Setting a realistic marketing budget is essential for SME’s
If you are a small business owner and haven’t yet got around to planning your marketing and marketing spend for the year ahead then now is the time to get started.
You may feel that creating a marketing plan and setting a marketing budget is a time-consuming exercise and only really useful for businesses with extensive marketing departments and large budgets. On the contrary, taking the time to put together a marketing plan and marketing budget now will save you time, money and potential headaches later on in the year.
It is just as important that as a small business owner you plan the best way to spend your budget and that will mean putting precious time aside to do just that. A smart budget will help you make the most of a small pool of money by planning and tracking spend to ensure wastage is kept to a minimum – essential, if like most small businesses owners you need to make every penny count.
What should I set as my marketing budget?
According to the SBA (US Small Business Administration) the average marketing budget for small businesses lies somewhere between:
2-3% of sales for an up and running business
3-5% of sales for a start-up business
Essentially though it comes down to your own individual business. An effective marketing budget will be a combination of the following factors:
- What you can afford?
- What time you can give (are you planning to outsource or will all the marketing be done by you)?
- Accurate reflection of a well thought out marketing plan
So before coming up with a figure, first take some time out to plan and think about the following questions: How is your business performing at the moment? What could you do better? What is it you want to achieve in the year ahead?
The importance of marketing planning
Planning is absolutely essentially to creating an effective, controlled marketing budget. It will eliminate waste and ensure you are making the most of your marketing spend.
A simple model to help get you started planning is the SOSTAC model (Situation Analysis, Objectives, Strategy, Tactics, Actions and Control)which essentially helps you plan by looking at the following questions in regard to your business:
- Where are you now
- Where do you want to be?
- How do you get there (strategy)?
- How exactly do you get there (tactics)?
- Details of Tactics – who is doing what and when
- How will you monitor performance?
Of course how detailed you go in your marketing plan is up to you and will probably depend on how much time and resources you have available. But by following a marketing planning model such as this and thinking about the questions it raises will help you focus on the best way to drive your business forward.
How to put together an effective marketing budget
An effective marketing budget is essentially a smart budget that gives you flexibility, keeps you in control of your spend and results in very little wastage. Your marketing budget is an integral part of your marketing plan and helps you outline the costs of achieving the goals you have laid out within the timeframe you have planned.
Of course the budget you set will depend on what you have to spend and what you are trying to accomplish as a business. A marketing plan and marketing budget will help you stay savvy and smart in the way you spend you money. Monitoring and maintaining your budget will help give you flexibility in terms of spending by enabling you to cross check your results against spend. For example if a promotion isn’t working you can stop it and quickly move your spend over to a more effective activity.
Considerations: What should you include in your marketing budget?
This is why marketing planning is so critical, if you’ve properly planned for the year ahead then you should have everything covered. Your marketing budget should be broken down to reflect the details of your marketing plan. Here is a bit of a checklist to help get you started. It is in no way exhaustive and some activities won’t be relevant to your business but it will get you thinking of all the different areas you may need to cover to avoid any nasty surprises from unexpected costs.
- Marketing promotions
- SEO – paid and organic
- Advertising (online and offline)
- Sales promotions
- Social Media
- Direct Mail (printing and postage costs)
- Affiliate marketing
- Outsourcing – copywriting, agencies, freelancers, fulfilment bureaus
- Events – do you intend to attend any exhibitions or trade shows
- Market research
- Design (designers, photos and images)
- Sales promotions (discounts offers , promotional mugs etc)
- Website Design and maintenance
And remember there are always unexpected costs that crop up so putting some contingency aside is not a bad idea.
Marketing Budget Templates
There are plenty of useful marketing budget templates you can find online to use as a guide – from basic to all singing all dancing spreadsheets. I’ve added a few links below to templates I have come across online that you may find useful.
Alternatively create a simple excel spreadsheet yourself outlining your planned marketing spend for the year ahead. A simple, effective way to monitor and control spend is to have a monthly breakdown of planned marketing activities with estimated costs against actual costs. This way you can have a clear analysis of spend against activity and can quickly see where you have overspent , underspent and enable you to monitor your potential ROI for each activity.
Don’t forget an effective, well thought out marketing budget enables you to spend smartly and get the most from your hard-earned money.
We’d love to hear your thoughts and experiences on this subject, so please do leave a comment.
- Budget image courtesy of Stuart Miles at FreeDigitalPhotos.net
- Calculator image courtesy of Pong at FreeDigitalPhotos.net
- Brain Thinking image courtesy of samuiblue at FreeDigitalPhotos.net