One of the trickier aspects of creating a marketing plan for your small business is the development of the marketing budget. Marketing budgets can be difficult, especially if the marketing strategy itself is being managed and implemented somewhat on the fly. (You know who you are!)
Often small business owners start developing a marketing budget by allocating a certain amount of money, such as a percentage of top-line revenue (1 or 2 percent for a lean plan, 3 or 4 for a more fully-fleshed plan, 5 percent or more for a plan that really puts marketing on center stage for the business.) That’s not a terrible way to do it, particularly for a well-established business.
However, for many companies—particularly small companies that are still finding their way in the marketing arena —an expense-first approach can be a good way to think about marketing.
In an expense-first approach, you don’t start out thinking about money. Instead, you make a list of all the marketing-related things you need or want to do in the coming year, like “attend the trade fair in Chicago” or “put flyers on every door in town.” Then you identify the costs of doing those things, and work out the necessary budget for each part of the plan.
From that baseline, you can get an idea of how much money you need to carry out all your plans. This gives you a reality check on your plans by identifying how much each element of your strategy is going to cost. You may decide to make major revisions to your intentions, either by trimming things that are going to cost way more than you expected, or by adding things when you realize that your existing plans are surprisingly affordable.
Understand Expense Types
Regardless of how you start working on your marketing budget, it will help clarify your budget process if you make some distinctions among your marketing expenses.
First, there are some expenses that are one-time expenses while others recur every year. For example, if you have a sales force as part of your marketing department, that salary expense is presumably something you’ll need to account for every year, and it isn’t attached to any particular project so you may want to list it first.
Second, some expenses may be only indirectly marketing related. For example, if you have a company vehicle that you plan to use for your marketing efforts, is that expense part of your marketing budget or not? There’s not a right or wrong answer to this type of question, it’s just something you need to decide in order to set an effective marketing budget.
Categories and Examples of Marketing Expenses
There are a lot of different categories that your expenses can fall into, and having a good overview of those categories can help you avoid the potential disaster of forgetting about a major expense until it’s too late to change plans. (“What do you mean, we need to rent a truck to get our booth to the trade show in Chicago? I thought we were using the company car!”)
Here’s an overview of many of the major categories of marketing expenses common to most industries, and some examples of expenses within each category. Your industry will doubtless have its own categories, and your company may have its own unique expenses.
This can be newspaper ads, magazine ads, paying for direct mail (producing, printing, envelope-stuffing, postage), TV and radio ads, online advertising (Facebook, Instagram, LinkedIn, email, pay per click), or any other kind of advertising.
Producing brochures, flyers, catalogs, coupon books, banners, business cards, or any other kind of print matter.
Design and Development Services
This can be paying for software such as Photoshop, or paying a graphic artist for work on a job basis; paying freelance illustrators, writers, editors, or other production professionals; paying designers for creative work.
Buying t-shirts, pens, notepads, sunglasses, sweatshirts, car wrap, USB drives, bags—all that good stuff you’re going to give away in Chicago, or to your customers, or to walk-ins at your store.
Tools and Technology
Some of this might fall under design and development, depending on your company, but this category covers expenses for your website, your automated platforms, your customer relationship management (CRM) system, your business’ domain name, etc.
Many of your marketing efforts are done on computers, laptops, or even tablets, displayed on monitors, generating hardcopies on printers, using phones and cameras.
Salaries for the marketing staff, contract fees for agencies or outside suppliers or vendors, and so on.
Buying access to industry reports, journal articles, product reviews, and paying freelancers to compile or analyze those reports for you.
You knew we’d get back to Chicago, right? Events cost money to attend – registration fees, travel expenses, supplies for the booth, meal and housing expenses for conferences and trade shows, supplies for events you host yourself—this is a big category all by itself.
When you have your expenses broken out and know what each line item on your marketing plan will cost, it makes it a lot more practical for you to review that plan in the light of real-world available resources and decide what your priorities are. Maybe Chicago just isn’t in the cards at all. Or maybe you decide that the trade show is worth the expense even if that means cutting the print budget. The decisions are yours to make, and once you have the data to make them, you’ll be in good shape.
It’s hard to come up with a marketing budget if you don’t have a marketing plan! Choose one of the six free plans in our guide below and adapt it to your business.