Not every company is Coca-Cola, McDonalds, or Walmart with billions of dollars set aside each year for marketing. And, since money doesn’t grow on trees, it’s important for every company to determine exactly what it is they want to accomplish with marketing, and find a budget that works with their goals. This article will present a few ideas to help you set both marketing goals and a budget that falls in line with your goals.
How much should I spend on marketing?
The first 2 questions that any new business owner should ask himself or herself is “how am I going to market my new business” and “how much should I spend on marketing?” Yes, indeed this question should come even long before “how am I going to develop my company?” and even before “how am I going to get people to invest in my idea?”
As a marketing professional, I’ve been called in to help last minute with marketing on new start-ups that have great leadership, interesting products, and even a billion dollar idea that would benefit the masses, but they haven’t set aside hardly any money for marketing, or done any strategic planning. This is always a mistake.
It’s important for any business owner to keep in mind that products and services don’t sell themselves, and hoping and praying word-of-mouth is not valid a marketing goal.
Whether you run a small company or a billion dollar corporation, marketing and advertising is vital to your growth, profitability, and continued customer loyalty, and so a marketing strategy, goals, and budget should be set up well before you even start developing your product.
General rule of thumb
It’s important to set up marketing goals and ask yourself “how much should I spend for marketing?,” but, unfortunately, there is not a one-size fit all solution to this question.
There is, however, a few general rules of thumb that will help guide you before you really start solidifying your marketing goals.
As a general rule of thumb, many businesses will calculate their initial advertising budget based on a percentage of their projected gross revenues, and add in an extra budget for start-up marketing costs.
For smaller companies with revenues less than 5 million, SBA.gov recommends setting aside 7 to 8 percent of their projected revenues to ongoing marketing, and an additional 3 to 5 percent for start up marketing.
For companies that are planning to grow their business, rather than just maintain awareness and visibility, experts recommend setting aside at least 10% of their total projected revenue on a marketing budget.
It’s important to keep in mind that these numbers are simply estimates, and should be tweaked based on your industry, the size of your business, and your growth goals.
Refine Budget by Taking Organized Steps and Setting Goals
So, now that you have a general rule of thumb in place, how do you actually get a more solid number in order to set up a realistic budget? While it may seem like a daunting task, and is a daunting task, it is doable. Here are some steps to take in order to refine your budget.
1. Do your research.
As mentioned before, every industry is different, and depending on your niche, advertising costs can be vastly different. For example, if you are interested in paid search advertising as a new lawyer entering in the market place, you’re most likely going to be spending around $13.00+/click on a paid search ad vs. if you sell a new hip line of purses, you will probably only be spending around .90 cents on an average click.
To get a rough estimate of how much you will be spending on keywords related to your industry, login to iSpionage.com, conduct a quick search for the keywords you want to target, and use the results to help you determine your budget.
Not only do you want to research keywords related to your business, and to your campaign, but you will also want to research your competitors, and what they are currently spending.
The best way to do this is to find a company that is similar to yours (of course they won’t be exactly like you, because you are the new, hip, one and only), and figure out what they are typically spending on SEO, paid search, and other types of marketing. Thankfully, there are many types of internet software, including iSpionage.com’s competitor data that will give you this information. That spares you from having to call them and ask them, and not get an answer.
Once you have reviewed the list, you can choose the company that most accurately reflects your new company, and delve a little detail to figure out what keywords they are targeting, how much they are typically spending, what type of ads they are running, and set your goals keeping this information at the forefront of your mind.
Finally, while you are conducting all this research, it’s important to research different types of advertising options. There are several ways to run an ad campaign both on and offline including billboards, newspapers, radio, paid search, SEO marketing, YouTube, social media marketing, and more.
In order to save money from the get-go, take the time to research your target audience and your industry, and find out what types of marketing works best to capture the attention of the people who will use your product. One of the best ways to throw away money is to walk into several campaigns with no plans, no goals, and just hope for the best. Take the time up front to do the research and set your goals based on your findings.
2. Organize financial information
Once you have really researched your industry, target market, competitors, advertising options, and have a general estimate of how much you may need to run a successful campaign, its time to get your financial information in order to see what you can realistically afford.
When you are working with rough estimates, it’s difficult to create a realistic budget, and understanding your financial situation will help you know exactly what you can, and what you cannot, afford. Once you have an idea of how much disposable income you have, you can set your marketing budget and really determine your marketing goals.
The first bit of financial information to organize is your reliable revenue sources. Know exactly how much money you make as a company, or how much you are projected to make if you are a start-up, and base your budget off of that number.
After you know your total amount of reliable revenue, make sure you subtract all expenses related to your business. After you have paid your expenses, you will have a good idea of what type of income you have left over to allocate to marketing, and can set up goals based on that information.
As a new lawyer, you may not have the type of funding to launch every marketing campaign, but you will have an idea of how much internet marketing may cost, how much you have, and what areas will be most beneficial for you. Set goals of what you want to accomplish based on this information, and use your marketing spend wisely.
3. Once you know your budget, set your marketing goals.
As soon as you know how much you have to spend, you can set realistic goals for advertising and growth. While it may seem like setting goals is the first step, knowing your budget will give you the hint of reality you need in order to make sure you spend wisely, smartly, and get the most bang for your buck. Here are some additional ways to help you set goals.
1. Determine your market – One of the biggest mistakes people make in marketing is trying to market to everyone on the whole planet. This is almost impossible (unless you are Coca-Cola or McDonalds), and will spread you too thin. Don’t be afraid to select a target group of people and only market to them. Walk away from any marketing plan that spreads your target audience too thin.
2. Determine the best ways to spend – Any SEO company will try and convince you that every internet marketing option is vital to your campaign, but it’s not so. For example, if you are targeting a very niche market in a small geographical location, and there is minimal to no search volume for your keywords and location, don’t let them talk you into a paid search campaign. It’s not worth your time, and is a waste of your budget. Don’t be afraid to say “no” if the marketing plan doesn’t fit your needs.
3. Set a plan for growth – Not only do you want to set goals for your target market and type of campaign, but you want to set goals for growth. Consider thinking outside of the box for ways that will help you reach and connect with your audience.
4. Assess data and make changes.
As always, it’s important to make sure you set up ways to evaluate what is working and what is not. Marketing is designed to bring in extra revenue, so if you aren’t making money by spending money, then it’s time to adjust your strategy and goals.
Ashley R. Cummings is the owner of Searchlight Content and a freelance writer, specializing in online marketing, education, and travel. Connect with Ashley on Facebook or on Google+, and learn more about her on LinkedIn.