Your small business venture is growing via word-of-mouth and referrals from your network. And you’re beginning to hit a bit of a new revenue wall--new leads that turn into clients are becoming scarce, though your bottom line is healthy because your operation is very lean. It might even be just you and a few employees.
With the current scarcity of new clients and a pool of money you can invest back in the business, you know the time is right to launch a formal marketing strategy. To do that, you realize you need to create your first real marketing budget. But, you wonder, how do you accomplish this with little to no historical data about what marketing channels will work best for your business?
Creating your first formal marketing plan and corresponding budget can be intimidating and certainly involves risk. But the rewards can be transformative for your business if you do your homework, keep consistent, and adjust your approach according to what your data is telling you.
Here are a few recommendations for creating your first formal marketing budget that will help you reach your goals and get the most bang for your buck.
Understand Your Financial Position To Determine What You Can Invest In Marketing
Every business has top-line revenue or gross revenue. That’s the total amount of money your business brings in annually. Your bottom line is what’s left after expenses. Pretty basic, right?
But be careful when creating your first marketing budget. Not only are you lacking historical data about marketing tactics that will work efficiently for you, but you’re also likely to face an increase in expenses as you implement your marketing strategy, which will obviously include marketing costs as well as hiring expenses (freelance, part time or full time), new equipment, or even office space.
Projecting what you’ll need to manage new leads and do all of the new work you’ll be getting is critical to determining what a realistic marketing budget should look like. In other words, you need to understand your marketing budget well within the context of your entire operation.
What’s more, you need to delineate between total monthly revenue and revenue that’s rock solid reliable. Your revenues will fluctuate on a monthly basis; some months will be higher than others. You need to determine what your reliable monthly revenue is, then deduct expenses from that number to identify disposable income available for marketing purposes.
Forbes contributing writer Michael Evans offers this advice: “It’s common for small businesses with revenues less than $5 million to allocate 7-8% of their revenues to marketing, splitting that between brand development costs such as websites, blogs, sales collateral, and promotion costs, as well as campaigns, advertising, and events. Never base your marketing budget simply on what’s left over after covering all other expenses.”
Alignment Is Critical: Link Your Business Goals To Your Marketing Plan & Budget
Once you know what you can spend--or perhaps you can work on your available marketing budget and goals on parallel paths--you need to be certain your marketing strategy and its accompanying budget align with your broader business goals.
Understand what cycle your business is entering. Are you in growth mode where you’re seeking a rapid uptick in leads and new business? Or are you in more of a maintenance mode where you’re planning for the future and want steady, more manageable growth for a time? If you’re reading this blog, you’re likely in growth mode and seeking a spike in new top-line revenue sources.
While you want to grow quickly to get there you must be methodical and meticulous. Don’t spend a bunch of cash trying to do everything at once.
- Determine an ideal budget based on reliable monthly revenue
- Create and document your business goals for the year
- Build a marketing strategy and create a marketing plan that will allow you to hit your goals
- Execute, track, and adjust the plan according to the data that your marketing tactics generate
Execute, Track and Adjust
Here’s the trickiest part. You don’t have a long marketing track record and therefore don’t have a solid data foundation to tell you what marketing tactics might work best. You’re really starting from scratch.
Before we discuss how you might overcome this lack of marketing data to achieve growth, let’s really focus on the importance of three items:
- Once your plan is approved, you and your team must execute it consistently; failure to do so will undermine your plan, generate incomplete data sets, and kill momentum.
- That’s why your goals, marketing plan, and budget need to be tethered to what your team can actually handle.
- Generating new leads that can’t be nurtured and converted due to a mismatch with staffing is a disaster.
- You must track everything so you can determine what’s producing the best returns.
- If you can’t afford tracking software, hit the Excel spreadsheets hard. Do whatever it takes to accurately track your results.
- This data is the gold you’re lacking right now; to not capture it and use it to improve marketing performance is negligent.
- You must adjust on the fly based on results; if a marketing tactic is working, do more of it; if it’s failing, move off of it or radically change your approach to how you’re doing it.
Consistent execution, accurate tracking, and real-time adjustments are crucial to getting the most from your marketing budget.
So How Can My Business Know What Tactics And Channels To Pursue?
On the one hand, you don’t know what you don’t know. You should go into the execution of your plan knowing some stuff just won’t work. On the other hand, you can do some research on businesses of similar size and industry focus to create at least some kind of metric benchmarks to guide you.
If this is your first formal marketing budget and plan, or if you’re exploring new top-line revenue-generating tactics for the first time, remember this: test the waters then go after what works.
Marketing guru Eric Siu of Single Grain puts it this way: “I wouldn’t recommend trying multiple initiatives at once, though. You might want to start with maybe one, two or three things based on how big your budget is, and then once you see something working, zero in on that one thing. When you’re starting out, you don’t have an unlimited budget so you want to focus on what’s working. Really refine it and make a reliable marketing machine, then move into other areas.”
So, you can add “go with what works” (adjust in real time to what data is telling you) to consistent execution and accurate tracking when it comes to what makes marketing plans and budgets successful.
The bottom line is that when you’re creating your first formal marketing plan and budget there’s a lot of ambiguity; there will be failures; however, if you align goals with your marketing plan and budget, faithfully execute your plan and diligently track results, you can cut your losses quickly and build on those successes you’ll win through you and your team’s hard work and perseverance.
If you’re an organization that’s in growth mode and is seeking a marketing advisor, we can help. Illumine8 Marketing & PR has helped organizations of all sizes create, execute, and adjust their marketing programs to achieve their goals. Reach out to us today. We’d love to discuss your vision for the future and how you see your company getting there.