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How Much Should a Small Business Budget for Marketing?

How Much Should a Small Business Budget for Marketing?

A startup budget is always a problem. There is never enough room to work with, and every new cost is an uphill battle. However, when something like marketing has the potential to bring in money and help you climb to the top of success, it shouldn’t be overlooked as an unnecessary luxury.

But knowing how much to invest in marketing is always a big question looming over every business. To help you decide, here is how much your small business should allocate to the marketing budget.

How Much Should a Startup Spend on Marketing?

A small business earning less than $5 million should spend 7-8% of total revenue on marketing activities. That’s according to the US Small Business Administration. However, if your profit margins are low; boost your spending to 10-12%, or find a middle ground that works for your business.

It’s your call. But remember to allocate enough funds, not just leftovers after taking care of expenses.

Is Spending the Same Across the Board?

No. Marketing budgets change from industry to industry. In fact, according to a survey from 2018, the percentage of revenue allocated to marketing by industry is only 6.9% on average. However, the figures range dramatically from 2% in mining and construction to over 18% among businesses in education and consumer services.

But this is just spending from revenue. Keep in mind that businesses also pay 11.4% of their budget on marketing, with some companies choosing to spend as much as 49%.

How much you spend will rely heavily on the number of competitors in your market. Running a competitive analysis before implementing marketing strategies helps you understand your industry better. Once you know what the competition is up to, you can find and take advantage of opportunities to target an unexploited area of the market.

Where Should You Spend Most of the Budget?

Again, it depends. The rise of digital marketing means most of the budget (3-5% of revenue) should be directed at your online channels. Research by Gartner supports this, as companies spend more on their websites, e-commerce, and digital marketing than any other marketing activity.

Initially, split the budget between the four basic types of online marketing:

  • Website
  • SEO
  • Social media
  • Paid online advertising

Once you have them in place, evaluate your efforts based on key performance metrics. It allows you to see what works best for your business so that you can allocate the majority of the budget into that specific channel.

Should You Invest Right from the Start?

Yes. Digital marketing trends change. It is equally important for entrepreneurs to explore every channel at their disposal to leverage new opportunities. Reserving a small amount of your budget (up to 5%) to marketing investments can bring lucrative rewards. All it requires is patience.

With the number of smartphone users set to rise to almost 7.5 billion by 2026, investing in mobile is the smart thing to do. Optimizing the website to be mobile-friendly is an initial step to consider. In contrast, developing an app is an achievable project even for a startup, but needs to be spread over a more extended period to remain inside the budget.

What’s the Best Investment for Startups?

he best way small business owners can invest in marketing is to start working with a successful Indianapolis digital marketing agency. A full-service marketing solution helps startup owners grow their business with a hands-off approach. You can focus on achieving long-term goals and finding new investment opportunities to reach the success you desire.

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