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What Should My Marketing Budget Be?
by Maverick Steffen on 12/7/2023
A well-planned marketing budget is critical to enable you to grow. It helps in strategic planning, resource allocation, and measuring ROI. Without it, you risk overspending or underinvesting in key areas.
1. Determining Your Marketing Budget
a. Percentage of Revenue Method
- Calculation: A common approach is allocating a percentage of either your gross revenue or projected sales. For small businesses, the U.S. Small Business Administration recommends spending 7-8% of your gross revenue on marketing if your net profit margin is within the 10-12% range.
- Example: If your business earns $500,000 annually, your marketing budget should be $35,000 to $40,000.
b. Objective-Based Method
- Approach: Define specific marketing goals and estimate the cost to achieve them. This method suits businesses with clear short-term objectives.
- Example: If your goal is to increase online sales by 20% in the next quarter, calculate the cost of required advertising campaigns, SEO improvements, or social media marketing.
2. Allocating Your Marketing Budget
Effective allocation requires understanding your business's unique needs and market dynamics.
a. Digital Marketing
- Allocation: Invest in SEO, social media, content marketing, and online ads. For small businesses, digital marketing, such as Facebook Advertising, often provides the most cost-effective and measurable results (if you know what you're doing).
- Tip: Start with a focus on one or two channels that best reach your target audience.
b. Traditional Marketing
- Traditional methods like print ads, radio, or local TV can still be effective, particularly for local businesses.
- Allocation Tip: Balance traditional methods with digital strategies for a more comprehensive approach.
3. Tracking and Adjusting Your Budget
a. Monitoring ROI
- Method: Use tools like Google Analytics for digital marketing and customer surveys for traditional methods.
- Example: If you spend $5,000 on a social media campaign and gain $15,000 in sales attributed to it, your ROI is 200%.
b. Seasonal Adjustments
- Understand your business cycle and adjust your budget accordingly. For instance, allocate more during peak seasons.
Your marketing budget is a dynamic and integral part of your business strategy. By using my advice, you'll have a marketing budget that's not just a number, but a powerful tool for growth and success. Remember, regular reviews and adjustments based on performance are key.
To your success!
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