How to prepare a marketing budget for your small business
Updated: Dec 31, 2019
Preparing and owning a marketing budget is essential for small businesses. I know for many small businesses, it sometimes feels easier to set aside a pot of money for a rainy day. But, without a marketing budget, you’ll run the risk of over or underspending on marketing. Marketing is a key ongoing business investment. It will bring you a better return in the long run as long as you prepare your budget carefully.
Why prepare a marketing budget?
Budgeting can help in so many ways including:
Focus – it will help you focus your efforts, think about things more strategically and spend quality time planning.
Savings – it may sound strange, but preparing a budget will save you money, ensuring you receive the best price and achieve economies of scale by bulk ordering.
In the absence of a plan, it gives you a loose guide/plan to follow for the year
Cashflow – it will also aid finance. If you have any large expenditure, it is important that finance/your accountant is aware of this in advance.
But how much should I budget?
The first question I always ask a client is, “Do you know what your budget is?”. It is not uncommon for the client to genuinely not know.
There’s no hard and fast rule as to how much money a business should budget for marketing. It really depends on the stage of your business, your profit margins, industry sector and of course your revenue. However, there are some principals you can follow to make it easier for you.
For start-up businesses, a larger budget is advised using 10 to 20% of your projected revenue on marketing. For more well-established businesses (over five years old) 6 to 12% of your projected revenue is recommended.
The CMO Survey compiled by Deloitte Digital, revealed on average marketing budgets are 11% of total company budgets. You can see how this breaks down by sector in the graph below.
Source: The CMO Survey and Deloitte Digital
While this may seem like a lot, remember new and emerging brands are looking to capture new market share and develop brand recognition with an audience that has absolutely no idea who they are.
How do I slice up my budget?
Your marketing budget should be part of the planning process and be an important part of your marketing plan. This is because your budget should align with your business goals as opposed to being a list of separate tactical activities.
Your marketing budget should include all your anticipated expenditure for advertising, product enhancements, distribution, merchandising and trade shows. Small businesses now spend nearly half of the marketing budget on digital channels. Many businesses also include staff costs in their budgets.
The CMO Survey shows how marketing budgets have been allocated in both B2B and B2C, as a proportion of their total marketing budgets. It revealed on average marketing budgets are 11% of total company budgets. You can see how this breaks down by sector in the graph below.
Some simple tips
If you have access to one, study the marketing plan and budget from the previous year. Select the projects you will continue in the coming year, or those costs that are ongoing. Add projects that you know will be necessary, including new products you will introduce, any marketing research or additional advertising you need.
You will need to put together a calendar plan of all your activities to understand what, when and how you intend to spend the money.
Dependent on the size of your business, it is worth meeting with other departments in your organisation to understand their plans and the subsequent costs.
You may need to obtain some speculative quotes from suppliers so allow time for this
Also allow for cost increases from suppliers for the year ahead
Have a contingency budget and be prepared to adjust your budget during the year. Expect new projects and expenses to arise from other departments.
Now that you’ve created a marketing budget commit to it. Many new business owners get nervous and pull back on marketing when sales decline. Marketing is absolutely essential and is what will help grow your sales. Without marketing, it will be hard to scale your business. A budget will help you to spend wisely as you build up your business. Also, remember by creating a realistic budget, you can work toward your specific business goals.
Free marketing budget templates
There are some fantastic free templates you can use as a guide. Blog spot provides a vast array of templates from a master budget to content and event budgets.
And remember, for your budget to be truly effective, it needs to work alongside your marketing plan. For tips on how to develop your marketing plan.
Still need some further help with your marketing? Then please feel free to drop me a line and we can set up a 30-minute free consultation.