A lot goes into running a business, and one of the most important steps is marketing and specifically your small business marketing cost. Establishing a plan is one thing, but the hard part comes down to allocating a sensible budget. Determining your marketing costs can help you see where you are overspending, and where you can afford to invest a little more. There are a number of factors to consider when building an advertising budget, and every business is different. Here are some vital points to consider, as well as steps to take to find the costs for your small business marketing.
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The Importance of Small Business Advertising
It is no secret that we live in a technological era. We spend an average of four hours per day on our phones alone, and much of that time is spent searching for products and information. Just imagine how much more is spent on other tech like tablets and laptops. Simply opening up a storefront, whether digitally or a brick and mortar location, is not going to cut it.
The only way people are going to know your business exists is if you start creating an online presence. This could include posting regularly on social media, buying social media ads or Google ads, and keeping your Linkedin page up to date and active. Depending on your industry, you may also benefit from sending marketing emails to gain recognition.
How to Determine Your Marketing Budget
There are many avenues to go about small business advertising, and diversifying from local marketing to possibly worldwide can be a game changer. The question is, how much does it all cost? Even operating on a low budget comes at an expense. It takes time, money, and resilience to get noticed, especially if you have competitors.
One way or another, coming to a conclusion about your small business marketing budget is essential. Here are some vital steps to determining what that might be for your particular business and situation.
Take a Look at Your Sales Funnel
Assessing your sales funnel and your customer acquisition costs help you determine how much effort and resources are going into your customer journeys. This can mean financial or material resources, but note that labor from yourself or your employees is also a factor.
Quantifying these resources to turn each visitor (to your store or website) into a prospect and ultimately a customer takes some though. It is the step that can make or break your revenue generation, and prioritizing knowing your business costs will help you with developing your marketing budget. Further, the more you know about your cost to revenue ratio, the easier it will be to determine a marketing budget.
Study Your Competitors
Perhaps the most important step to take when figuring out your small business marketing costs involves keeping a close watch on your competitors. This doesn’t mean you have to copy their every move, but conducting competitive market analysis will help you know what techniques are the most effective in your industry.
Not only will this allow you to draw inspiration and apply it to your own advertising, but it also gives you an idea of what you can expect to spend on it. Additionally, you also want to pinpoint your target customer demographic in this step, as it will give you an idea of which competitors may be targeting the same demographic.
Decide Which Marketing Avenues You are Going to Take
You will inevitably realize after completing a market analysis and identifying your target audience that you have a plethora of marketing avenues to take. The next step is to determine which one(s) will be the most profitable for your business. Will you focus on digital marketing like social media? Or add in some offline advertising like print ads and billboards?
With this in mind, finding the best course of action in marketing to your target audience ultimately depends on your business goals, which brings us to the last step in establishing your small business marketing costs.
Set Goals for Growth and Plan to Revisit Regularly
At this point you should have an idea of your small business marketing cost. The final step is to set goals for growth. Marketing strategies need to be fluid and it is important to adapt your plans for growth and outreach accordingly. Ensuring that your goals are SMART is a great way to stay on the right track.
If you have a marketing team, schedule regular meetings, whether they are monthly or at least quarterly meetings to evaluate what needs to be tweaked or reconfigured to stay relevant with current market trends. If you are a one-person marketing team you’ll need to do these evaluations on your own.
Average Small Business Marketing Cost
We’ve covered some basics on creating a marketing budget, but you may still want to know what the ballpark average is for marketing. According to recent calculations, some small businesses can expect to budget up to 50% of sales for marketing costs, just to establish their place in the public eye. Others may try to just match their competitor’s allocation.
However, this largely depends on the industry you are in. In fact, the range can vary anywhere from 1% – 50%. But a rough national average for most businesses is in the range of 10% – 15% of sales allocated towards marketing. Keep in mind that your marketing costs are rarely a fixed number. If you are launching a new product or service for example, you can expect your small business marketing cost to increase.
Bottom Line
As you can see, determining your small business marketing costs can be a continuous, multi-step process. The key to successful marketing boils down to showing your target audience what makes your business special and different from your competitors. Evaluating the most effective marketing plan comes with establishing your marketing budget.
As mentioned before, this process takes a little work and you’ll find yourself getting better at it over time. Some businesses will rely on marketing agencies to help them determine a marketing budget but keep in mind you’ll then need to allocate even more money, to cover their agency commission fees.
