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Your marketing budget should be a percentage of your revenue. A common rule of thumb is that B2B companies should spend between 2% to 5% of their revenue on marketing. For B2C companies, the proportion is often higher between 5% and 10%.
Marketing is the door through which the target market connects with your services or products.
Running on a limited marketing budget is just like running your car on fumes and expecting to reach your destination. It can derail your growth goals faster than Usain Bolt can complete a 100 meters sprint.
You need a sizable budget in your marketing war chest to compete effectively with other players in your industry and to increase sales.
A few decades ago, small businesses’ marketing was mainly outbound-based, such as in newspapers.
Now it is a website, content marketing, search engine optimization (SEO), pay per click (PPC), email marketing, and much more, that are dominating in today’s world.
With the expansion of channels, marketing costs have grown as digital platforms are opening up new frontiers that require data-driven approaches and emerging AI-based tools.
It turns out there’s a particular AI-driven tool that can help you cut down your digital marketing costs while driving optimum and desirable results.
In this blog, you’ll learn:
As far as numbers go, there’s no single advertising budget for small businesses that’s valid across the board.
Yes, you read that right.
After all, a company’s advertising budget is unique to the specific business and industry and depends on a number of factors, namely:
The numbers vary across industries by keeping the marketing due diligence in mind too.
So there’s no exact number one can report about companies’ spending on marketing. We recommend you follow the tested and proven 5% rule—that is, dedicating 5% of your revenue to your marketing budget.
But the aforementioned 5% is a one-size-fits-all approach that may or may not suit all businesses.
The US Small Business Administration suggests spending 7%-8% of gross revenue on marketing (for companies with < $5 million annual revenue and net profit margin of 10%-12%).
Research studies conducted on marketing budgets have come up with a general percentage margin:
The digital space is full of marketing channels. When allocating your marketing budget, consider which channel will have the highest return on investment (ROI).
As we said, the marketing budget is a percentage of a business’s total budget that is dedicated to tailor-made communications for the target market.
But let’s break it down even further to understand what it is comprised of.
Below is a marketing budget breakdown showcasing the expenses you should expect when planning your marketing budget.
Keep reading because we’ll explore the average marketing budget for small businesses, as suggested by experts in leading sectors.
Marketing is a broad term that involves many activities, such as:
The success of a small business depends on the owner’s ability to market their products and services effectively.
Let’s picture this.
You have a great product and stellar customer service. But your target market does not know your brand exists. Will you achieve your strategic goals (profits and equity growth)?
Marketing gets your brand’s message out to potential clients and entices them to try your offerings.
Below is how marketing can help your business thrive:
A good marketing budget can help you compete with well-known enterprises for a piece of the market share.
Small and medium-sized businesses (SMBs) have an advantage over larger companies because of their personalized approach to the market. Marketing services, such as pay-per-click, allow you to personalize communication and offers for the target market.
Your potential clients will instantly recognize your branding efforts if you execute your marketing strategy well.
Remember, your clients can also become a part of your marketing campaign by writing positive comments about your brand, as well as recommending it to their friends and families.
In other words, a well-executed marketing strategy and a sizable budget can turn prospects into a brand evangelist.
Keep reading because, in the next section, we’ll recommend the best tool to use to cap the average marketing budget for small businesses.
When you launch a small business, there’re a million different tasks to handle.
One of the most important and overlooked tasks is marketing.
Yes, you read that right.
After all, how will your target customers know your brand exists if you don’t get the word out?
Follow the best practices (mentioned below), especially when creating a good marketing budget for your business.
Rule of the thumb.
Create a marketing strategy before embarking on the budget part. A marketing strategy acts as the blueprint for guidance.
To spend in a way that guarantees solid returns, you need a plan.
Marketing is a variable expense. Just because you can’t afford to spend as much now doesn’t mean you won’t invest more during profitable periods.
Your marketing strategy is made up of several components.
If you remember the Ansoff Matrix, you will come to know importance of market penetration, product development and much more which should be the around your goals to achieve growth.
Essentially, goals are the results you want your marketing efforts to yield. Obviously, the end goal with all marketing is to increase sales. But you should be more specific to yield a profitable strategy.
A practical example of a goal could be to drive traffic to your company website or increase user engagement rates on social media posts.
Your target audience is the people you intend to convert into customers and brand evangelists using your marketing.
To zero in on your target market, you’ve got to perform market research:
Distribution is the channel through which you market your brand to the target market.
