For small businesses, marketing used to be limited to things like tiny, one-column ads in programs or hand-lettered signs. The most effective marketing tools of the day—television or massive direct mail campaigns—were just too costly and out of reach for small businesses.
The digital age has changed all that, thankfully, but small business owners still find themselves with a boatload of marketing challenges:
- How much should I spend on marketing?
- What’s the best strategy and mix of tactics?
- How do I maximize my return on investment, or ROI?
- How to I track results to make sure I’m getting a return?
First things, first: How much to spend. Marketing expert Meredith Munger says always think of your marketing spend as an investment. You’re spending money to make money, regardless of your budget. The SBA recommends that small businesses (under $5 million in sales) allocate 7-8 percent of their budgets on marketing. That’s $350,000, or $30,000 a month! Sounds like a lot, doesn’t it? The SBA also says that spending should be based on industry and consumer-focused industries could go as high as 20 percent!
Munger also cites figures from other sources like the CMO Council, which are more like 11 percent. Wow. But her real points are that regardless of your objectives, strategy or tactics, marketing’s not free. You’ll need to make a substantial investment to increase your sales, especially in the early years of being in business. Your competition’s never going away. In fact, it’s probably heating up. Which means you better be out there!
But this is where small business owners need to be very smart. Before you determine your budget, articulate—in writing—your objectives: Why are you marketing in the first place? “Increase sales” is probably #1 for every business. Things like building your brand and visibility are worthy goals, to be sure, but much tougher to measure. And besides, these will be natural by-products of your marketing efforts. You need to make sure that you’re marketing to a specific objective (or objectives); that your efforts are consistent and sustained; and that they’re measurable. Only then can you assign marketing dollars.
And speaking of your marketing budget, it will also depend on a whole host of variables—things like your target audience, your competitors, your geography, whether you’re brick and mortar, web-based or both and so on. That’s why setting an arbitrary monthly marketing spend just doesn’t quite make sense. Dollars need to be tied to specific actions. Especially with social media, there are lots of creative marketing tactics that cost very little and enable small businesses to make a big effort with a smaller investment.
On the other hand, what if your competitors are out-marketing you like crazy? If you find yourself in this situation and think you can’t afford a strong marketing effort, think again. Remember, marketing is an investment you’re making in your business and in the growth of your sales. It may make good business sense to get some capital to use for marketing. After all, if your fundamentals are in place—objectives, sound strategy, measurability—your marketing investment could easily generate several times that amount in revenue.
That’s why at Business Financial Services, when we’re talking to small and medium-size business owners about financing, we look not only at your current financials but also at your business model and your potential for growth. Business owners are able to use funding from BFS for any business expense they see fit. In fact, we have a number of customers who’ve used their capital from us for marketing-related expenses, and it’s paid off for them. We see it in action time and time again:
“A man who stops advertising to save money is like a man who stops a clock to save time.” – Henry Ford
But even if you decide to make a larger investment in marketing, there are still loads of great low- or no-cost tactics to put into the mix. Forbes.com contributor and marketing agency Principal Lois Geller offers some great insights in Big Marketing on a Small Budget. Read this article for some big ideas which, as Geller says, don’t have to cost big money.
And because ROI will always be important to everyone, we’re also suggesting that you check out Three Ways to Increase Small Business Marketing Spend ROI by digital marketing expert Dustin Heap on smallbusinessbonfire.com. Heap takes a fresh look at three important areas that, if you implement them or make some changes in what you’re currently doing, can boost your ROI. The three are
- Call tracking
- Taking full advantage of analytics
- Integrating “offline” advertising into your mix (not everything has to be digital!)
Image Courtesy of Stuart Miles / FreeDigitalPhotos.net