There are too many confusions on what a small business marketing budget consists of, as well as what it can accomplish. To most business people, it either sets restrictions or establishes unrealistic goals that cannot be met financially.
Planned and conducted correctly, your small business marketing budget can be a formidable policy and tool that will grow your business and ensure sustainable revenue, even during a recession.
Typically, the word “budget” means determining what to not spend money on or what to cut. This really is budgeting at its bare minimum. Of course, you must watch expenditures very carefully. I never advocate waste or extravagance, as this will surely deplete your accounts and leave you bankrupt.
The True Value of a Small Business Marketing Budget
The amazing value of a budget is control. Only with control over all expenditures and business processes can any small business hope to succeed. A budget will include not only the cost of actions, personnel, inventory, supplies, taxes and other necessities, but their value in terms of what return they render. In other words, does it deserve to be financed further or is it needing to be cut back? The Ne Plus Ultra of any budget is the ability to clearly demonstrate the return of each dollar spent, detailing the value of all components of conducting business.
Marketing: A Crucial Business Process
How can anyone consume a product or service if they do not know about it, or have forgotten about it? They cannot. Why would anyone purchase your product or service if they cannot find it online or if it has no favorable reviews? Only marketing can remedy those challenges.
Marketing is not an “expense”, as much as that statement may infuriate your CPA. Marketing is a crucial process in which you are able to feature and distribute your products and services. When you minimize your marketing within your budget and overall planning, you are in effect turning off the faucet to your garden hose. You are closing the valve which determines how much flow of water comes out – or not.
How Much Should My Small Business Spend On Marketing?
A formula that I come to use is 14% of your net. For instance, if a local chiropractor was generating $50,000 in revenue per month, and it cost him $20,000 to run his clinic (rent, payroll, utilities, taxes, etc.), the Dr.’s net would be $30,000. Per the formula I have implement successfully, the Dr. would allocate $4,200 to his marketing budget that month.
But allocating money for marketing is just the beginning. Now one has to determine how to best invest those marketing dollars so as to generate that money back, plus a 2-3X increase. Correctly invested, your marketing dollars should result in additional revenue being generated.
Small Business Marketing Requires Planning & Analysis
To execute your small business marketing budget with complete aplomb, you will need to analyze how your marketing dollar is performing. With the case of our chiropractor, he would demand from his front office person that each new patient that came in was asked how they found out about the clinic. Over time, he would see what was working, what stopped working or what new methods were now creating an increase in business.
Another key component of setting aside marketing money within your small business marketing budget is that this amount can accumulate. There is no need to spend all of that $4,200 for that month. The Dr. may find that he can spend $3,200 that month and put the other $1,000 aside for a time when new patient influx is low and increase his marketing output during those leaner months.
Investing In Success
When any business owner can effectively analyze and fund the sources of business success, the business and its revenue will grow. A small business marketing budget can be a powerful tool to put one in the driver’s seat of how to determine that growth and success.