We all know that it takes money to make money. So, I have written this post to show simple steps to creating a marketing budget as a startup business. If you do not have a marketing budget yet or need to upgrade yours, read on.
Here’s a step-by-step guide to help you set that budget to align with your goals.
Before you start writing your marketing budget for your small business, here are 5 questions you need to ask yourself.
- What are my needs? What can I do to generate more brand awareness? Do I need to generate more product sales? Am I able to generate more leads? Your goals will help determine where your money should go. For example, if you need to generate leads for your business this month and you start off with an SEO campaign, you’re probably headed down the wrong path. Once you identify your needs, you will be closer to identifying a budget. For example, you have a business that offers business coaching services to local businesses in the area. You are after leads that close in 60 days or less that generate $2,000 each group session. That is a well-defined need.
- What are you currently paying for marketing? If you are running a business, you are currently paying to obtain clients or to get brand awareness one way or another. This is part of your cost of doing business. If you have a storefront that costs you $1,000 a month, you are spending probably spending 2 times that on advertising hopes of getting foot traffic. It makes more sense to have a budget to be able to streamline your ongoing capital and subsequent profit.
- How fast can I afford to grow? Looking back at #1 and #2, once you understand your needs and what you are currently paying for marketing, you can try to figure out how much you can spend on each lead or how much to discount when you want to run a product sale. For example, let’s say you make $500 off each $5,000 transaction with a wholesaler every 60 days; you end up with a trade account worth $3,000 of profit to you. How much of that profit are you willing to give away to get the next customer? If you say 25%, that means you can afford to pay $500. Now that you understand what you are willing to pay for a client, ask yourself how many clients like that can you afford to buy?
- Am I able to take the risk? Marketing is about testing. Say that you decide to designate $1,000 for a marketing budget and that you can only spend that $1,000 if you get 5 new clients. There is no way for you to know if you will indeed get those 5 clients unless you spend it—and risk not getting any additional clients.
- How do I minimize my risk? It is important to understand that marketing in any category of business is risky. Knowing how to minimize your risks is really important, even before you set up your budget. Create a digital marketing strategy that you test out to minimize your risk. Invest time to watch the quality of the leads each week. Or get a digital marketing consultant to do this for you for a minimal fee. Start your marketing campaign at $200 a day and if realize that it costs you $100 per lead—at $200 a day you are getting two leads a day that convert to customers. At the end of the second week, the same thing happens, but you realize you are getting more than 2 leads close with the same budget so you start thinking about doubling your budget. Now you can see why having a budget is so important. You have established a starting point to test your lead generation with an understanding of how to change the details and methods as needed.
If you would like to discuss doing this exercise for your business, feel free to schedule a 30 min consultation and we can figure out your marketing budget together.
To get the most from your marketing funds, you want to create a budget that covers marketing expenses only. Here are some things that should be included in your marketing budget:
- Marketing materials: Business cards, flyers, give-away items like T-shirts or pens, as well as other items that are designed to spread the news about your company and its offerings.
- Paid advertising: Any ads you run in newspapers, magazines, direct mail campaigns, TV, and radio should be included.
- Online advertising, such as videos, banner ads, email marketing, pay-per-click (PPC) ads, content marketing.
- Production costs: This includes any art, design, photography, graphic art, and any other expenses necessary to create your advertising.
- Technology costs: The cost of building a website and maintaining it should be included in your budget.
Set A Goal For Your Marketing Budget:
Identify a measurable goal, such as a specific number of new clients or a certain amount of revenue, and then work backward to come to a budget. For instance, you typically get 10 new clients a month and your goal is 30 new clients, then you know that you have to get 300 leads to convert to meet your goal. Now, look at your past marketing efforts and determine how to do that and what it will cost.
Be ready to spend a percentage of your sales on your marketing efforts. Like I stated earlier you need to spend money to make money.
Forecast your sales in the following simple steps:
- Current sales: Keep track and use your current sales as a guideline for what your sales will be next year. This method will only work if you own an existing business and have prior sales. Be sure to take into account any upcoming events, such as a location expansion or discontinued product lines, which might increase or decrease your sales volume.
- Projected sales: This method is ideal for startups that have no historical data to rely on.
- Rolling average: This is based on past rates/prices within a 200 day period. When you average your predicted sales with your current sales, you’ll get a rolling average. This method should be used if you want a conservative estimate.
- Ideal sales: This is when you set a sales volume you would like to achieve in a set period of time.
When completing your budget, be sure to take advantage of the free tools available online. You can download a free annual marketing budget here. The Web Silo Copy of An Annual Marketing Budget Template
This annual marketing budget template includes categories for market research, branding, public relations, lead generation, digital marketing, events, sales support and travel. Organize your annual marketing plan while tracking monthly expenses.
It is my hope that I have been able to address any concerns you have regarding a marketing budget or marketing forecast in this post. For a custom analysis of your business marketing budget or assistance with setting goals feel free to request a consultation with a digital marketing consultant.