Determining the appropriate marketing budget is a difficult task for every company. Startup firms and small businesses, in particular, must maintain a good revenue-to-cost ratio while simultaneously spending resources to advertise and develop their company. As a result, the most important question for each small firm is: how much money should be put aside for marketing?
A common rule for small firms with revenues less than $5 million, according to the Small Business Administration of the United States, is to devote 7-8 percent of their revenues to marketing. This number is calculated using data from firms with margins in the 10-12 percent range (after expenses).
Of course, while setting a budget, there are several other elements to consider, such as the industry, the size of the firm, the stage of the business's growth, and so on. For example, firms that are just getting their feet under them and are concentrating on brand building may spend up to 20% of their revenues on marketing, which is a significantly greater amount than established organizations.
It doesn't matter how much money is put aside for marketing; all organizations may benefit from a system of checkpoints to ensure that marketing expenditures are being utilized to their maximum extent possible. Here are a few suggestions for reducing wasteful marketing expenditure:
Prepare a marketing strategy that is effective. Costs should be estimated, and a strategy for achieving targets within an acceptable time period should be developed. Check out Does Your Business Have a Marketing Plan? for some pointers on how to put one together. sometimes known as how to set a marketing budget that is aligned with your business objectives and yields a high return on investment.
Keep track of your return on investment (ROI). Measure your expenditures as well as the present efficacy of all of your endeavors. Tools like as Google Analytics and call monitoring can be useful, but even simple spreadsheets or pen and paper are preferable than doing nothing at all in some situations. Determine why one quarter was more profitable than another by doing an investigation. Simply said, simple tracking enables you to do more of what works and less of what doesn't work by providing you with more information.
Revisit your plans if necessary. It is important to recognize that the initial marketing plan you developed is adaptable and may be modified as needed. Keep reminding yourself of your objectives and evaluating your progress during the course of the year. There is no assurance that your initial strategy will be effective, but as long as you are aware of whether your marketing expenditures are truly reaching your marketing objectives and are prepared to make the necessary adjustments, you are on the right route.
Yet another approach to think about your marketing budget is to think about it in terms of the revenue increase you hope to generate as a result of your marketing activities.