How much should my small business spend on marketing?

What the big guys recommend:

For a long time, big experts have recommended allocating 10% of gross revenue to spend on marketing.

But, for small businesses, we know all too well that marketing is the first thing to get cut when money is tight. So, make the most of what you’ve got, and take a look at the following strategy to determine how much your small business should spend on marketing.

Do this first:

Look over what you’ve spent in the past year and determine what you’ve gotten from those dollars. In fancy language: determine your Return On Investment (ROI).

Nail down what amount of income can be attributed to each marketing channel. This will give you an accurate picture of what is effective.

Some small business marketing channels may include:

  • Networking Events
  • Association Membership Dues
  • Email marketing costs
  • Paying a social media manager
  • Pay-per-click ads (Google AdWords, Facebook Ads, etc)
  • Brochures and other print materials

Example: Last year you spent a total of $5000 on Google AdWords and got 50 new clients. You earn an average of $300 from each new client, so your gross revenue from the AdWords campaign is $15,000. Next, after you subtract the marketing cost to get them, as well as your overhead and supply/delivery costs, you determine that those clients from AdWords produced a net profit of $3,874. Great! From running the numbers, you’ve determined that Google AdWords is a profitable marketing channel.

Do the math for every one of your marketing channels and use the data in the next step.

Next, scrap those that don’t work well, and create a plan for those that do:

It might be tough to say goodbye to those fun lunch meetings you attend each week. After all, the social element is a great break in your long day of hard work! But, if your networking efforts aren’t churning out a huge ROI, it may be time to break up with this mistress.

After you’ve identified the most profitable marketing channels, create a plan to expand them. Remember that profitable Google AdWords marketing channel? Ask yourself what can be done to expand on it?

You may want to include elements in your plan such as: spending time to learn more about the profitable marketing channel, or deciding to hire an expert to manage it instead of doing it yourself.

Your small business marketing budget should be a purposeful document based on factual data, not a gut feeling.

Once you’ve broken up with all the mistresses, and have the numbers crunched, you’ll have a much better idea of how much your small business should spend on marketing and where those dollars should be spent too!

Want to learn more about different marketing channels for your small business? We’d love to help. Get in touch for a complimentary consultation focused on educating you on the many options for effective marketing.

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Mark ChapmanAbout The Author: EAM Blogger, Mark Chapman, works with clients across all industries; helping them acquire more leads, who are excited to buy the products and services they offer. His ongoing work in pay-per-click marketing gives him endless amounts of insight for writing great blog posts and speaking to audiences nationwide.