As a company you need to be well informed about your budget and resource usage, but even more crucial for SMBs.
It is often hard to figure out what to spend on the initial marketing budget, but sales and marketing budgets doesn't have to come from only profitable companies.
How to allocate ad dollars is a tough task for even established business. But hopefully this framework for SMBs can help your marketing process:
What is a typical marketing budget? What should a marketing budget look like? what is a reasonable budget for an SMB?
I get asked this often from startups, but first, let's explore how traditional advertising methods look at marketing budgets:
Yes, smart tracking tools help. Same with lead monitoring tools. But startup marketing budget considerations can be catered to its company's unique circumstances — rather than sales and revenue.
True, but marketing costs for SMBs have to either address a goal (usually business objectives set to investors) or just a forecast based on monitoring tools.
Established companies often have historical marketing budget to pair with how much traditional advertising cost the company — aka baselines.
Here are a few strategies to use to set an initial marketing budget:
A common example for a marketing team is rather than spend $X on radio marketing for three months, shift a percentage of that budget to test Google Adwords and see if the actual performance leads to more sales and revenue.
To be honest, that model is very, very, conservative, and a marketing decision that depends on when paid advertising occurs and finishes will lead to slower — or no — growth.
Don't go off what companies spend, or what someone said it'll take to build brand awareness. Instead...
Recommending Facebook here. Young companies often only need to project out a website management fee aka how much it'll cost on Shopify), a little bit of reading essential resources on how tos, and some budget.
Note, the smaller your marketing budget, the longer it'll take to create a baseline.
Pick marketing channels that have a good reach to your target audience that can give you a quick baseline to evaluate your marketing costs.
Make sure to isolate efforts so that your gross revenue can be more easily attributable directly to the sales and revenue coming from that channel.
Spend on marketing budget as much as you're comfortable with.
Sales and marketing absolutely inform budgets, but a startup marketing budget is sometimes whatever you have to spare.
No matter if it's Facebook, Google Ads, YouTube, Emails, Mailers, etc... small businesses will need an overall budget that yields a baseline. And, in my humble opinion, Facebook has the lowest barrier to entry and the lowest opportunity cost.
Startups spend anywhere from $1,000 to $10,000 as a baseline, and I think that's a good place to start to undestand an SMB's target market and test some marketing goals.
Now a bit more tactical...
You'll hear budgets have a high correlation to gross revenue and hear ROAS (Return On Ad Spend) a lot. But, rather, I believe a startup marketing budget looks at the overall revenue from sales and marketing.
But, SMBs can ONLY do that if it simplifies your marketing. When you don't have a baseline, don't run more than 1-2 channels at a time.
Rather than a business having to embrace analytics, it's easy to say how much you spent on marketing — and what the company's total revenue is — because you just, for example, spent on Facebook.
Don't get lost in ROI of content marketing, SaaS companies, marketing best practices, etc...
Keep It Simple, Stupid (aka KISS method) makes SMB operate quicker. Just know there isn't an industry-best smart tracking tools strategy that you can't unlock because you're an emerging start ups.
Last tips, especially heading into the new year:
In conclusion, advertising can achieve business goals, but the entire relationship isn't on gross revenue or best practices.
Traditional advertising refers to a Return On Investment principle, where you need to get more money than you spend.
Hopefully these above will help your business create a baseline.
Once that happens, you'll start adding more complexity. But the path becomes easier, and clearer, once you have a better idea of how to spend the marketing budget next.
Tony Lee (aka @sheckii) is a digital advertising entrepreneur who worked on brands like 20th Century Fox, Sam’s Club, ABC Entertainment, Nintendo, Starz, sweetgreen, outdoor voices, First Republic Bank, Kane’s Furniture and more. He currently works as a lead for Performance Marketing at Shopify for international paid social media acquisition. He’s also the host of welcome to sheckiiville podcast available on Apple and iOS devices.