Marketing Costs: Deciding How Much to Budget

Marketing is one of a business's bigger expenses, but spending money on this crucial part of the business game is entirely necessary. Without marketing, how will people see your business? If you play your marketing cards right, you'll see a high rate on investment.

That said, you can't go around spending the company's money on marketing strategies willy-nilly. As much as it is a creative practice, you must stay financially disciplined. That's why every business should decide how much to budget for their marketing costs every year.

Not sure how to get started? Here are a few suggestions.

Look at Your Revenue

Marketing costs should not exceed your revenue. It should take up a percentage of your total revenue, but even then, not much. If your business is still new, you may have to budget a higher percentage of your total revenue. Consider this a jumpstart to your marketing plan. Make an effort to be seen!

Plan to set aside about 20% of your sales revenue. This may seem a bit high, but as your business grows, you can scale this down to about 7 or 8%, depending on how successful your previous marketing strategies are. With your percentage set aside, divide it into different parts (operational costs, advertising, analytics, etc.) of your marketing plan.

Settle on a Marketing Plan That's Reliable

Many established businesses are switching from traditional marketing strategies (billboards, television, radio, etc.) to online marketing strategies. While traditional advertising options have their place, they tend to be more expensive. And even though companies can afford it, the potential reach of the Internet is far greater. Online marketing strategies such as online banners, sponsored social media advertisements, and influencer marketing, are all new reliable -- and in some cases preferred -- ways to market your business.

Some of these online strategies you may be able to do inexpensively, too, especially if you're starting out. For instance, if it's just you and a partner, get to know how to work social media. Be your own influencer. It doesn't take much to start a decent following. So, especially if you're a new start-up with a small overall budget, plan to pay for a virtual marketing plan instead of a tangible one.

Factor in Your Operational Costs

The operational costs of any marketing strategy include hiring an advertising agency, part-time marketing staff, influencers, etc. These are necessary marketing expenses. But do not budget all your money towards these things. You'll also have to pay for research and analytics to monitor your business growth and reach.

Write Clear Business Goals

Specific business goals will drive a clear marketing budget. In other words, know what goal your money is going to help you reach. It also helps if you prioritize these goals, as you'll be able to justify spending more money on one particular strategy over another. Say that next year, one of your goals is to reach 500,000 followers on Instagram, and it is your top priority. Assess how much it would cost to hire a social media and SEO specialist, a professional photographer, and take out ad space on the platform. Budget enough money for this strategy.

The Growth Stage of Your Business

Your business's stage of growth will also significantly influence your marketing strategy. A business that is still growing needs to make more revenue as opposed to inroads into the market. On the same note, a business will also have to make inroads into the market to generate revenue. To rectify this chicken-egg scenario, you'll have to invest in quick-win marketing strategies. Choose strategies that are inexpensive, effective, and easy to execute, like social media campaigns. Your business can invest more money into long-term marketing strategies when you gain a steady revenue stream.

Current and Future Marketing Trends

Understanding current marketing trends and being able to foresee future ones will help you decide on a current budget and prepare for financial changes. Contact a firm that can make accurate predictions about marketing trends and do your own analysis of what your competition is doing. A good marketing budget will allocate funds for the current marketing trends and those you expect to emerge in the future.

Finally

Deciding how much to budget for your marketing costs should be guided by the points above. While many other factors will help your decision on budget allocation, these five pointers above are an excellent way to start.