As a small business owner, nonprofit or startup company, it may be difficult to know exactly how much you should spend on marketing. Additionally, it’s a bit of a chicken-and-egg scenario — do you invest in marketing so you get more business, or do you wait to get more business so you have the budget to invest in marketing?
Ultimately, only you can make that decision! However, here are some “signs” to look for to help you determine if it’s time to start spending money on marketing:
- You’re struggling to reach your target audience: If you’re having trouble getting your message in front of the right people, investing in marketing can help you increase your reach and connect with your target audience.
- You’re not generating enough leads or sales: If your sales are stagnant, or you’re struggling to generate leads, it may be time to invest in marketing to increase your visibility and attract new customers.
- Your competitors are outperforming you: If your competitors are doing a better job of capturing your target audience’s attention and stealing market share, investing in marketing can help you level the playing field and stay competitive.
- You’re introducing a new product or service: If you’re launching a new product or service, investing in marketing can help you build awareness, generate excitement, and drive sales.
- You’re looking to expand your customer base: If you’re ready to expand your business and reach new customers, marketing can help you raise awareness of your brand and attract new leads.
- Your business is growing, and you want to sustain that growth: If your business is on an upward trajectory, investing in marketing can help you sustain that growth by continuing to attract new customers and increase your market share.
How Much Should I Spend on Marketing
According to the Small Business Administration (SBA), small businesses with less than $5 million in annual revenue allocate 7-8% of their revenue to marketing. This can vary depending on a range of factors, such as industry, company size, growth goals, and target audience.
As a reminder, revenue is what your business makes before expenses.
So, if your business made $250,000 last year, you would want to spend about $17,500-20,000 on marketing, which is $1,458-1,666 per month.
How to Allocate Your Marketing Budget
One important factor to consider, particularly if you are outsourcing your marketing is to consider what you’re investing in! If you pay a freelancer or an agency, you’ll also want to consider the cost of advertising spend. For example:
If the agency retainer is $1,500 a month, and you hire them to run ads on social media that drive traffic to your website, that leaves very little advertising budget ($1,666 – $1,500 = $166 remaining for ads…and that’s the TOP of your 8% budget)!
Another important factor to consider is what your business goals are! If you want the ability to track exactly where leads come from this year, but you allocate your marketing dollars to radio advertisements, you are going to be in trouble. Similarly, if you feel like your organization doesn’t have a lot of brand awareness, but you invest your marketing dollars in retargeting ads, you aren’t going to reach new audiences and influence new people to learn about your company.
Before you spend money on marketing, take some time to figure out your budget, your business goals and who you want to reach (i.e. your target audience. Click here for a free resource to help you get started.