a sample marketing budget for a home cleaning company. Let's assume they've been in business for a couple years, so they already have a website set up. Their goal is to increase work during a slow season by using Facebook ads with a focus on their geographic area. They're also going to outsource graphic design and copywriting since this is a one time campaign.
Normally, funding for this type of campaign would come from current profits in hopes to have even higher profits later. In smaller businesses, this would mean smaller draw. For this example, though, they used less supplies than they expected, so they're making a smaller order. They're combing the excess money in their supplies budget and a small owner's draw for this marketing budget.
Tips for Managing Your Budget
Sometimes it's easier to make a plan than to follow it, but there's no point in making a budget just to throw it away. Here are some tips to help you stick to your marketing budget.
Spend over time rather than all at once
Stagger your marketing expenses and be selective when it comes to ordering your campaigns. This will make your data clearer, allowing you to focus your money.
Keep your budget up to date
Pay attention to your income and expenses so that you can adjust your marketing budget accordingly. If you overspend because you don't know your marketing budget, this will put you behind or even cut into your profits. Spending under your budget may seem like a good thing, but it could also mean that you're missing out on opportunities. Staying informed is key.
Make decisions based on data
This isn't the place to make decisions with your gut. Instead, track and analyze your marketing strategies so that you spend on marketing efforts that are bringing in the most money. You'll thank yourself when you see the results.
Tools for Managing Your Budget
Having the right tools to tackle your budgeting needs is non-negotiable for effective budgeting. Why live in the future if you can't take advantage of the resources?
Apps and Software
With so many digital and mobile-friendly tools designed specifically for finance management, keeping track of your budget has never been easier. There's plenty of paid and free budgeting software for small businesses, and some of them are specially tailored to specific tasks like bookkeeping, bill pay, payroll, and invoicing.
If you decide to sign up for a subscription, recognize your priorities from the onset. Whether it's mobile accessibility or a one-size-fits-all package, do your research to determine if its features justify its impact on your budget.
Sometimes nothing beats good old spreadsheets like Microsoft Excel or Google Sheets. If you have the time, spreadsheets are 100% customizable. With spreadsheet macros, you can create all the reports and automated trackers that other software can offer you for free. It does take time, though - and if you're not excited about it, that time is better spent in other ways.
We have the team and technology you need to set up a marketing budget for you and operate as your virtual business partner for all things marketing. We will set up your website, buy your ads, run your reviews, and improve your business.
Different marketing budgets for different small business verticals
According to a 2020 survey from the American Bar Association, less than half of the firms that responded said they had any marketing budget. 13% said no one at their firm is responsible for marketing. Many of these companies will choose to partner with a services company for their law firm marketing needs to help them get their customers
The leading channels from the same survey were sponsorship, LinkedIn, email, Facebook, and print. The takeaway here is that good marketing doesn't have to cost a lot.
For those law firms that do spend on marketing, Lawyer Monthly reported that they invest between 2% and 15% of their annual revenue. Most firms tend to be on the lower end, though.
Aside from regular factors, like the size of the firm and the type of marketing, their spending also depended on the type of law they advertised. For example, Google Ads charged personal injury lawyers the most per click on each ad. Estate planning lawyers were charged the least.
Marketing budgets for healthcare businesses and medical practices tend to come in on the lower end. According to Baker Marketing Laboratory, healthcare businesses usually need to spend 2% to 3% of their yearly revenue to maintain growth, brand awareness and have good inbound marketing. The cost is around 4% to 5% if growth is stalled or if the business' brand is being built.
Just because healthcare businesses spend a smaller percentage, that doesn't mean that you can neglect your marketing. Since healthcare businesses rely on long-term patients asking for reviews and focusing on the quality of your patients' experience goes a long way.
Home service businesses
Most home service businesses spend a higher percentage of their revenue on marketing. This is partly because a lot of home services are one-off jobs.
Another reason is that people do a lot of research before calling a home service - they need social proof. A 2020 Bright Local survey found that 87% of consumers read reviews for local businesses, and 93% of consumers use the internet for this same purpose. This suggests that getting help with digital marketing would be a good place to start for home service businesses that are new to marketing themselves.
Other types of small businesses
If your business doesn't belong to the above-mentioned industries, the Small Business Administration recommends that small businesses making under $5 million per year should spend around 7% to 8% of yearly revenue on marketing.
As always, though, adjust your numbers to what you know will help you reach your goals. If costs are low and profits are high, then you might consider raising your budget a bit. If you're dealing with lower profits, then you may want a lower number.
Even recommendations from the Small Business Administration aren't going to work for every business in every situation. If you're launching a product, for example, you might want to consider a larger budget. If you know you always get fully booked during a certain time of year, then you might want a lower marketing budget at that time. Pick the technique - whether that being print ads or content marketing, like blogs - and the amount that fits your business best.
Marketing is essential to growing your business, but you don't have to go into debt to do it. Asking colleagues or experts for help will speed up your success. Remember, though, that there are resources available for business owners who might prefer an independent approach. Find the marketing that works best for you and double down on it.
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