How to Set a Marketing Budget for Your Small Business

Jan 27

Marketing budgets should have a dedicated space on your balance sheet. A dedicated budget, whether as a fixed amount or a share of revenue, will help you track related expenses and accurately measure your marketing’s ROI. There’s no perfect formula, but there are plenty of ways to set a marketing budget you feel confident about.

Setting a Small Business Marketing Budget

Before you even start looking at agencies (hey!) or dollar amounts, look at your short-term and long-term business goals and connect the dots:

What marketing channels will best support my immediate goals?
Do I need additional marketing to support new initiatives, such as a new product line or service?

With these questions in mind, take stock of your existing marketing budget and campaigns and gauge their effectiveness. Don’t guess; use any metrics available to determine which efforts drive sales and which aren’t carrying their weight.

B2B vs. B2C Marketing Budgets

B2C brands typically spend a higher share of revenue on marketing than B2B by about 5%. This varies widely by the size of the company, location, and its growth plans, but it’s worth keeping in mind as you create your marketing budget. And it makes sense; even niche consumer markets tend to have a wider prospective audience than many B2B industries.

External Factors: Competitors and Macroeconomics

Marketing, like business, doesn’t happen in a vacuum. Take time to evaluate your competitors’ marketing efforts across platforms and honestly assess how you stack up. Find out where your competitors are spending and determine if that’s the most cost-effective way to grow. Some things to focus on:

Are they running paid media campaigns?
How’s their website?
Do they outrank you on the search engine results page for key terms?
Who is the better on Facebook or TikTok?
Are they sponsoring local events?

Knowing what your competitors are doing well – and where they aren’t – can be an extremely valuable investment, especially as you plan your marketing budget. We can help with an in-depth competitive analysis – get in touch.

There are broader economic factors that can influence your marketing budget. Substantial evidence shows that even small businesses benefit by maintaining ad spend during market downturns, including recessions. Why? When everyone else stops spending, your content is more visible, allowing you to reach a wider audience with the same budget. Hold strong or keep marketing cuts minimal, and you’ll come out stronger on the other side.

How to Create a Marketing Budget for Small Businesses

Most small businesses should allocate 2-5% of their total budget to marketing expenses, but it varies widely. As recently as 2022, marketing as a share of revenue jumped to 11.7% fueled by lingering stimulus income and record-high consumer savings.

After researching your competitors, it’s time to crunch numbers, starting with your cash flow.

1. Establish your revenue.

We recommend breaking your revenue down by quarter. Especially in seasonal or tourist-focused businesses, adjusting quarterly spend will help maintain efficiency without wasting money when sales are speculative at best. One tip? Ramp up marketing before business pops to ensure your brand is top-of-mind when users are ready to convert.

Average each quarter’s revenue for the past two years. Find 5% of that number; does it make sense? If it’s too high or too low, adjust in small increments, but attach any changes to a specific strategy or campaign. What value will an “extra” $1,000 deliver in a paid ad campaign or sponsoring the North American Vasa?

2. Slice the pie

Once you have a marketing budget, break down each expense to specific campaigns or channels. Divide your budget based on what time and skills you have in-house and determine what marketing efforts could be outsourced (hey, again!).

Marketing budget allocation varies widely, but researchers have nailed down some ranges. According to Improvado, most companies tend to allocate their marketing budgets like this:

› 40-50% digital marketing

› 20-30% traditional marketing

› 10-20% events and sponsorships

› 5-10% research and analytics

3. Track it!

Setting a budget is only the start. The real work is creating effective content, delivering delightful emails, and keeping the social in your social media. Commit to accurately tracking your budget and the time you spend making it all work. In so many cases, small business owners’ time and attention is better spent on running their businesses. Decide if delegating certain tasks to internal staff or external vendors is a more effective use of resources. You may also need additional software, like a social media scheduler or a website subscription, and additional hardware like a nice podcast microphone or a better camera.

4. Start small

Make small moves in many directions and follow what works. Instead of splashing all your cash on a paid campaign during peak season, run a series of small cross-channel campaigns the preceding quarter. Test, iterate, and test again; see what images, messaging, and audience are the most effective ways to spend your budget.

5. Assess

Regularly compare marketing performance with your goals. Can you connect your marketing to sales? How much of an impact is it making? Which channels are the most effective, and which could you wind down? While it’s important to support events or causes that align with your values, at least to start, it’s important to examine all expenses through a business lens.

You Don’t Have to Be Everywhere

One of the most important lessons we’ve learned is that small businesses don’t have to maintain a presence on every social media channel, on every review website, run monthly ads in the newspaper, and sponsor every event in town. Wherever you spend your time and budget, do it well. If you aren’t in a position to post consistently on, say, LinkedIn, don’t make it a priority in your goal-making or budget allocation. Focus on what you can do and experiment with new opportunities as revenue and time allow.

Let’s Build Something Together

Small business marketing budgets aren’t an exact science, but no one knows your business like you. Make a plan, stick with it, and react based on real-world data. We’ll help you apply industry knowledge to your marketing strategy. Get the busy stuff off your to-do list; Sovis Media has you covered. Get in touch today!

Cody Sovis