Whether you’re ready or not, the end of the year is fast approaching. For many businesses, it’s time to pull out the ledger and start thinking about plans and budgets for 2018. While planning typically includes things like accounting for new hires, large expenses, operations, investments, and so forth, it’s far too common for businesses to give marketing the short end of the stick, or worse, forget marketing altogether.
Let’s discuss how to determine what percentage of your budget should go to marketing, as well as review a few ideas that might help you make a much bigger marketing splash in 2018.
How Much Money Should Go to Marketing?
Just like personal lives, all businesses have budgets to follow. Outside of essential things like staff costs, overhead, investments, and so forth, there’s always a question of how much to set aside for sales and marketing. The trouble is that a lot of small businesses are tempted to feel like budgeting for marketing is like adding more expenses. Many businesses see it as a necessary evil or even a waste of money. Really, a healthy marketing budget alongside a great marketing plan can result in lots of new business. Marketing isn’t an expense so much as it is an investment in finding new business.
Typically, when you set aside money for marketing it will be a percentage of your overall revenue. According to the U.S. Small Business Administration, a general rule of thumb is that a small businesses with revenue under $5 million should allocate 7-8 percent of revenue to marketing. However, this number also depends on your margins (wider margins allow for more marketing money), as well as the stage of growth your business is in.
Entrepreneur.com suggests that newer businesses (one to five years old) invest 12 – 20 percent in marketing. The rationale is that smaller, lesser-known companies need to spend more to develop brand equity, find new customers, and to establish themselves in their market.
Meanwhile, more established companies that have already gained market share and brand equity can see success from investing between 6 and 12 percent of their gross revenue. Even still, many companies might choose to invest more in marketing with the goal of aggressive expansion or building more brand equity.
As an example, let’s say your annual revenue is around $500,000 a year. Let’s also say you work for a newer company that’s trying to grow quickly and get a bigger piece of the market. Your marketing budget might be 15 percent of your overall revenue, which means you have $75K to invest in people, tools, and marketing activities. That’s great, but what now? How do you know where that money should go?
Where to Invest?
Regardless of the percentage of revenue you set aside for marketing, you’ll need to break down the total into specific areas of marketing. In general, there are a few categories of marketing every business needs to think about to be successful. Here are some questions to ask yourself about each category as you think about where to allocate budget.
- Staff – Who does all your marketing work? Should you bring someone on full or part time? What about interns or college students who can help out with various activities? Could you find a local ad agency to build you a marketing machine?
- Branding –Branding is how you show who you are to the world and develop connections with customers and prospects. Does your logo feel fresh? Is your messaging tight and distinct? What makes you stand out in the market and how can you bring that to the forefront?
- Website – Your site might be the first touchpoint a prospect has with you. Does it make you proud? Is it clean, sharp, and easy to navigate or is it a little dated? Is it distinct compared to competitors’ sites?
- Social media – Do you have a consistent presence on social media sites like Facebook, LinkedIn, and Twitter? Are you building an audience or just putting stakes in the ground? Is there untapped potential?
- Advertising – Are there opportunities for magazine, newspaper, billboard, or online ads? Have you considered developing pay-per-click campaigns through services like Ad Words? What about re-targeting through tools like Ad Roll?
- Public relations – Are there contacts in the media that might be interested in profiling your business? Are you doing something interesting that industry publications might like to write about? Think carefully about how you can establish and leverage media relations.
- Content marketing – Are you sharing your insights and building loyal fans? Do you have blog posts, ebooks, infographics, videos, or other content to share and promote to your audience?
- Email marketing – How are you keeping in contact with customers who aren’t quite ready for services? Email marketing campaigns are a great way to keep in touch.
- Events – Are there events in 2018 that you could exhibit at to find customers? How might you leverage local trade groups and meet ups to find new connections at events? Check out our post on the value of exhibiting at events for IT firms for some more insight.
Your marketing plan will ultimately depend on your goals, budget, and what worked (or didn’t work) in the past. In any case, make sure you have a healthy budget set aside for marketing and take the time to carefully define where those dollars are going. The more you can plan your strategy now, the more success you’ll see in 2018 and beyond.