All marketing plans have one major thing in common: they all require money.
As a small business owner however, how much money should you allocate? How do you plan for, and track, your expenses?
When I sit down with a client for this portion of their plan, it’s very common they will tell me “I don’t know how much I have/want to spend.” It’s not entirely surprising since many make the mistake of thinking their marketing dollars are only used for advertising/direct mail/collateral pieces, and until they’ve gotten quotes from designers, agencies or print shops, they don’t know how much things will cost.
The above items are only one type of marketing expense. Two actually, between the creative costs and the media buys. Other types of expenses that can (and should) fall under marketing can include networking costs, monthly email platform subscriptions, hiring bloggers or creating online content, time spent following up with new contacts or referrals, business development lunches or drinks, etc.
Step 1: Know how much you’ve spent in the past.
You know that saying, “You can’t know where you’re going until you know where you’ve been?” To start, developing your marketing budget is a little like that.
The first step in developing your budget baseline is to identify everywhere you’ve spent marketing dollars in the past year or two. If you’re brand new, then you can skip to Step 2. If you’ve been around for a little while, review the previous 2-3 years for what you spent. This is your starting point for evaluating what’s worked in the past, where you had good/bad ROI, and what your comfort level will be moving forward.
Step 2: Add in the new tactics you’ve developed.
Once you’ve generated your baseline, ask yourself if you want to spend more or change what your dollars go towards. In general, you’ll want to stick with any tactics that returned good ROI (more on that below) but how do you factor for new tactics when you can only guess at their costs? Here’s where a little research can go a long way. This article on Entreprenuer.com has an excellent breakdown of the different levels and costs for a variety of marketing expenses.
If you’re fortunate to know someone who works in the marketing or creative communications realm, ask if you can buy them a beer or lunch and get them to share with you general ballpark costs for things you’re considering.
Step 3: What’s your marketing:sales ratio?
OK, you’ve listed out your marketing tactics and totaled up how much it’s going to cost you. Now what? You need to factor the ratio of your marketing expenses against your company revenue or forecasts.
Traditional wisdom says that your marketing costs shouldn’t exceed 10% of your sales, but the reality is that number will vary widely depending on how old your business is, what you’re trying to achieve, and the type of industry you are in.
Step 4: Track Everything
At this point, you’ve gotten numbers jotted down, you’ve identified what you’re comfortable spending, and chosen the first few tactics to move forward with. Ready, aim, fire!
True tracking of your marketing tactics start almost immediately. Create a spreadsheet that separates out every tactic you’re using. Then every time you take a call from a potential client, ask them how they heard of you and log it in. Every time a customer walks into your store, ask them what brought them there. If you land the sale, enter in the sales amount next to the customer. Pay attention to your Google Analytics and conversions you’re getting through your website or online marketing efforts. You’re going to use all of this data as part of your tracking and monthly reviews.
Marketing results don’t happen overnight, and some tactics take longer than others to bring results. Be prepared to stick with it for enough time to see the results. It might come as a relief to know that while traditional marketing tactics can still cost a pretty penny, the number of low-cost yet effective tactics is increasing. Social media, content marketing, or consistent networking with the right people are all options you can consider.