Let’s face it: developing a marketing budget for a small business is usually not a very big priority. Typically, we just don’t have enough money to warrant having a formal marketing budget. Sometimes we just ignore doing one because it’s depressing. After all, if you don’t have any money to put towards a marketing budget, what’s the point of creating one?
Why bother? The answer is quite simple. If you don’t create a marketing budget, chances are you’re being reactive with your marketing instead of proactive. In other words, you may be choosing what to spend your marketing on in the moment, instead of having a consistent strategic approach over the year.
Don’t be too hard on yourself if this is ringing true. Chances are what’s holding you back is that you feel there isn’t enough money to do what you would like to do with your marketing.
So that’s why for today’s exercise I’d like you to embrace a philosophy I learned over 20 years ago. It was at a time when I was trying to figure out what I wanted to do with my life. One of the thought leaders at the time talked about taking your limitations out of the picture so that you can clearly see what it is you want to achieve. He suggested that to take out the limitation of finances, you pretend you have a huge amount of money. That way, you can focus on your dreams and aspirations instead of limiting yourself by financial constraints.
It’s actually this little exercise that I want you to think about applying to your marketing budget today.
By doing so I believe you will arrive at three major benefits:
- You will finally formalize a marketing budget for your company.
- You will have clarity on what it is you really want to accomplish with your marketing.
- You will be more proactive with your marketing instead of reactive.
Allocating your $100,000 budget
In order to start our exercise, the first thing you have to do is to think about where you want to apply your imaginary $100,000 budget (of course, feel free to make this number higher if it makes even more sense). Below I’ve listed the main components that should be part of any good marketing system. Have a look at the elements below, tweak them if need be, and then allocate your $100,000 in a way that would make some sense for your business over the next year.
- Content Creation
- Graphic Design
- Landing Pages
- Follow Up Steps
- Referral Strategies
- Social Media
- Email Marketing
- Website Updates
- Reviews, Testimonials, Case Studies
- Award Submissions
- eBooks & Books
- Proposal Development
- Product/Service Packaging
- Cross Selling/Upselling Promotions
Making sense of the numbers
Now, I want you to notice where you allocated the most money. These heavily weighted areas probably hold more importance to you, so take note of them.
Next, notice where you allocate the least amount of money. It would make sense that these areas hold either the least amount of importance, or you feel that you can tackle these areas on your own with little or no cost.
Finally, remove the areas where you have allocated nothing because they either don’t apply or they aren’t a priority in the next year.
What’s your REAL number?
It should now be clear where you would focus your dollars if you had the budget. Now let’s take our marketing budget down to reality. To start, I want you to come up with a figure that you feel you can reasonably spend within the year. If you’re having trouble discovering what this number should be, here’s a few realistic ways to calculate your marketing budget.
The simplest way is to take a percentage of your net sales or net profit—a percentage you feel you can afford to put towards marketing.
Another approach is to look at what you spent last year on your marketing, and determine whether or not you could afford to spend the same amount or perhaps a little bit more this year.
A third technique is to look at what your monthly sales are, and then to allocate an amount that you feel you can affordably handle month to month, knowing that some months are busier than others during the year.
Finding a budget for a small business usually means some sacrifice. It could come from nixing the cliché “daily latte,” skimming from other outgoing costs, reducing your income, or borrowing. Just make sure the sacrifice doesn’t cause you to lose sleep at night!
Remember that investing in your marketing budget is like investing in a company’s stock. The difference is, you have insight into this business—it’s yours!
Defining your real budget
Now that you have your number. I want to go back and look at your budget. Let’s say your annual budget is $10,000 instead of $100,000. Can you reduce each number to 10 percent, or are some now ridiculously too small? Are the areas that you identified as important still weighted more heavily? Can you reduce the least important areas to gain more budget in other areas?
In reordering your budget, you probably discovered some areas that you can do yourself to save money. Be very careful that these elements don’t end up putting so much on your plate that there’s just no way you could actually get around to doing them all without jeopardizing other elements of your business.
Review your new to-do list. Now prioritize it by importance as well as your skill level. If they aren’t important and you don’t have skill with them, can you put them on hold for now?
You still may find you need to take some things off of your marketing budget for now. Keep a “parking lot” budget document with a list of these areas, and review it when you have more money to spend. It will give you new ideas to implement going forward and a budget number to strive for.
Now, have a look at what you’ve created! Do you find that you now have a clear idea on where you want to go with your marketing? Do you feel like you have created an affordable, realistic marketing budget? Are you excited about doing something a little different with your marketing?
Having a formal marketing budget gives you an important guideline to measure your marketing activity. It will help you grow your business and give you sound advice on where to focus your marketing activity.
What strategies have you used to determine your marketing budget? What worked and what didn’t? Share your tips—and anything you learned about your marketing budget strategy from this exercise—in the comments below.