When you are starting a new company, there are many demands on your budget and time. One of your primary concerns could be budgeting for the online marketing of your startup. You need to put your startup funding where it will give you the biggest bang for the buck, reach your target customers, be effective in driving sales, and help grow the business.
Creating your startup budget can feel like taking a shot in the dark, yet it is vital to the success of your small business. How you manage your budget will determine the way new customers discover your business. If your startup has not been making consistent revenue, thinking about your future marketing budget can be confusing. Rather than thinking of marketing costs as an expense, consider it as an investment. Your marketing costs will result in a measurable return in the future.
What is a Marketing Budget?
To understand our recommendations, first, let’s define marketing budget. Your marketing budget refers to all the costs for advertising, marketing, promotions, public relations, and anything else you might cover under that very wide cast net called “marketing” on a date to day basis. This includes social media, print ads, Google AdWords, and event sponsorships.
How much should a startup spend on marketing?
There is never a clear-cut answer as to how much a business should spend on its marketing costs. However, as a general estimate, it is recommended that startups should spent nearly 20 to 25% of their revenue on marketing costs, while this figure is in the range of 10 to 15% for more established companies. The answer will mostly depend on your company’s unique circumstances, like target market, product, location, and whether you’ve secured funding or going the bootstrapping road. That said, there are a few universal considerations that can guide your marketing costs no matter your industry type.
Use the 5% Thumb Rule
There is a general rule of thumb in the marketing industry, that you should aim at spending between 2 to 5% of your sales revenue on marketing. Always research marketing budget data to establish some benchmarks. It is vital to calculate what sales you might get from your marketing expenditure.
Considerations When Setting Your Marketing Budget
Here are a few things to consider before you set your startup’s marketing budget.
Marketing Costs by Industry
Marketing cost varies across industries. For instance, companies in technology, banking, and communications spend most on marketing as a percentage of revenue, while mining and construction, manufacturing, and transportation companies spend less.
There are factors that will influence how much your business spends on marketing. Your marketing budget is likely to fluctuate according to the current market trends. According to a recent survey, marketing budgets have risen to 11.4% of revenue, up from 8.6% before the Covid-19 pandemic. This likely reflects a prioritization of marketing strategies to maintain brand awareness and customer retention throughout this challenging economic period.
Figure Out Marketing Expenses
Regardless of how much budget is set aside for marketing, all businesses can benefit from a system of checkpoints to make sure marketing budgets are being used to their fullest potential.
Here are a few ways to curb wasted marketing expenditure:
Your budget expenditure should be dedicated to what you hope to achieve, and also to what you can realistically afford. Regardless of what you select, it’s important to have a goal in mind for when you go off and start marketing. You must customize your marketing expenditure based on your startup’s long-term and short-term goals.
Track Return on Investment (ROI)
Measure your spending and the current effectiveness of all your marketing activities. Tools such as Call Tracking and Google Analytics can help, but even simple spreadsheets or pen and paper are better than nothing. If one quarter was more profitable than another, investigate why. Simply put, basic tracking empowers you to do more of what works and less of what doesn’t. More importantly, carefully plan how you intend to divide your marketing budget. Maybe your blog has been your most powerful tool, and you want to invest 40% of the budget in it? Or maybe you want to spend most of the budget to develop a new e-book or an online course? Just be certain you have the logistics settled before you start spending.
Reconcile Your Budget Routinely
Marketing expenditure is often spread across business units, time periods, teams, and geographies. Accurate tracking, classification, and accounting for marketing expenses are important to create a clear picture of your startup’s financial performance. Aim to set up three meetings each month to track and adjust your budget if necessary:
- Beginning of the month: Compare your expenditure from the last month to the expected budget for this month.
- Mid: Note any unusual category that needs to be accounted for.
- End: Review expenses and all invoices to make sure all stakeholders have the same information.
Adjusting Your Budget Over Time
It is expected that your first startup budget will be inaccurate, but you can learn and make adjustments along the way. The very nature of a startup is a rollercoaster of unpredictable roadblocks and unexpected opportunities. You will have to roll with these and adjust accordingly. It is crucial to track marketing expenditure on a daily basis so that you can adjust spending mid-month or seek the essential approvals for any extra expenses required for the remaining period. Make sure to keep a close eye on categories that easily run over budget, including contractor hours, digital ad costs, and even events. Also, be mindful to track expenses, such as software downloads and non-monthly invoices that need to be allocated across months accordingly.
Your Marketing Channels Must Align with Your Business Objectives
There are a fair number of choices in today’s digital world when it comes to picking a marketing channel to reach your target audience. No two marketing channels are created equal and, the channels that you choose should be primarily influenced by your business objectives. As a startup, this will inevitably revolve around your financial situation and how much Investment you have secured. It is also important to assess your company’s internal skills and capabilities so that you have a reasonable understanding of what should be outsourced and what can be done in-house. Your marketing budget and channels must be directly proportionate to the amount of funding you have secured or can afford to allocate.
So how do you choose your marketing channel to fit your budget? Here are some things you should consider for each of the major channels when starting up:
Pay Per Click (PPC)
This is a great way for startups to see traffic and conversions when their site has limited domain authority and SEO rankings, both of which take time to develop organically. As such, PPC is suited for startups with investors that need to see results quickly.
These days there is no excuse for any company to not have a great website. A website serves as a foundation for your digital presence and complements all other digital marketing strategies. An effective web design doesn’t come cheap, but it’s definitely worth it.
Blogging is the bread and butter for an effective content marketing strategy and it is a great way to develop brand recognition with potential customers. While it can take some time to see a return on investment for content marketing costs, the leads it yields are easier to close because they’re already familiar with your brand and consider you a good match. In the long term, you may also find that your cost per visit to your website will be lower than PPC will also help your search engine rankings.
Planning your business budget is one of the most stressful parts of entrepreneurship. But being realistic about estimating your business startup costs and how much money you may need to borrow right away, will go a long way towards getting your startup up and running. To dig a little deeper to create an accurate marketing budget, you must always analyze the way your customers engage with you. Is this through a mobile-ready website, social media, app, or website advertising?
Identify your most profitable marketing platforms and then dedicate more of your marketing budget towards which channels are working the best for you. Constantly monitor your customer analytics. Look for weaknesses and fix them. This could be by dedicating additional funding to fixing them or restructuring your marketing funnel for example. If you spot any weaknesses, you must limit your everyday marketing activities until you have resolved your issues. This is where Trigacy Agency can help out.
We help with your brand’s marketing and branding. In your initial start, our expert services can take care of the branding and marketing part. This will help you focus on the other aspects and together, we can make your brand successful. By weighing your big picture goals and objectives against the different marketing tactics at your disposal, we make sure that you make the most informed decision for quick wins, without spending a fortune.