Your marketing budget is a crucial yet tricky thing. Some studies show that small business owners are conservative regarding their marketing budget and most don’t have a dedicated amount that they work with. Others utilize a kind of “fly by the seat of their pants” approach – using Google AdWords one month, Facebook another, then a print ad, then they forget a couple of months before getting back on the marketing bandwagon.
That you need a marketing budget is, hopefully, a given. If you’re not targeting your buyer personas then how can they know that you can solve a problem that they have? But how much that budget should be depends on a number of variables regarding you and your particular business.
Ask a financial analyst and he or she is likely to tell you that 8-10% is a safe allocation to hit modest marketing goals. It is perhaps a safe number, but it isn’t based on you. If you have a solid client base and your sales are steady, then 10% may feel very manageable. But that 10% looks much different if you’ve just added new staff or if you’re adding a new product line which requires quick and far reaching campaigning.
It’s likely that your marketing goals are somewhere along of lines of increasing sales and your client base. So the question is whether 8-10% of your revenue is enough to reach those goals. Depending on your business it could be way too much or way too little. It’s an easy approach to just say 10% and be done. The more successful approach is to set your goals and base your budget around those goals.
Determine Your Cost And Your Channels
You can read all the market research available to find what the experts are recommending that small businesses spend on marketing. But the actual cost comes down to two things: what your Cost Per Acquisition (CPA) or Cost Per Lead (CPL) needs to be as well as what specific channels are the most efficient for your business and your goals.
The market is unpredictable so it makes sense that you spend time testing various budgets and channels to gauge their performance and to understand which will provide you with the most sustainable ROI.
As you work to calculate your CPA, be sure to include all your expenses here. This includes overhead, the value per client, the profit per sale, return business, etc. The more factors you include, the more accurate, and ultimately helpful, your CPA will be.
From here you can play with the various ways to use your CPA. As long as you’re using analytics to help you gather data on the outcome of your marketing strategies, then you can easily learn what works and what doesn’t. If it’s not working then either your marketing channel or your CPA needs to be adjusted.
As a small business owner you understand that reaching every household in America is not your marketing goal. You’ve got a local community and a buyer persona that you want to target. The smartest way to reach them is to create a campaign designed to elicit an action from your targets. Whether that’s a sale, a lead, or continued visits to your website or all three is up to you. What you want is to be in dialogue with your current and potential customers.
With Inbound Marketing we focus on the best ways to attract clients, convert them, close the deal, and then continue delighting them. If you’re using a marketing strategy that doesn’t get all four elements done, then you’re trying to move your business in the wrong direction.
This is a big reason why we love the idea of pay per click (PPC) marketing and specifically Google AdWords. It provides the most flexibility for your budget. Using Google Analytics (or another analytics software like HubSpot) in combination with your business goals, you’ll see clearly what your CPA should be and how much your marketing budget should be. Which for you could be 5, 10, or even 30% of your revenue.
Be The Tortoise, Not The Rabbit
We know that PPC isn’t the only option and we work to explore everything that might work for you. There is no get rich quick marketing strategy. It takes focus, consistency, monitoring, and adjusting over a period of 6-12 months in order to see the best results.
If you approach budget creation with an eye toward focus and flexibility, then you’re already ahead of the game. Using your analytics to help you adjust as you go is another huge piece of the puzzle. Knowing yourself and relying on the expertise you’ve gained and the experts you surround yourself with is another.
You need to get the word out about your business – whatever your budget, make sure you analyze it and then spend it!