Marketing makes a business go round. No seriously, it does. A business can have a snazzy PR group and a cool line of products or services, but without marketing, it’s as good as a sinking ship.
Whether your business is small or large, marketing is the factor that will keep it afloat by guiding its growth and profitability. This includes helping a business build a strong online presence through social media, plan out strategies for campaigns and other marketing methods, create promotional materials for a new product or service, and much, much more.
If you’re just starting out, though, it’s hard to really know how much revenue to allocate towards marketing in all its forms. Distributing too much or too little puts your business and its products at risk of drying out and honestly, no one wants that.
Luckily, we have some tips and tricks that can help you figure out how much money should be allocated towards marketing and how to check if your marketing efforts have paid off.
Factors To Consider For Your Marketing Budget
Generally speaking, businesses allocate a percentage of actual or project gross revenue to marketing—the actual percentage varies on whether it’s run-rate and start-up marketing. Of course, for smaller businesses, you should always take baby steps when it comes to budget allocation. For instance, businesses with less than $5 million in revenue should only allocate 7-8 percent of their revenue to marketing.
According to this blog post by Caron Beesley, this budget should also be split between brand development and business promotions costs. Marketing comes with different facets, including the channels in which you promote your brand, services and promotional materials, and so, your marketing budget should accommodate these costs. Each part outlines the costs that will go into the methods and channels used for these brand promotions and other materials.
You must take several factors into consideration about your own business before you allocate any money to marketing. These include the industry your business belongs to, its size and growth stage.
Different industries, business sizes, and growth call for different percentages in budget allocation. A small business belonging to the healthcare industry, for instance, will use their revenue for marketing a lot more than that of a long-time established business in the retail industry.
Other factors include business margins for expenses. Beesley recommends that having margins lower than 10-12 percent means you must lower your overall margins and focus your allocation (additional spending) on marketing. Marketing should never be left last after all other business expenses have been paid off.
Checking Your Marketing Efforts
You should always have a plan that not only takes into account all of your expenses and areas for improvement, but is also flexible. You never know when an unexpected event or change may come up, and what’s more important is how your spending is meeting your goals.
To better gauge your marketing efforts and spending, take some time to compare plans, methods, and impact. Point out any areas for improvement, in which you can give any additional spending.
And most important of all, throw out your marketing plan after a year, especially if there are any changes to the marketing climate or your business’s branding.
As mentioned in Beesley’s blog, products and services don’t sell themselves. By not allocating enough money towards marketing, a business puts a block on their path to success. Always have a flexible plan, revisit your marketing efforts, and expect the unexpected.
Before you know it, you will be on the way to reaching your business goals!