James Melton

James is a content strategist at Sagapixel and the team member that piloted our link building offering. He is also a classically-trained guitarist and musician.

How to Set a Marketing Budget for Your Small Business

Table of Contents

Tailor Your Marketing Budget to Your Business

Most small businesses are aware of the importance of marketing. It is an essential expense for any company looking to profit and grow. However, just having a marketing team and not really understanding how marketing is supposed to function within a larger business is like driving a car on auto-pilot while blindfolded.

Do not willingly reject control over the direction of your business’s success.

You do not want to have wasted money on a marketing campaign only to learn that the investment was unfruitful. It is now commonly known in business circles that 80% of businesses get past their first year, but only 50% can make it past 5 years. Every dollar counts and knowing how to allocate funds for marketing will give your business a fighting chance to survive its niche market.

This post will help you develop a budgeting strategy that prioritizes sustainable growth and profit.

If you need help setting a budget for your digital marketing, we would love to assist you. We are an Philadelphia SEO company with extensive experience handling SEO campaigns across an array of industries.

Devise a Marketing Budget That Suits Your Company and Market

Any experienced business owner knows that there is no single catch-all marketing strategy. There is no magic number you can throw at a system and expect successful results to emerge. There are multiple factors that you need to consider when determining what your marketing budget should be – your business’s industry, the size of your business, and your business’s growth stage. 

Let’s use small retail businesses as an example. When a small retailer is building their brand, they are going to have to spend way more on marketing – upwards of 20% of their sales. This number will vary depending upon the products they sell, their competition and the time of year.

Spending a larger percentage of your budget early in your business’s life makes sense as you build up your brand’s foundation in your respective market.

The $5 Million Dollar Rule

If your business makes $5 million-a-year or less in sales revenue, then the U.S. Small Business Administration suggests spending 7% – 8% of that revenue on marketing and advertising. If your business makes more than $5 million in sales, then you should spend less: 3% – 5% on marketing and advertising. This assumes a profit margin of 10% – 12%.

Whatever amount you decide on, you need to split it between brand development (which involves all the media you use to attract and convert leads – think website, blogs) and business promotion (which involves the actual campaigns, events, and outreach.

Spend According to Your Marketing Budget Plan

Here is an example of a marketing plan provided by the U.S. Small Business Administration.

The budget is a part of the plan. You need to adhere to the budget and revisit the plan as often as needed, several times a year minimum. This plan should also be time-sensitive- your marketing goals should have deadlines and you need to meet them.

Check out this invaluable post from the SBA to learn more about developing a marketing plan.

Plans Need to be Flexible

Though your plan should be thorough and thought out, it also needs to be flexible enough to react to factors that you cannot control for. These factors can be anything – market downturns, a recession, a change in trends, or a natural disaster. Also, there may arise unforeseen opportunities that will require a reallocation of funds and you need to be ready to execute.

You need to be able to adapt your plan to the circumstances facing your business. An inflexible business will not bend but it can most certainly break.

Pay Attention to the Results – What is the ROI of Your Plan?

Educate yourself on how marketing is supposed to be working – and be able to recognize when it is not. If your plan is not providing you with the projected results then you need to change course and adjust accordingly. Marketing is not effective when running on auto-pilot – you need to be in the driver’s seat to navigate your business through the market successfully.

Mastery Is in the Details

It is the attention you pay to the nuances of your market that will grant you the cutting edge in business. What quarter was most successful? Was there an external or internal factor that led to an increase or decrease in profit? What are the seasonal effects on your market? What are your direct competitors doing and how can you learn from them?

Build from the failures and successes you’ve experienced and incorporate them into your business plan moving forward. If you start focusing on marketing specifics before spending big bucks on printing, event space, and graphic design – you’ll be setting yourself up to make it beyond the dreaded 5-year mark. The first step is devising a plan.

Remember: Marketing plans should be maintained on an annual basis at a minimum, and revisited if you launch a new product/service, or if the market landscape changes.