How to Set Your Marketing Budget for Your Small Business

By Brooke Tajer on
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 Small businesses are always wondering how much to spend on their marketing efforts. What is the right amount? Is 10% of total revenue an inadequate amount? But isn’t 20% too much? Not only is the ideal amount uncertain for many businesses, but the strategy often differs as well, as some will use Google AdWords as their main strategy one month and then use Facebook for the majority of their marketing the following month. If these situations resemble your business in any way, you are probably looking for a clear cut answer to know how much you should be spending. Here are two effective ways to go about addressing the situation:

1. Goals. One way to set your budget is by defining your business goals and from there creating an action plan. This is called goal-based marketing. For example, if your goal is to reach 100 new customers, what will your business need to do in order to achieve it? How much advertising is needed? Which social media outlets will you use, if any? This type of marketing uses a mix of your own business goals, mixed with the reality of your company’s finances. Though this type of budgeting takes the most work to establish, it is also the approach that makes the most sense since you will be basing your budget on necessity – the necessity to meet your calculated goals.

2. Sales Percentage. Another way to go about setting your market budget is by setting aside a certain percentage of your business’s total sales to go toward all of your marketing efforts, such as advertising, social media, trade shows, and public relations. Though this type of budgeting is easy and very appealing as it eliminates the stress of having to determine a set amount of each month, it is also quite chancy – you may end up spending way too much or way too little. You may end up selling a lot more during one month, increasing the amount for your marketing budget when you might not even need it at the time. If this is the course you choose to pursue, make sure that you are still aware of how much the set percentage – for example, 5% of total sales – is giving you for the month, and then adjust accordingly. Choose to use the percentage as more of a guideline, rather than the decided amount.

Along with one of the two basic routes above, use your own business details to further determine the correct amount needed for your marketing strategies. Take things like your profit margin, the newness of your company, and the aggression of your competition into consideration before setting your budget totals. Marketing is an essential part of your small business – take the steps needed to determine its price for your particular business.