Practical Tips on How to Set a Marketing Budget for Your Small Business

I see you! I know who you are!

You're a small business owner with a lot on your plate. You're an expert in your field, whether it's manufacturing or importing, but when it comes to marketing, you might not be as confident. There are so many marketing channels, tactics, and tools out there, and it can be overwhelming to figure out which ones to invest in.

With all these distractions looking at your from everywhere, having a marketing budget becomes essential to mobilize your resources and focus your attention. It's like having a roadmap that helps you stay on track and reach your destination. With a budget, you have a clear idea of how much money you can spend on marketing and what your priorities are. This makes it easier to decide which marketing channels and tools to focus on and which ones to skip. Think of your marketing budget as a way to keep your eyes on the prize. You know what your goals are, and you have a plan for how to achieve them. This helps you stay focused and avoid getting sidetracked by shiny new tools or tactics that might not align with your overall strategy.

A well-planned and executed marketing strategy can lead to increased brand awareness, customer acquisition, and revenue growth. However, if you haven’t done such projects in the past and have only a vague idea how much spending is enough, setting a marketing budget can be a daunting task, especially for small businesses with limited resources. In this article, we will discuss a few practical ideas for setting a marketing budget for small businesses.

Working within a marketing budget means, you are essentially setting limits on how much money you can spend on your marketing efforts. This helps you plan ahead and decide which marketing strategies will be the most effective for your business without overspending. You can also make sure that you're balancing short-term and long-term marketing goals. This means that you're not just focusing on immediate gains, but also thinking about the long-term growth of your business.

By having a budget in place, you can also make sure that you're not overspending on marketing. You know exactly how much you can afford to invest, and you can prioritize your spending accordingly. This helps you avoid running out of money before you've even had a chance to see results.

So, if you want to make the most of your marketing efforts and reach your business goals, having a marketing budget is essential. It's like having a compass that helps you navigate the marketing landscape and stay on track. With a budget in place, you can focus on what's important and avoid getting distracted by all the noise and hype surrounding different marketing techniques and tools.

Several factors must be considered when setting a marketing budget, let’s dive into some of them.

1. The size of your business is a key consideration. Small businesses may have a lower budget than larger businesses, but it's important to allocate those resources efficiently to maximize ROI. For example, a small business might invest in targeted social media ads to reach a specific audience, while a larger business might invest in a broader advertising campaign.

2. Industry is an important factor. Different industries have different marketing needs and require different budget allocations. For example, a technology company may need to invest more in online marketing channels like SEO and PPC advertising, while a retail store may need to invest in traditional advertising like billboards and flyers.

3. Your marketing goals are also crucial when setting your budget. Your goals might range from increasing sales to building brand awareness. Depending on your goals, different budget allocations may be required. For example, if you're focused on increasing sales, you might invest more in paid advertising or promotions.

4. Understanding your target audience is also essential for setting your marketing budget. You need to invest in marketing channels that your target audience is likely to engage with. For example, if your target audience is active on Instagram, you might invest in influencer partnerships or Instagram ads.

5. Keep an eye on the competition. Understanding what your competitors are doing can help you determine the right marketing budget for your business. You need to invest enough in marketing to stay competitive, but you don't want to overspend if you don't need to. By analyzing your competition, you can find the right balance between investing in marketing and maximizing your ROI.

Practical ideas for setting a marketing budget for small businesses

a. Benchmarking:

Benchmarking is an essential tool for setting a marketing budget. It involves comparing the business’s marketing budget to similar businesses in the industry. This can help businesses understand if they are over or underinvesting in marketing. Several websites can provide benchmarking information, such as Marketing Sherpa, AdGooroo, and SEMRush. HubSpot regularly publishes reports and studies on marketing trends and best practices, which often include benchmarking data on marketing budgets. Additionally, HubSpot's marketing software includes tools for tracking and analyzing marketing spend and ROI, which can be used to benchmark your own marketing budget against industry averages and best practices.

b. Percentage of revenue:

A common approach to setting a marketing budget is allocating a percentage of revenue. This method involves determining the amount of money to be spent on marketing initiatives based on a percentage of the business's revenue. According to the Small Business Administration, businesses with revenue under $5 million should allocate 7-8% of revenue to marketing. However, this percentage can vary depending on the industry and marketing goals. For example, businesses in highly competitive industries may need to allocate a higher percentage of revenue to marketing to stay competitive. Similarly, businesses with aggressive growth goals may need to invest more in marketing to reach their targets. When using the percentage of revenue approach, it's important to regularly evaluate the effectiveness of marketing initiatives and adjust the budget as needed to maximize ROI.

c. Project-based budgeting:

This is a popular approach to budgeting. It involves allocating resources specifically to individual marketing projects to ensure that funds are available to execute them effectively. Businesses can track the effectiveness of each project and adjust the budgets on the go. When planning your budget for a project, you can choose to include all costs of project components or use past experiences to estimate the budget. Experience shows, that both ways are great starting points, before considering other elements, like risk mitigations (if you need to). Plan for 1 project, connected to 1 event during the year, like a Street Festival in summer, dedicated to your industry (like a dog show event) or a town, etc. Then plan other activities around it. Budget to advertise before, then budget to advertise after.

d. Seasonal budgeting:

Seasonal budgeting is an effective approach because it keeps focus on the natural ebb and flow of consumer demand. During certain times of the year, customers are primed to buy and actively looking for products or services that match their seasonal needs or preferences.

For example, during the holiday season, customers are often searching for gift ideas, deals, and promotions. By allocating more budget to holiday-themed marketing campaigns, businesses can better capture this demand and engage with customers at a time when they are most likely to make a purchase.

e. Prioritizing budget allocation:

Prioritizing budget allocation involves identifying the most effective marketing channels and investing more in them. For example, a business may allocate more budget to digital marketing channels such as social media advertising and search engine optimization if they have been proven to generate more leads and conversions. Businesses can analyze their past marketing data to determine which channels have been most effective and adjust their budget allocation accordingly.

How a business consultant can help with setting a marketing budget:

As a solo business consultant, I can help small businesses set a marketing budget by providing personalized advice, guidance, suggest tools, help ideate - in other words, I can draw a navigating map that can lead you towards your goal. We will analyze your current marketing strategies and budget allocation and recommend changes that align with your goals and budget constraints. A part of the services you can receive from me is a recommendation on the amount or percentage, a starting point for you to work from. I can provide consultation and help businesses identify the most effective marketing channels applicable for them, set up metrics to measure the effectiveness of marketing campaigns, and optimize marketing strategies for maximum return.

Learn more about marketing for small businesses on my blog by reading articles in categories like Growth Hacking, Business Growth, Small Business, Marketing etc.