When it comes to a marketing budget for small to medium-sized businesses, it can feel a bit overwhelming, especially if you’re not seeing the results quickly. But how should you decide on a marketing budget, and what should you consider when putting one together? In today’s blog we’re tackling those questions. Read on to find out more.
Where do you want to be?
For the first few years of your business, everything is a bit up in the air, we’ve all been there; through word of mouth, networking and referrals, you build your client base, but as the business grows, it can feel overwhelming, particularly as you add staff. It can mean that as founders and business owners get more and more responsibility, they don’t have the time to chase down the opportunities that they dreamed of.
So, first things first, you need to work out where you want the business to be in 3 or 5 years. Break this down into measurable goals but those that still excite you. This gives you a baseline so that you can work out where else you want to go.
The Numbers
One of the ways that you can determine your budget is by making it a percentage of your sales. Here are a few steps to get you started:
- Step 1: Take a look at your last financial year and understand how much money you have spent on marketing, as close a number as possible
- Step 2: Divide the number by your turnover for the same financial year
- Step 3: Multiply by 100
- Step 4: Ta-da! Here is your current percentage spend
The team at LinkedIn created a handy example which breaks down how this would work in real life.
Let’s say company turnover figure is £800k and the marketing spend is £38,000. We divide 38,000 by 800,000 which equals 0.0475. We then multiply that number by 100, which equals the percentage, so in this case 4.75% so we can safely round up and say around 5%.
What do the experts say?
In the same article, LinkedIn reported that Hootsuite believes businesses should spend 2-5% of their revenue on marketing. CMO and Forbes argue between 4-12%. This, of course, depends on your overall turnover and the funds that are available. A brand new business that is just starting out is going to have a vastly different budget to one that is established. If in doubt, talk to your accountant about what you can afford and decide what the most pressing issues are.
A few questions to ask yourself
Like any financial decision, there are a few different elements that you need to consider before making and agreeing on a final plan. These include but aren’t limited to:
How ambitious are we being?
Ambition is great, but make sure it’s in line with your overall goals and, most of all, that it’s achievable. Are you looking for a 30% increase in revenue or steady growth year on year? It’s good to discuss with your teams and, more importantly, finance.
What are our competitors up to?
It’s a good idea to keep an eye on what others are doing. How saturated is the market in terms of what you want to do? How are others marketing to your audience? If you’re in an industry where marketing is often underutilised, then you can take advantage of this.
That said, if you’re in an industry that is hot on the heels of marketing trends, you may need to be more savvy and could need to increase your investment to be seen and successful.
Where are we in the market?
Consider where you are. If you’re looking to win customers in an area you’re less known in, you have the bonus of being shiny and new. If, however, you’re known in the area and want to increase sales, you may need to invest more to make a splash.
Does your target market respond well to change?
Depending on your audience and target market, your ideal customer may not be excited by change, which can be an additional hurdle. Those in finance or similar industries may be hesitant to change due to the risk. Carefully assess this and incorporate it into your game plan.
If in doubt, we’d suggest talking to a marketing professional about your plans, ideas and your ultimate goal. Our team is on hand to help you make your marketing decisions easier with years of experience, understanding and support.
Want to talk about how to boost your business through a new marketing strategy? Get in touch today.