Blog post

How much should a small business spend on marketing?

In this blog post, I’m going to look at the million-dollar question – how much should a small business spend on marketing?

As you might expect, there are lots of different answers to this question and there isn’t a one-size-fits-all approach.

The good news is that there are some key questions you can answer right now to work out how what marketing budget is right for your small business.

Average marketing cost for small business in the UK

Let’s start by understanding a bit about how much small businesses in the UK spend on marketing activities. According to YouGov, the average marketing cost for small businesses in 2019 was 9.3% of total revenue.

How to set a marketing budget for your small business?

If you’ve never had a dedicated marketing budget before, allocating around 10-20% of your annual revenue to marketing spend is a sensible starting point. You can keep the budget closer to 10% if you’re happy with steady growth or aim closer to 20% if you have ambitious growth plans.

Another way to look at how much you should be spending on your marketing is to review what you’ve already spent. Do you already have a budget allocated for marketing activities? If so, how much is that and what percentage of your annual revenue is it? You can then decide if you need to allocate more or less budget to marketing depending on your business goals.

Marketing budget allocation best practices

If you already have a marketing budget or have been spending money on marketing activities, you should look at spend by channel and work out the return on investment from each.

For digital channels, you can look at different metrics such as click-through rates, followers, likes, engagement and website visitors. ROI for traditional channels is more difficult to measure but consider asking your customers how they found out about you to give you an indication of how effective these marketing activities are.

Make sure you diversify your marketing budget across a number of areas so you’re not completely reliant on one or two activities. This will help you implement both long-term and short-term marketing strategies to ensure you always have a good sales pipeline and aren’t scrambling for sales.

If you spot something that isn’t working, stop spending precious marketing budget on it. I see a lot of small businesses continuing to do something because they think they should or because it’s what they’ve always done. To stay competitive, you’ll need to make sure you’re maximising your marketing spend to get in front of your ideal customers rather than wasting money on ineffective activities.

When it comes to allocating your marketing budget, don’t be afraid to experiment. Consider allocating 10% of your marketing budget to something new that you’ve never tried before. Identify how you’re going to measure whether this activity is successful and then stick with it for at least 6-12 months. Don’t expect instant results from new marketing activity but give it chance and after a year you’ll have a good idea of how effective it is for your business.

Marketing spend categories and marketing budget breakdown

A lot of different things can fall under the catch-all of marketing activity, but these are the main ones to consider for your small business:

  • Website
  • Advertising
  • Design
  • Market research
  • Agencies/freelancers e.g. for social media management
  • PR and outreach
  • Brand development
  • Asset production e.g. videos, photography
  • Print e.g. business cards, flyers
  • Sponsorships
  • Marketing consultancy
  • Promo e.g. gifts for customers, giveaways
  • Events e.g. trade shows, exhibitions
  • Travel expenses
  • Marketing training
  • Marketing tools e.g. CRM system, automation tools, analytics

Not all businesses need all of these categories. As always, it depends on who your ideal customer is and which marketing channels are best to reach them.

How much to spend on advertising for a small business?

Advertising tends to be one of the biggest marketing costs and needs to be managed carefully. The sky’s the limit when it comes to how much you can spend on advertising so it’s important to make sure the advertising channels you use have good ROI.

Traditional advertising tends to be very expensive and hard to track, whereas digital advertising can be much more cost-effective. It also gives you the ability to target specific demographics, criteria or keywords to help you get in front of your audience at a lower cost than traditional advertising.

I’d recommend setting aside anywhere from 50-75% of your total marketing budget for advertising and spending the majority of this on digital advertising rather than traditional.

Digital marketing budget allocation

In addition to budgeting for advertising, it’s vital to think about the money you’re going to allocate to your digital marketing. This includes things like website design and maintenance, creation of digital assets such as templates for social media and infographics or managing digital content such as social media channels and blogs. It’s worth investing in your digital assets consistently as your small business relies on these to represent your brand online to both prospective and existing customers.

If you need help with your marketing budget or marketing strategy, arrange a free 30-minute discovery call with me today.

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