7 Essential Questions: Part 6

It’s planning season for many businesses. That’s why over seven weeks we’re posing seven questions you should ask yourself and your team that will inform your marketing planning for 2020.

This week we explore our sixth vital question: "What's this all going to cost?" Our recent posts covered setting business goals, defining audience, marketing goal-setting, strategy development and choosing tactics. Now it's time to get out the calculator and start sketching out your marketing budget.

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If you’ve followed along on our blog, you’ve done good work in this planning cycle – quantifying your business goals, developing an understanding of your audience and determined which broad strategies and specific activities will do your business the most good. But this is what many small business owners (especially solopreneurs) find the hardest part – committing to spend the necessary funds.

We have conversations time and again with owners who have no problem paying for rent, utilities and supplies, but then they often balk when it comes to their marketing spend. There can be many reasons for this, but often we hear they’re a) overwhelmed by choices and b) afraid they’ll make expensive mistakes.

Most often we hear them say they just don’t have the funds – leading them to postpone marketing or trying to “DIY” it – trying to learn new skills on the fly like building their own websites or designing their own brochures. And while that may seem like a solution in the moment, all it does in the end is take you away from your core business.

So, deep breath. Marketing will cost you, but if you follow a logical course that connects your business goals and your customers, you can make choices that won’t break the bank (see last week’s blog on choosing marketing activities).

Let’s look at some things to consider as you put together your marketing budget:

• How much should you spend on marketing? The U.S. Small Business Administration recommends spending 7 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. If you’re a new business, you may have to increase these numbers to establish yourself with target customers.
  
  Here’s some insight from last year’s CMO Survey of marketers on what different types of businesses are actually spending.  Firms surveyed said they spend on average between 9.4% and 12.1% of their overall budget on marketing, with variation for B2C (business to consumer) and B2B (business to business firms).
  
  B2C product companies allocate considerably more to their marketing budgets as a percentage of total budget (17.2%), compared to B2C Service (11.6%), B2B product (8.5%), and B2B service (9.6%), the survey said.
  
  
• Think about return on your investment. Even if you’re doing something simple like ordering flyers or putting up a simple blog page, what is your likely return on that investment? Will it lead to increased leads or customer sales/conversions? Or is it just what seems trendy? Use your gut – you know your customers – but be strategic and think through whether you’re likely to make a difference with one tactic/platform or another.
  
  
• Ask for details. What are you spending, with whom are you spending it, what will you get for your money, and when? We recently talked to a client who paid for an ad on faith with a new local magazine, but never got a good sense of their circulation, how they’ll be distributed and what the demographics of their audience were. So, he’s stuck with a shot in the dark – and wishing he’d saved his money for something more clearly relevant, transparent and accountable.

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A LoveSmallBiz.com budget worksheet

• Look for the hidden costs. When we work with our marketing mentoring clients, we use a detailed worksheet to help them capture anything they might anticipate spending. For example, if you’re going to print brochures will you need more than just printing – will you need to pay a photographer, graphic designer or copywriter? Will you be buying stock photography or illustrations? Are there delivery costs for the final product – and will it require travel (fuel) expense, postage or even temporary staff? Will you need to pay someone to distribute an electronic version or post to social media? Better to think things through to avoid surprises.
  
  
• And as we’ve said in past blogs (and yes on this point we often repeat ourselves), stick to your business goals. If you have to make hard choices due to limited resources, remind yourself how this particular bit of spending or that will relate to helping you achieve those goals. And jettison – or at least postpone – anything you have doubts about. Remember, building a relationship with your customers is a marathon, not a sprint.
  
  
• Finally, spend on what you can measure – where are you now and how will you track whether you’re marketing is “moving the needle?” We’ll cover measurement in next week’s final question for planning.

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A bit of tough love

This is where the tough love part of our relationship comes in. It’s completely normal after reading through all this to feel a flash of panic and think “I can’t afford that!” Breathe. You’re not alone. But you also have to push through it.

Marketing is an essential business expense just like office supplies and taxes and you won’t survive in business without it. That doesn’t mean you need to do anything foolish or break the bank – as we always say, if you’re strategic and think your options through you can be effective at just about any price point. Do what’s appropriate for you, your business goals and your customers, and prioritize and “course correct” as you go. You’ll do great!

Next week

How will you measure if your marketing is successful?

Last week

Check out our blog post on choosing marketing tactics