You’ve heard the common phrase, “It takes money to make money,” or similarly, “You have to spend money to make money.” Well, that’s fine as a slogan, but how much money are we really talking about?
Taking money out of your earnings to spend on marketing can sometimes seem like a lot of pain, and it’s hard to know when to do it and where to spend it to be most effective.
The Small Business Administration (SBA) recommends that small businesses allocate 7 to 8 percent of their budget to marketing. So based on this calculation, the annual marketing budget for a $1 million business would be $70,000 to $80,000. That works out to an average of $6,250 per month.
In fact, the SBA further recommends that some industries, especially consumer-focused industries, plan as much as 20 percent for their marketing budgets.
Much in line with this, the CMO Council, a peer network for chief marketing officers, reported that consumer-focused (B2C) companies averaged about 17 percent, while business-focused (B2B) companies spent roughly 11 percent in marketing.
When you look at it as a percentage, it’s an easier pill to swallow. When you think to yourself, “Yeah, 10 percent sounds like a decent amount to spend on my marketing… I mean, I need to grow somehow.” But then when you have a very small $120,000 business and you’re asking yourself to shell out $1,000 a month to promote his business, it becomes MUCH harder to pull off.
He owned a business called Local Search Services where we offered small businesses the ability to have their business listed on Google Local, Bing Local, Yahoo Local, and other local and regional search engine directories.
The service was one that absolutely everyone needed and still needs. We only offered the service to small businesses that we knew in advance were not listed in those directories. It would only take us about 45 minutes to complete, we did the service on site and it would only cost $125.
We enter the vast majority of small businesses; from day spas to burger joints to law firms to dance studios – you would have thought we were asking them to buy a SuperBowl Commercial. The business failed because we couldn’t get small business owners to see the value of having something so needed completed for so little money.
So where am I going with all this? What is my last advice? One word: plan. Plan to spend money on your business to help it grow. Plan to spend money on marketing and advertising monthly and choose the best places to spend that money.
It is much easier to spend money on marketing when you have already allocated that money for that use.
Think about it, if you went to a bank or venture capitalist asking for money to finance your small business, and presented them with a financial budget showing that you were going to spend little or no money on a marketing budget, you would do it. be denied every time!
So why do we actually try to do that? If we know that marketing is a vital part of the survival and growth of our business, why is it so hard for us to open the checkbook and spend money on marketing?
I know the answer to that question, and that’s because we’re not sure. We don’t like spending money on things that we just don’t know if we’ll get a return on our investment.
What tends to happen with most small businesses I see is that they spend as little as possible on their initial marketing. They get the cheapest website they can find. They spend no money on the brand and have their 17-year-old nephew create his logo since he is taking a class in high school. They run a coupon on some mail and have the mail company artist design it for free and tell them they’re going to reach 100,000 people in their cheap mail and that’s why it appeals to them. And then none of those things work.
So the wrong assumption becomes, “Look, the marketing isn’t working…it’s just a huge waste of money, so I’m going to spend as little as I can on any future marketing.” Unfortunately, they didn’t allocate the right amount of their budget early on, when it was crucial to their success.
It may seem selfish for a marketer to recommend this, but I would suggest that a small business owner spend at least 30% of start-up capital on marketing within the first 6 months. If he does, he can build a strong branding and marketing foundation that will move his business forward.
When you plan to spend money on marketing your business, you can spend that money much smarter and get better results because of it; And that’s all you really want from your marketing, no matter what your budget is.