As a rule, your marketing budget should be a percentage of your revenue. B2B companies should spend 2% to 5% of their revenue on marketing. For B2C companies, the share is often higher, between 5% and 10% of their revenue. Below are 10 tips for creating an effective marketing budget, along with the most common marketing mistakes and how to avoid them.
10 Tips for Creating an Effective Marketing Budget
These tips cover everything from the planning stage to implementation. Developing a marketing budget has never been easier.
1. Plan ahead
Waiting until the beginning of the new year to create a marketing budget is a great way to have a disorganized budget that leads to wasting money on marketing efforts that don’t convert. You need time to step away from your original marketing ideas so you can come back to them with a clear head. And when the numbers don’t add up (and they often don’t), you need time to develop new marketing solutions.
2. Start with your sales goals
Setting goals is an important step in creating a marketing budget.
- How much income should you have every month?
- How many sales do you need to make your monthly income goals?
- How many links should be created?
- How many of those leads should convert into sales?
Research what percentage of your leads typically convert. If you’re just starting out, research typical sales conversion rates in your niche to get a realistic target.
3. Develop Your Customer’s Buyer’s Journey
Customer: buyer’s journey a series of steps for your potential customer to buy your product or service. Mapping out your buyer’s journey will help you understand your marketing needs.
- How do your customers find you?
- What should they know before they buy?
- What key factors contribute to their final decision?
- How will you treat your customer?
- How can you turn your customers into advocates for your brand?
Whether it’s social proof, videos or free resourcesknowing what your customers need along their journey can be eye-opening and inform your marketing plans and budget.
4. List your operating expenses
You need to know exactly how much money is going out and how much money is coming in to create a marketing budget for your small business.. Create a spreadsheet with all of your current or expected operating expenses. Expenses can include staff, inventory, SaaS subscriptions, web hosting, sales tax, professional fees, social media promotion fees, and whatever else you need to run your business. These basic business expenses will give you a realistic picture of what you have to work with when it comes to your marketing budget. It is important to create a monthly marketing budget.
5. Evaluate last year’s budget
If you’re already in business, start by looking at what worked well and what wasted money in the previous quarter or year. Are there areas you’ve gone over budget? Are there categories in which you’ve never spent a dime? Take a look at your current marketing spend. What drives website traffic and sales results? This will let you know where to invest your time and money in the new marketing budget.
6. Understand your niche market
You need to look at what your competitors are doing with their marketing efforts. Look at your top three competitors. Use spyfu.com to check where they spend money on their site. They buy ads online. Do they generate inbound leads with thought leadership blogs? podcast:or videos? What methods do they use for advertising? Do they prefer direct mail over social media advertising? Are they investing in every possible marketing platform or a select few? You might want to start with basic tactics your competition is already using and see what works for your business. Remember that success leaves traces.
7. Evaluate which marketing efforts are generating revenue
Not all marketing is an expense. When you host a live conference or paid webinar and charge people to attend, you’re marketing your business and earning revenue from that activity. Knowing which marketing efforts bring in money is a great way to measure their impact on your business. It also shows what is worth continuing and what should be deleted. If none of your marketing activities are generating revenue or leads, it’s time to strategize some new marketing ideas.
8. Develop or update your marketing plan
Creating a marketing plan is the fun part. At this point, you need to understand where your business is and where it can go. Use the information from the steps above to build your plan.
- How much money do you need to spend to reach your sales goals?
- What basic marketing tools can you use to get started?
- Do you understand how your customers spend time online?
- Do you know how they want to be marketed?
It will be important prioritize your spending. Focus only on what will make you more competitive sooner rather than later. Don’t start a marketing tactic that you can afford to invest in for at least three to six months. Once the plan is complete, setting a marketing budget for your small business will be easy.
9. Know the difference between a sound marketing strategy and a fad
You may have your heart set on a marketing tactic, but if it’s not supporting your overall business or the numbers aren’t showing up, it’s time to cut it and move on. If it seems like the trendy tactics everyone else is using might work for you, remember that your business is different. What works for one company may not work so well for another. Focus on your customer’s needs and develop a unique marketing approach that is difficult to duplicate.
10. Expect the Unexpected
Remember that your marketing budget has the same characteristics as your personal budget. No matter how well you plan for every eventuality, something will pop up without notice. Leaving a little wiggle room in your marketing budget for unexpected expenses allows you to make healthy decisions. Mark a special column for emergencies so that unnecessary money is not spent on frivolous things for the office.
5 Common Marketing Mistakes
Now let’s discuss the most common marketing mistakes and how to avoid them as you build your marketing budget.
1. Failing to set clear goals
One of the common mistakes small business owners make when creating a marketing budget is doing so without clear sales goals. You can’t budget for something you didn’t even set in the first place.
2. Not testing your client’s buyer journey
A broken customer buyer journey can also impact your marketing efforts and lead to failure, regardless of your marketing budget. Therefore, you should regularly test it and make the necessary adjustments.
3. Failure of marketing strategy and sales coordination
Let’s say you don’t align your marketing budget with sales. Then you can end up running an ad campaign without directly impacting revenue, which is a waste of money unless it’s strategic for brand awareness.
4. Focusing exclusively on new customers
You may feel tremendous pressure to add new prospects to your company’s buyer funnel. However, it will cost you about five times more acquire a new customer rather than retain an existing one. Focus on keeping your current customers happy.
5. Failed to evaluate your marketing strategy
Marketing is a field that is constantly expanding and changing. This requires consistent training to get the most out of your investment in your marketing efforts. You won’t know if your marketing budget has been put to good use unless you regularly evaluate your current strategy. Perform an in-depth analysis of your marketing efforts. Look at the performance and results. Know your cost per lead and your cost per sale. Also, assess whether all the marketing tools available to your team are being used effectively.
Creating a marketing budget for your small business doesn’t have to be overwhelming. But with persistence and a willingness to study the competition, try new tactics, and track metrics, the process can help you build a strong foundation for your business for years to come.
A tight budget shouldn’t hold you back either. DIY marketing works too. Start small. Get specific about your marketing channels; this will make you feel more confident in your marketing efforts. As you learn to set a marketing budget for your small business, try a thing or two to see what works.
And if you don’t know how to market your business, take the time to educate yourself. My Make your own boss course several weeks are devoted to various aspects of marketing, including branding, planning your marketing approach, and your marketing strategy. Meanwhile, if your small business is already up and running, you may benefit from the information shared in my course How to sell and market online.
As a final tip, I want to remind you that marketing is an ongoing effort. It’s hard to manage your business operations and also manage your marketing, but you should work on marketing one day a week or two hours every day. Marketing is the engine that drives your business results. Focus on it.