In the past, distribution was done majorly via outbound marketing (i.e., TV, radio, and physical advertisements). Nowadays, it’s most cost-effective for small businesses to advertise online. There are many ways to advertise online, from buying ads to investing in social media marketing (SMM) and search engine marketing (SEM).
In-depth knowledge of your target audience can help you narrow down the best and worst-performing platforms for distribution.
Your marketing goals should be measurable.
This is where analytics come into play.
A solid marketing strategy leverages data-driven tools like Google Analytics to measure returns relative to set objectives. Analytics can help you narrow down the areas in your marketing efforts that are succeeding or failing.
In short, analytics answers the what, why, and how of your marketing. Besides, it outlines your overall plan and the tactics you’ll use to hit your goals.
To know the average marketing budget for small businesses, you need to dive deeper into your data for insights.
Yes, you read that right.
To derive a good marketing budget, especially if you run pay-per-click (PPC) campaigns, you need to tool that crunches your raw data faster for in-depth insights.
In other words, you need a smart tool like PPC Signal.
Keep reading because, in the next section, we’ll address the following question: how much should a small business spend on marketing?
PPC Signal uses machine learning and artificial intelligence technologies to offer a management experience that perfectly blends automation and human intervention.
More so, the AI-driven tool allows you to pay attention to significant shifts, trends, outliers, and other occurrences, instead of toiling over every minor fluctuation.
Every change that PPC Signal discovers is packaged as a convenient insight ready to be unpacked. And these “signals” appear on the tool’s main dashboard, as shown below.
PPC Signal is one of the tested and proven tools you can use to drive the sky high returns from your existing marketing budget.
Let’s interpret the above screenshot.
The PPC Signal is forewarning a fall in conversions and increased cost per conversion. If the campaign (above) is left to run for long, it can suffer massive losses.
Cost per conversion is one of the metrics you need to keep watch because it can drain your budget.
PPC Signal comes loaded with a wider range of metrics for each of the three sections of a sale funnel to guarantee access to high-level insights. For instance, you can easily assess the performance of the top of your funnel by checking the following metrics, namely:
Take a look at the screenshot below. You can filter the results by selecting any desire metrics of your choice from left side of the window.
You will find that there’s anomalies on the top of the funnel. Impressions are growing while clicks are declining.
If you click the Explore button, PPC Signal will provide with more details and corrective actions you should undertake.
In other words, you’ll be directed to a chart that will furnish you with high-level insights into the anomaly reported by the PPC Signal.
So having detail level analysis of your signals will always lead you to monitor and control your campaigns with strong grip. You can take timely action to fix the issues in the campaigns and save a lot for yourselves and for your clients.
The U.S. Small Business Administration recommends spending 7 percent to 8 percent of your gross revenue for marketing and advertising if you’re doing less than $5 million a year in sales. And your net profit margin after all expenses is in the 10 percent to 12 percent range.
Spending up to 20% to 25% on marketing of total budget for young companies will be a good number to start with go-to-marketing strategies. The aforementioned percentage is deemed enough to build sizable brand awareness and convert leads into paying customers and brand evangelists. Small businesses need a good marketing budget to compete on level ground with enterprise-scale brands.
As we said, marketing is the door through which the target market connects with your services or products.
Running on a limited marketing budget is just like running your car on fumes and expecting to reach your destination. You need a sizable budget in your marketing war chest to compete effectively with other players in your industry.
So what is the average marketing budget for small businesses?
Your marketing budget should be a percentage of your revenue. A common rule of thumb is that B2B companies should spend between 2% and 5% of their revenue on marketing. For B2C companies, the proportion is often higher (between 5% and 10%).
With the expansion of channels, marketing costs have grown as digital marketing is opening many doors that require data-driven approaches and emerging AI-based tools.
It turns out there’s a particular AI-driven tool that can help you cut down digital marketing costs while driving incredibly high returns on investments (ROI).
The name of the tool is PPC Signal.
PPC Signal is the leading AI-driven application built from the ground up to mitigate complexities associated with setting up marketing campaign budgets for optimum results.
It uses advanced algorithms and machine learning to automatically detect opportunities and risks in your overall marketing strategy including budgeting.
No matter how complex or paralyzing your data is, PPC Signal provides actionable observations about positive and negative changes occurring in your marketing campaigns.
Sign up for a 7-day free trial to drive the sky-high returns from your marketing budget.
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