Coming up with an ideal marketing budget for any kind of business is a tedious task overall. However, startups and small businesses tend to struggle with this the most because they must maintain a healthy balance between revenue and costs while also investing on marketing and growth. This is where the big question comes in: how much of the budget should go into marketing?
According to the U.S. Small Business Administration, small businesses that generate a revenue that is less than $5 million should only be spending 7-8 percent of their revenue on marketing. This recommendation is based on businesses that have margins in the 10-12 range after expenses. Although these numbers are extremely helpful, there are several other factors to consider when determining a budget like the type of industry, the size of the business, how far into the growth stage the business is in, and more.
Despite how much of the budget is spent on marketing, every business can benefit from a checklist system to make sure that the marketing budget is being used at its full potential. Check out the following tips that can help you spend your marketing budget wisely.
- Make a realistic marketing plan- Outline the costs and identify how you are going to achieve your goals within a realistic time frame.
- Track your ROI (return of investment)- Keep a close eye on your spending and the effectiveness of all your activities. Something as simple as a spreadsheet or pen and paper can help you log all your information. If the numbers show that one quarter was more profitable than another, make sure you find out why. Basic tracking allows you to do more of what is working and less of what isn't.
- Revise your plans- Create a marketing plan that is flexible so you can adjust along the way. Revisit your goals and evaluate your performance throughout the year. There is no concrete certainty that your original plan will work. However, as long as you know that your money if being spent mindfully and you are willing to make changes when needed then you are on the right track.
You can also coordinate your marketing budget according to the revenue growth you're aiming for through your marketing efforts.