How Important is establishing a Marketing Budget?
Often times small business owners overlook the importance of investing in a small business local marketing budget thinking it is an unnecessary expense. Or in some cases, a business owner buys some Local Advertising but did not have the results they were hoping for and so feeling defeated by the bad experience they give up on the whole idea of Marketing.
Whether realized or not each new customer relationship involves a Cost of Acquisition. When a small business does not invest in marketing and several hours, days or weeks go by before the next customer there is a real expense to that time.
If for example you provide a service, say pressure cleaning, and the average cost of that service is $1,500.00 and you have a week where you have 3 idle days you would at a minimum take the cost of overhead, say $50 a day for a small home based business, plus your minimum necessary salary to meet your personal needs, say $200 a day and multiply that by the three idle days for a Cost of Acquisition of $750. If instead, that same business owner had, for example, the month before proactively invested $150 in a Direct Mail campaign to New Homeowners and picked up just 1 customer from his investment and that job filled the 3-day gap he would have $1,350 in additional income that week. Plus now he has an additional customer who may refer even more business.
Like every part of your business, the process of Marketing which includes a Marketing Budget should yield a beneficial return on investment that leads to growth.
Here I’ll review some best practices to help ensure your investment in a Marketing Budget leads to real growth and a good return on investment.
Step 1. Before establishing a Marketing Budget you should create a Marketing Plan. A Marketing Plan helps you establish the framework and evolving process necessary to continually reduce your Cost of Acquisition over time as you find the best Marketing Channels for Small Business Local Marketing growth.
Did you know that approximately 90% of small business owners don’t use a Marketing Plan?
And that those who do grow at 2 – 3 X greater rates.
– You’ll be done in as little as 35 Minutes
How to Establish a Marketing Budget
Commonly Small Business Owners ask the question how much should I spend on Marketing?
This depends on your current Condition and Goals.
The Deloitte CMO Survey Results shown below indicated a Marketing Budget by industry that most industries spend between 8% and 15% of Gross Sales on Marketing.
Based upon experience here is a chart that can help you consider your current Condition when deciding how much to allocate to a Marketing Budget.
|Start Up or Stagnant
|12% – 15%
|Emerging or Expansion
|10% – 12%
|8% – 10%
|Mature Market Leader
|4% – 8%
Last 12 Months