Dollars and Sense | Creating a Logical Marketing Budget for Your Business
Well my friends, it's that beautiful time of year again where we hunch over Excel spreadsheets and crunch numbers trying to figure out budgets for next year! Though a riveting time for all involved, it can also become a bit stressful, especially as a small business owner maybe not quite sure what exactly to budget for.
We get it. And as always, we're here for you.
I have gone ahead and listed some initial steps and things to think about before going into specific line items. It's always good during this process to keep your eye on the big picture and where you want to go this next year. This is exciting, I promise!
1. Show Me the Money
First thing's first. How much money are you going to put towards marketing in the next year? And I suppose even before that question is, how are you going to arrive at that number?
Each company does it differently and a lot of it has to do with where you're at as a business. Newer companies will be investing more money (average: 12%-20% of revenue) and resources into marketing whereas more established companies tend to lower this percentage (average: 6-12% of revenue).
Here are four ways to calculate that overall dollar amount.
For some, their manager will give them a number. Having already done one of these other options, your CEO or CFO may just slide you a number on a Post It note and that's what you have to work with. For those of us in the micro business landscape, we are that CEO and one of these other options will work better for us.
For some who are trying to keep up with their competition, a good idea for how much to spend is based on what their closest competitors are doing. Are they on the radio? So are you. Are they mailing out flyers? So are you. This method seems a bit reactionary to us as we're always trying to think out of the box but for those of you who don't have a lot of time and energy to invest into new marketing strategies, this is a great jumping off point.
3. Goal Oriented
For some, you may find your best idea of a number in the specific goals you've set for yourself this next year. Maybe you'll base your number off of how many new clients you want or how many followers you want to get on Instagram. If your goals are flushed out, this may be the option that makes sense for you.
4. Percentage Based
Now this is my personal choice. For a lot of us every year offers new challenges and victories. You never truly know what's going to come up in the next year. For myself, I work well with percentages. A percentage is a concept I can wrap my head around. Set aside 30% for taxes, plan on 15% for marketing efforts, etc. With the percentage based option you take a certain percentage (6-12% for established companies, 12-20% for new businesses) of your last year's revenue. I like this option because it's scalable and works with money you already have.
2. Those Damn S.M.A.R.T. Goals Again
If you've kept up with us for a bit, you know that we constantly refer to SMART goals and marketing plans. This is no exception.
If you've done your due diligence, you have a marketing plan that is symbiotic with your business goals. And with your marketing plan you have devised a series of goals and from those a list of tasks to achieve them.
By keeping these goals in mind, you will have a better idea of where your money will be most effectively spent. Always reference back to your marketing plan. If you find it's no longer matching with where you want to go, tweak your plan!
3. Split Those Costs
You will have many different costs. Some will be constant (software, web hosting, etc.) and some will fluctuate based on the campaign, event or even product launch. Here are the categories you can fit most of your marketing expenses into.
1. Paid Advertising
This includes all social media advertising, Google Ads, banner advertisements, radio spots, commercial spots, and any ads you run in newspapers, magazines or direct mail campaigns. This also includes content marketing you have created or written for you (infographics, podcasts, blogs, etc.).
2. Marketing Collateral
These include tangible things such as brochures, t-shirts, promotional items, flyers. Any piece of marketing material that you will hand out to promote your business should be itemized in this category.
3. Production Costs
This is Half & Half Creative! Any graphic design, web design, video work, photography, typography work, etc. is included in this category. Any labor necessary to create your marketing.
4. Technology Costs
The hosting and maintaining of your website should be included in this category. You may also have CRM software, mass email software, demographic tracking applications, etc.
4. Work Within Your Means
As with your SMART goals, you want your budget to be measurable and attainable. Be honest with yourself when you start playing with numbers and come up with solutions that you're comfortable with. Spending money as a small business is hard. Everyone wants a piece of the pie you baked. But if you spend your dollars wisely, you'll have quite the marketing toolkit to drive up sales.
As always, if you have any questions, need any design work done or need someone to bounce ideas off of, you can always contact us here!