To run a successful business, you need to find the perfect balance between cost
management and growth.
One of the most important aspects of this is to determine how much money you are going to set aside for marketing.
When you have a well-designed marketing budget, you can reach your business goals, get new customers, and keep steady growth in the industry of your choice.
But, what’s the right amount of money? How do you go about calculating it?
Let’s walk you through the steps you need to take if you want a marketing budget that willsupport your business growth and help you reach the goals you have in mind.
Marketing budget: is it essential?
In a nutshell, yes. It will help you make better, more informed decisions. You’ll invest in growing your business, in the end.
So, whether you want ads, SEO, or email campaigns, knowing how much to spend and where to use the best resources is the priority. You can maximize your returns this way.
According to research, in 2024, advertising and marketing spending will grow by 7.7 percent to almost 1.76 trillion U.S. dollars worldwide. That’s why having a clear budget helps youtrack the performance of the strategy and adjust on demand.
When you don’t have a well-defined budget, you can overspend in areas that are ultimately not beneficial for you. Plan and make sure that every dollar counts for your goal: growing your business.
Step 1: What are your business goals?
Before we get into the nitty-gritty, let’s take a few minutes to think about the goal of your business. Here are some interesting questions to ask yourself or your business partners:
● Do you want to increase sales, raise brand awareness, or reach new markets? ● Who do you want to talk to?
The clearer your goals, the better.
Consider that the budget might change depending on what you’re doing. If you’re launching a new product, the numbers won’t be the same as if you’re entering a new market or growing
your current customer base. Get these aspects defined so that you can better anticipate the rest of the budgeting process.
Step 2: get to know the industry standards
Although some experts recommend spending between five and ten percent of your revenue on marketing, the truth is that this number changes by industry. So, research a little bit about your niche to get an idea of what companies like yours are spending on marketing.
That way, you’ll ensure you’re not overspending or falling behind your competitors in your efforts.
Don’t forget about what stage of growth your company is in – if you’ve just started your business, you may have to invest a little bit more in marketing to establish your brand.
If you’ve already made a name for yourself, you need to focus your efforts on retaining your customers and allocating some budget to making new ones.
Step 3: get to know the best channels for your brand
Not every social media channel is the same, and you’ll probably invest time in multiple channels, such as advertising and email campaigns, social media, and content marketing.
Identify which ones are the best for your business.
These are some of the most popular ones:
● For social media marketing, platforms like LinkedIn, Facebook, or Instagram help you build a community of followers and potential buyers.
● For SEO, you should consider a long-term investment, something that can get great results if you do it right. Be prepared to wait for results.
● PPC, or pay-per-click advertising: you can invest in Google Ads or Facebook ads, but you will have to make a consistent effort for bids and ad placements. ● If you’re thinking about an email marketing campaign, you can get high returns for near-minimal investment, but you still will need to budget for list management, creative design, and software.
Set aside funds based on the performance of these channels in previous campaigns.
Step 4: don’t forget about operational costs
Marketing campaigns can take up most of the effort, but there are operational costs to consider, and you can’t ignore them. Software subscriptions, staff salaries, technical infrastructure, all of that can influence your budget.
For example, learning how to use a static IP address for your marketing tools or analytics platforms can improve the reliability and security of your operations. Since most startups are targeted by cybercriminals at least once, this is a strategic move for your benefit.
When you’re calculating your total marketing budget, consider these expenses.
Step 5: evaluate the past performances
When you’re starting a new marketing campaign, make sure to determine the budget by considering the past performance of your campaigns. Some of the key metrics are:
● Return on investment, or ROI
● Cost per acquisition, or CPA
● Customer lifetime value, or CLV
Remember to ask questions and evaluate which efforts were the most successful. That way you can focus your efforts on the results that work for your brand.
This doesn’t mean that you should eliminate the campaigns that didn’t do well. You can see what it was that didn’t work out, adjust, and try again.
Step 6: Create an emergency plan
There will always be unexpected expenses, no matter how much you plan around them. So, set aside a portion of your budget as a contingency, in case there are unforeseen costs to cover.
This can include things like market shifts, competitor actions, and even opportunities you didn’t see coming. Overall, it’s best to set aside around 10% of your total budget for emergencies of all kinds!
That way you’ll stay flexible and operational no matter what happens.
To sum up
You don’t have to be overwhelmed when calculating your marketing budget. If you understand your business goals, do your research, analyze what worked and what didn’t in the past, and invest in the right platforms, you won’t have a lot to worry about.
Account for both campaign and operational costs, and set up good safety measures to protect your business against cyberattacks. Leave room for flexibility and set aside money for contingencies.
