Building Your Small Business Marketing Budget

So you want to start marketing your small business to reach people beyond your referral network. But how much is this going to cost? Let’s get into the details of a small business marketing budget to help you determine when you’re ready to start your marketing investment.

Want to listen to this topic instead of reading it? Download my podcast episode, which is all about your small business marketing budget.

“What should I budget for marketing?” on Apple Podcasts

“How to estimate your small business marketing budget” on YouTube

The Importance of Marketing Investment

First and foremost, it's crucial to shift your mindset from viewing marketing as an expense to seeing it as an investment. This change in perspective is vital because marketing is not optional if you want your business to grow and thrive. Just like you wouldn't skip having a finance or HR department, marketing should be an integral part of your business strategy.

Marketing is a continuous process, one that requires consistent effort to keep your brand visible and relevant in the marketplace. Whether you're a startup or an established business, regular marketing activities help maintain and increase customer engagement and loyalty.

Determining Your Marketing Budget

A common question I get from business owners is, "How much should I spend on marketing?" A general rule of thumb is to allocate about 4% to 10% of your annual revenue to marketing. If you're a newer company or looking to make a significant impact quickly, this percentage might be higher, possibly exceeding 10%. And it’s different for each industry, so make sure to do your homework when deciding on a marketing budget.

For most businesses, a good starting point is around 6% of your annual revenue. This figure can be adjusted based on your specific goals and the level of growth you aim to achieve.

The Costs Involved

Marketing costs can vary widely depending on the strategies and channels you choose to pursue. Here are some typical costs to consider:

Marketing Strategy and Assessment

Starting out with a marketing assessment and strategy can range from $1,000 to $5,000 or more, depending on the depth and breadth of the audit and the size of your organization. This fee typically includes a comprehensive review of your current marketing efforts, competitive analysis, and detailed recommendations for moving forward.

Content Creation

This includes both content writing (blogs, articles) and copywriting (ad copy, sales materials). Costs for these services can vary, but expect to pay anywhere from $50 to $200 per hour depending on the expertise of the writer.

Website Development

If you need a new website or significant updates to an existing one, costs can range from $2,000 to $10,000 or more based on the complexity of the site.

Digital Marketing

This encompasses SEO, social media management, email marketing, online advertising, and other marketing services. Monthly retainers for these services can range from $500 to $5,000 or more.

Hiring the Right People

One critical decision you'll face is whether to hire in-house or work with contractors. Each approach has its pros and cons:

Hiring an In-House Marketing Team

Building an in-house marketing team means you'll have dedicated staff who are fully integrated into your company culture. However, this comes with significant costs. A Chief Marketing Officer (CMO) can command a salary upwards of $200,000 per year, while a marketing manager might cost around $100,000 annually.

Hiring Contractors and Agencies

Working with contractors or agencies like mine offers flexibility and access to a wide range of expertise without the overhead of full-time salaries and benefits. Fractional CMOs, like me, provide the strategic insight of a full-time CMO at a fraction of the cost.

Evaluating ROI

When investing in marketing, it's essential to measure the return on investment (ROI). Consider the average sale value and the lifetime value of a customer. For instance, if your average sale is $10,000 and a marketing initiative brings in just one additional sale per month, the ROI can be substantial.

Additionally, understanding your lead time – the duration from initial contact to sale – helps in setting realistic expectations and budgeting appropriately. If your typical sales cycle is 6 months for a high-ticket service, the ROI you’ll see will be different from a low-ticket product with a sales cycle of a few weeks.

Preparing for Marketing Success

Before you ramp up your marketing efforts, ensure you have the necessary infrastructure to handle increased demand. This includes having a robust sales process in place to convert leads generated by your marketing activities. Remember, marketing's role is to bring potential customers to your door; converting them into paying clients is the job of your sales team.

Avoiding Common Pitfalls

One common mistake is underestimating the value of professional marketing services. Cutting corners by hiring inexperienced personnel, such as college students or teenagers, for critical roles can be detrimental. Marketing requires strategic thinking and experience to be effective. Make sure you're investing in qualified professionals who understand your business and market.

Budgeting for marketing is a strategic decision that requires careful consideration and planning. By understanding the costs involved, setting realistic budgets, and hiring the right people, you can ensure that your marketing efforts will drive growth and success for your business.

If you need further guidance on budgeting for marketing or want to explore how fractional CMOs can benefit your business, feel free to reach out. Contact me here.

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