7 Ways For Small Businesses To Establish A Marketing Budget

7 Ways For Small Businesses To Establish A Marketing Budget
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We are aware of the numerous difficulties small business owners and founders of start-up companies face every day, including finding funding, surviving, expanding at the proper rate, generating leads, and assembling a strong team. We also comprehend how some people believe that marketing is a luxury that is best left to major businesses, such as those who can afford Super Bowl commercials and high-end marketing initiatives.

They’re mistaken, though, because any business, no matter how small, needs to have a budget and a comprehensive marketing strategy to raise brand awareness, expand its clientele, and enhance sales.

A crucial element of any marketing strategy is your small business marketing budget. It will include a breakdown of the expenditures associated with achieving your marketing objectives within a given time frame.

Knowing where to begin and how much money to invest can be difficult when there are so many different marketing strategies to try, from events to advertising campaigns. A marketing budget is necessary because of this. It not only helps you narrow your focus but also makes it simpler to stick to your expenditure and growth targets. Without a budget or strategy, a company runs the risk of overspending or, in the opposite scenario, underspending to compete and expand.

Each small business owner typically has a unique approach, circumstance, or method of budgeting. However, there are a few factors that are present in almost every budget that you can use. 

The following are some crucial measures for establishing a marketing budget as a component of your marketing plan: 

1. Base Your Marketing Budget On Your Business’s Objectives.

Asking yourself the following questions can help you determine your business goals:

  • What are your company’s goals for the upcoming quarter?
  • What goals do you have for your company this year? Consider the next three years.
  • Based on their closure rates, how much of those contacts must be given to your sales team to sufficiently affect revenue to meet those goals?


Small businesses with an annual turnover of under $5 million often devote 7-8 per cent of that amount to marketing, dividing it between advertising, campaigns, and events, in addition to brand-building expenses like those for blogs, websites, sales collateral, and promotions.

Never just use the money that’s left over after paying for all other expenses to make up your marketing budget.

2. Scope Out The Competition

Understanding your specialty is crucial when deciding how much money your small business will spend on marketing.

Keep tabs on your main rivals and research their advertising strategies.

  • Who are the main participants in your sector?
  • What techniques do they employ for marketing?

Describe what they have in common next.

  • Do they prefer printed marketing materials to internet ads?
  • Do they invest in all available marketing channels, or just a few?

3. Organize Your Financials.

It’s vital to have a sense of your profit margins and operating expenses to evaluate how much capital you can spend on marketing. Make a list of all of your business expenses, both variable and fixed, to get started. Rent, insurance, and payroll are fixed expenses, whereas office supplies, equipment maintenance, and utilities are variable expenses. 

The next step for companies that sell items is calculating the cost of goods sold (COGS), or the sum of money needed to produce and sell the goods. This comprises the price of the raw ingredients as well as the expenses related to shipping, packing, and storage.

Use the following formula to determine your products’ production and sales costs:

Cost of Goods Sold = Cost of Inventory (Starting of the Year) + Extra Inventory bought During the Year – Cost of Inventory (End of the Year)

From there, you can use the following calculations to determine how much money you’re making:

Net Profit = Revenue – Cost of Goods Sold – Expenses

Net Profit Margin = (Net profit divided by Total Revenue) x 100

The U.S. Small Business Administration advises enterprises, assuming they generate less than $5 million in revenue and seem to have profit margins of around 10 to 12%, to spend 7-8% of their total revenue on marketing.

Nevertheless, every company is unique. The average marketing expenditure in 2018 and 2019 was 11.2% of a company’s total revenue, per Gartner’s 2018-2019 CMO Spend survey. Several variables, including your industry, rivals, goals, financial status, and internal capacity for growth, will affect how much money you spend on marketing.

4. Develop A Holistic Marketing Strategy

Business consultation team for marketing success

You can develop your marketing strategy if you are certain of your objectives. A small business should first conduct research and create an integrated marketing strategy before determining its marketing budget. The budget then becomes a component of the entire plan, and it will be much simpler to distinguish between where marketing expenditures should be made and where they could be made. Furthermore, it is much simpler to predict how each budget item will be spent over the span of a year, two years, or longer.

Even though the majority of small business owners lack the expertise required to create an integrated marketing strategy, this phase should still be completed. Without one, many business owners overpay or underspend, but there is little doubt that they are wasting their valuable marketing budget. This results in little to no ROI for them. As a result, a lot of businesses fail and shut down.

The anticipated ROI is not only made evident with an integrated marketing strategy, but it is also attainable provided that the plan is followed. This important section of the business plan can be obtained by small firms from a knowledgeable online marketing agency. It’s a great investment that pays off for many years.

5. Prioritize Your Needs

This is the challenging phase. While marketing across all platforms is ideal, it might not be practical for small-to-medium-sized businesses (SMBs).

Start with the most expensive activities to prioritize your marketing requirements. Pick the strategy that generates leads the most effectively, then move on from there.

