If you want your business to grow, you need to create a marketing budget. As a small business, you may think you don’t need a budget because your investments are so small. The truth is, your investments will forever remain small if you don’t have a budget. Putting structure around your marketing investments enables you to get returns on them and increase them over time. Below are some best practices for setting an effective marketing budget that facilitates sustained business growth.
Look at Your Competitors
Many small business owners fail to create a budget because they have no idea how much to spend on marketing. While every business budget is unique, you can start by looking at what your competitors are spending. You can’t access their exact budgets, but you can look at industry averages to help give you an idea.
Keep in mind that allocation percentages are different for each industry depending upon their profit margins, so be sure to look only at your industry average. Also, remember that these are industry averages, so in some cases the information will not be directly applicable to your small business budget, but can serve as a reference point.
Prepare Your Budget
Your marketing budget prepares your business to grow, but you also must prepare your marketing budget! It is a best practice to have a process in place for handling unexpected costs. Whether you contribute a certain amount or percentage each month to grow an emergency fund, or set aside one lump sum right off the bat, you should always create a cushion in your marketing budget.
You should also have a loose idea of the appropriate action to take when in tough situations, such as which budget items should be eliminated or if you will need to reallocate resources from one area into your marketing activities.
Have a Slush Fund
At times, you will spend less than the amount you set aside for a particular activity. Rather than spending that money on a different marketing activity or even department, consider saving your money by contributing the extra dollars to a slush fund. A slush fund can be used to cover overages in other areas, surprise costs, or to take advantage of unexpected opportunities.
This will help you to maintain consistency in your budget, despite ebbs and flows in different areas. If you find yourself consistently under spending in an area over time, you may then want to look at adjusting that part of your marketing budget.
With digital marketing today, new apps, platforms, and marketing tools are coming out constantly. Some of them become universally popular, others end up being helpful to a specific niche, and yet others flop.
Staying informed on the latest tools and technology is a marketing budget best practice that can help you determine the best approach for a new or upcoming tool. That way, if it becomes a widely used tool, you won’t be rushing to learn it and catch up with everyone else. Or, if it flops, you’ll be glad you didn’t waste time trying to figure it out. You won’t always be able to predict which tools will be right for you, but staying informed can be just enough to get a leg up on your competitors.
Go Wide Before You Go Deep
You don’t have to know which marketing strategies are best for your business before creating your marketing budget. In fact, your marketing budget will help you to identify the most important and effective strategies you employ to grow your business, based on how much they cost and what the return is.
This means that in the early stages, it may be best not to focus the majority of your resources on just one or two strategies that you aren’t even sure will work. Rather, you might invest lightly in a lot of different strategies, and then as you gather more data, eliminate what doesn’t work and allocate more toward what does.
The above best practice comes with a caveat, as some strategies require a minimum investment in order to show their value. While you want to avoid focusing all resources on one or two strategies, you also don’t want to allocate ineffective amounts of resources on too many strategies at once. Taking on too many channels will prevent you from giving each one the time and resources it needs in order to help your business.
Just like your marketing plan, your marketing budget is not set in stone. It is simply a starting point upon which you add and build up over time.
Have Diverse Goals
One way to take on multiple (but not too many) marketing strategies at once is to diversify them. Some strategies require an exact amount of money and can be tied to a specific marketing goal, such as advertising and lead generation. Other strategies require more time than money, and are tied with harder to measure goals, such as brand awareness. With a proper mix of marketing goals, you can allocate your budget in a way that maximizes the use of your resources.
Remember Your Central Messaging
At times you might have to choose between two items that you want to include in your marketing budget. Or you you may have trouble prioritizing your goals and activities. One of the best ways to ensure you make right decision is to remember your central messaging. Forget about which activity you like doing the most or which one you think is most successful. Which activities are the most closely aligned with the core values and overall message of your business? Going back to the heart of your business can help you to properly set and maintain your marketing budget.
A budget is not just for those who have a lot of money to manage. It is a plan to manage whatever money you have, so that you can invest it properly and grow. Follow these marketing budget best practices to create the proper structure around your marketing investments.