As a small business owner, you know that creating and sticking to a marketing budget is essential to your success. But where do you start? And how much should you spend? In this post, I’ll walk you through the steps of creating a marketing budget for your small business, and provide some tips on how to stick to it. Let’s get started!
1. Define your goals 🎯
It is no secret that goal setting is essential for the success of small business growth. Equally important is to plan how you are going to reach that goal. As Brian Tracy said, “a goal without a plan is just a dream.” Always keep in mind when setting goals for your business is to use actionable items that you can control. I have talked about this a bit in my last post; you can learn more here.
So, what type of goals should you set for a business? Here are some items you should consider:
- Revenue goals – how much money would you like to earn each year, each quarter?
- Business expenses – how can you reduce what you spend on business expenses while still maintaining a successful workflow
- Customer Traffic – what can you do to bring in more customers?
- Employee retention – how can you create an employee-centric environment to engage and retain your employees?
- Marketing – how do you plan to market your business?
This may sound like a lot of work and consideration, but I promise that having goals and an actionable plan to achieve those goals will improve your business in the long run. In addition, it will help in creating and sticking to a marketing budget as you will now know where you should allocate your funds to reach those goals as most goals can be achieved with added marketing efforts.
2. Calculate your average customer lifetime value 💸
According to an article written by Qualtrics, customer lifetime value is how valuable a customer is to your company. You can measure this by understanding what value the customer gives your business at each interaction. Say you are a candy store and you have a loyal customer that comes in to purchase about $20 worth of candy each holiday equaling about $140 each year in revenue from that customer. Now, if that customer has been there for 5 years, their lifetime value is approximately $700.
Now you can calculate what the customer acquisition costs are – basically, how much did you spend to bring that customer in? This is where your marketing efforts come into play. Did you list an article in the local newspaper? Did you run a Facebook ad that drew customers in? If that number is larger than the lifetime value, you will need to make some adjustments to lower that acquisition cost so that you are profiting from the interactions. This helps in creating a marketing budget as you have now determined how much you can spend on those efforts to continue to stay profitable.
3. Research your competition 🔍
Knowing your competition and what their marketing efforts are will help you determine how much you need to allocate to your efforts. In addition, you can see where they are marketing their business and which platform might be valuable to you. Here is a great article from the US Chamber of Commerce about how to conduct competitor research. When doing competitor research, keep the following in mind:
- Trends in the marketplace
- Which channels are successful and which ones are not
- How are customers responding to the competitor’s efforts
Remember that your goal here is to not copy what the competitors are doing but to gain knowledge about what is working and what is not in your industry.
4. Determine and set a budget for each marketing channel 📄
Now you can determine where and how you’d like to market your business and using your competitor research, you can determine which channel is best and how much you can allocate towards that channel. For example, if you are seeing success for your industry on Facebook, maybe more of your budget can be placed on boosting posts or running ads. Or maybe you see more success in website content so you can allocate more to website SEO.
5. Track and adjust your budget as needed 📈
Marketing is never a set it and forget it endeavor. It takes frequent analysis and adjusting. The same goes for the marketing budget. While monthly analysis is important and should also be done, I recommend watching your KPIs (Key performance indicators) over a quarter – usually three months – and noting the trends. If something isn’t performing as well as you had hoped, it is probably time to adjust the spending to that tactic and put it elsewhere.
- A budget comes AFTER a strategy
- Tactics are mechanisms for a strategy
- Consider hiring someone who specializes in digital marketing – Let’s talk – Click to set up a call
- Use this FREE template to set up a marketing budget
- Consult with an accountant who specializes in small businesses if needed
Now that you understand how to allocate your marketing budget, it’s time to set some goals and put your plan into action. I would be happy to help you create a custom marketing strategy and walk you through the process of setting up your budget. Set up a call today so we can get started!