The rest of your budget can be balanced with more cost-effective strategies once the spending-heavy strategies have been implemented.

The majority of B2B and B2C marketers believe that consulting with an agency facilitates choosing the ideal marketing mix. The marketing channel objectives for most small firms that see the greatest success online include:

  • PPC campaigns
  • Content marketing
  • SEO
  • Thought leadership

6. Base Your Budget On Your Revenue Expectations

Knowing where the money originates from and what your expenditure will produce is essential to creating a budget. A method that bases your budget on your actual or anticipated revenue is the per cent of revenue. The marketing budget for small businesses that use this technique ranges from 3 to 5% of sales. However, it might change depending on the following factors:

  • The capacity of your business
  • How long will your campaign last?
  • What field of work do you have?
  • How much growth can your company withstand?


The development of your business depends on its early stages. Here are some general guidelines for developing a marketing budget:

  • 12–20% of sales should be set aside for new firms.
  • Businesses with a five-year or longer history should allocate 6–12% of their income.
  • 7–8% of income should be set aside by B2B businesses.
  • 9% of income should be set aside by B2C businesses.


As long as these margins cover the remainder of their usual expenses, this strategy can succeed.

7. Choose your routes of distribution

Girl and man with laptop discussing work plan.

Your marketing approach has a significant impact on how your marketing money is allocated. You will either use outbound or inbound marketing as your distribution strategy.

The goal of inbound marketing is to attract potential customers to you, so expenses related to website upkeep, SEO optimization, running a blog or other forms of content marketing, or creating a unique infographic, film, or case study that promotes your company are included.

Any strategy that gets your product or message in front of potential buyers is referred to as outbound marketing. This can be done through events, billboards, promotional products, or advertising campaigns.

Make a note of all your outbound and inbound marketing campaigns, then sum up their expenses to check if your new budget still allows for them. If not, you might need to change your spending habits or reassess your plans.

According to a Gartner report, chief marketing officers in 2018 allocated 29% of their marketing budget to marketing technology, including digital analytics platforms and web content management. Over 21% of marketing budgets are allocated to advertising, and 25% of those funds are allocated to digital resources like sponsored search and organic search.

Prioritize the strategies most likely to generate the biggest returns for your company if your marketing budget is not sufficient to cover all bases. Additionally, you may concentrate on high-impact, low-cost solutions like social media and email marketing.

Extra tips for managing the marketing budget:

Collect Feedback From Prospects And Customers

Not every endeavour you make will succeed. Your intended audience might not be there at times. Your messaging or creativity may also be to blame on other occasions. You may avoid making this error over and over again by gathering feedback.

Marketing is one of the most crucial elements.  The simplest way to determine a small business’s marketing budget is to ask current and potential customers which platforms or channels they prefer, how frequently they want messages from you, and what kinds of discounts or deals you can provide. 

Businesses often overspend on social media, especially Facebook Ads, because of how simple the interface is to operate, which reduces some of the traditional campaign-running fears. Keep in mind that your time is also valuable; if your advertising efforts aren’t bringing in many new customers, devote more time to those endeavours rather than ones that only waste your time and money.

Test, Revisit, and Revise

More important than strictly adhering to a budget is knowing whether your spending is truly assisting you in reaching your marketing objectives. There is no such thing as a marketing budget that is set in stone, after all.

A small business can test out new markets and revenue streams to evaluate what works. Afterwards, you can adjust based on the results.

The objective is to continuously monitor your marketing activities. You can continue investing the very same amount, or even more if you have the resources required to do so, or if the platform is producing the ROI you need. You can reduce or eliminate the expense of the platform if it isn’t producing results and reinvest the savings in platforms that are.

Several of these tools can be used to evaluate and track the success of your marketing initiatives including:

  • Use Google Analytics to track internet traffic to your company, where it is coming from, and the success of individual marketing activities.
  • Tools for A/B testing: You may A/B test copy, graphics, and more using a programme like Optimizely to determine what performs best for your marketing efforts.
  • Service for email marketing with suite reports: You may send marketing emails and track their effectiveness using a platform like MailChimp or Campaign Monitor.
  • Tools for social media marketing: While the majority of social media networks have their own analytics programmes (for example, Facebook Insights for Business Pages), you can also monitor your social media campaigns and engagement with the help of third-party programmes.

Position Marketing As An Investment, Not A Cost

Budgets for marketing typically start at the top of the business, where marketing teams are viewed as cost centres, and the budget is seen as an expense.

According to this way of thinking, businesses will evaluate their marketing spending from the previous year and decide where they want to increase or decrease their spending. Your marketing budget should be viewed as an investment that will, over time, produce a tangible and measurable return on investment.


It may seem intimidating to develop a marketing budget for your business, but it doesn’t have to be challenging.

Prioritize developing a marketing strategy, then experiment with numbers and distribution strategies until you discover what works best.

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