There’s no such thing as a magic formula for working out your marketing budget.
If you do a search for marketing budget online you’ll find a lot of different ideas about how to figure it out: everything from a percentage of sales (and the actual percentage recommended varies wildly) to a percentage increase on last year’s marketing budget or simply a figure that sits well with your gut.
If you’ve been in business for a year or more (or even a few months), take a long hard look at your marketing efforts up to now. Make a list of everything you’ve done, together with the costs involved, and the results of each item.
If you’re like most small businesses, you can’t pinpoint your marketing results for the most part. It’s tough to admit that, but it’s a reality for most of my clients, and many others in business. You spend money from a mostly non-existent marketing budget and then you don’t know whether you spent that money wisely.
So as a first stage for doing better, look back to last year and see what you spent your money on. To help you jog your memory here’s a list of possibly marketing expenses. It’s not meant to be fully comprehensive, so just use it as a guideline.
What I Spent My Marketing Budget On
- newspaper advertising
- directory advertising
- business conferences
- flyers
- giveaway promotional items
- special offers
- price discounts
- advertorials
- brochures
- website
- newsletters
- graphics
- copywriting
- special events
- loyalty programs
- referral programs
- customer service
- market research
- packaging
- distribution
- publicity
- public relations
- trade shows
- marketing education
Write down information about each expense using the following headings:
- What I Bought
- How Much I Paid
- How Much I Made
You should now have a detailed list of all the print advertising, fliers, business cards, websites, copywriting, brochures, promotions etc that you worked on. You should also have an idea about which of your marketing efforts were successful and which weren’t.
Should. But probably don’t. Assuming that you’ve figured out how much you spent on marketing last year, that’s as good a place as any to start with as a guesstimate for this year’s budget. Only this year, do things a little differently. Be more proactive about tracking your marketing efforts. Keep notes on what works and what doesn’t.
Doing a newspaper advert? Use a call to action that lets you track who’s replying to the ad. That can be as simple as using a specific email address, a special phone number, or even just asking prospective customers how they heard about you.
If you have a website, or plan on getting one, make sure that you have a way to track what people are doing on your site. Which are the most popular pages? Which pages make them run away screaming?
You can get some great insights into whether you’re spending your marketing budget wisely by listening to your customers. Ask them questions. They’ll be happy to tell you what they think. And even happier when you take action to improve their experience with you.
These same principles apply just as well to you if you’re just starting your business. True, you’ll probably end up pulling your marketing budget out of thin air, but also true that you’ll learn what’s working as you go along because you’ll do what so few businesses do from the very beginning: you’ll test and track your marketing to make sure you’re always doing it that little bit better.
And little improvements soon add up to a whole lot.
So go ahead. Pick a figure. Small is fine to begin with, until you get the hang of it. But don’t be afraid to add to your budget if you can see that your plans are panning out. If you know that you’re bringing in $5 for every $2 you invest in marketing, your marketing budget isn’t going to be limited to a set figure. You’ll invest more to make more. It’s as simple as that.