How Much Should SMEs Be Spending on Marketing?

Every firm requires marketing in order to attract customers, generate sales, and compete more effectively. However, many small business owners are unsure of how much money they should be spending. The reality is that there is no one-size-fits-all solution as a lot depends on the type of business you have, your business goals, and your revenue.

What Is a Marketing Budget?

A marketing budget precisely displays how much money has been dedicated to marketing functions solely. The money invested must be in line with the marketing objectives or marketing projects that are being planned.

Paid advertising, market research, or hiring marketing professionals or contractors are all examples of this. Purchasing marketing equipment does not go towards the marketing budget. It is up to you if you want to spend your marketing budget on such things, but it leaves you with less money to spend on initiatives that will drive revenue and business growth.

Rule of Thumb

You need to spend money to make money. The more you spend wisely, the more you should be able to reap. But the all-important question remains: how much should I spend?

There are general standards that are be bandied around, such as that any business should spend at least 5% of their gross revenue on marketing.

Marketing spend as a percentage of revenue varies, with most values falling between 6.5% and 8.5%.

Marketing should account for 7-8% of your gross sales, according to the US Small Business Administration. In 2021, you should spend half of your marketing budget on digital marketing channels. This ratio is expected to rise to 55% by the of 2021.

Image Source: https://www.wordstream.com/blog/ws/2016/10/26/marketing-budget

To be specific, when it comes to determining a marketing budget, you can consider the spending as below:

In order to maintain your present level of business will require 5-7% of your revenue.
Your company will expand by 7-10% of its revenue.
10-20% of your revenue will significantly boost your company’s growth.

Having said that, Planium Pro team has compiled the following suggestions and thoughts for developing a marketing budget that is appropriate for your small business.

Define Your Needs

Your budget is heavily influenced by what you intend to achieve. Your requirements are distinct from those of other businesses and will evolve over time. You might want to:

Rapid growth
Grow in a sustainable manner
Increase brand awareness
Retain a well-established presence

These are all very different goals with very different prices. Even if you’re just starting out, every business requires a unified identity and a functional, professional website. Aside than that, your requirements are entirely unique.

Research Your Industry

For B2C enterprises, the number of marketing budget is frequently between 5% and 10%. This is due to the fact that B2C businesses often need to invest in more marketing channels in order to target various client categories. We believe that researching what’s usual in your sector and what your competitors are spending is an excellent method to cut down your goal budget.

Consider All Potential Costs

Marketing, like every other business expense, has numerous components. It is advisable to spend a portion of your marketing budget to each of the following categories. You can change the quantity over time based on what works best.

Website: It’s practically the foundation of everything you do online; make it a priority. The price of your website includes both the original design and the monthly hosting. It also means spending to maintain the information current and fresh. Make sure your site has analytics as you are able to watch who’s coming and from where, which will help you determine how well your other marketing initiatives are paying off.
Social media: Set aside some funds to invest in online advertising through social media platforms that are appropriate for your business, such as Facebook and LinkedIn. Even if your social media traffic is entirely organic, i.e. attracted by the content you post, creating that content necessitates resources that you should budget for.
Online advertising: To be efficient, search engine advertising such as Google Ads needs to be a minimum monthly spend of $1,000. You’ll be able to budget more effectively as you analyse and tweak your web advertising.
Traditional media: While digital advertising is more cost-effective, traditional media such as radio, print, and television still have value depending on who you’re trying to reach. Consider your resources and how you might make the most of your money.
E-newsletters: Sending regular updates to clients who have chosen to receive messages from your firm keeps your company top-of-mind and encourages repeat business. Time and resources are required for planning, writing, and using web tools to distribute this material.
Video: Every small firm should experiment with video marketing. Costs can range from hiring a cameraperson and editor to simply upgrading your smartphone so you can record video yourself.
Training: If you rely on internal workers to plan and execute marketing strategies, budget for training as the accessible channels continue to evolve, and your team needs be trained to stay on top of the best practises.

Keep Track of Costs Regularly

Working through your marketing budget each by line will reveal what you can afford based on your priorities. Keep track of your expenses and analyse web statistics on a regular basis.

Examine your marketing budget on a quarterly and annual basis to check if your estimates match your actual spending. You will be able to develop more realistic budgets as time goes on if you analyse your marketing costs and refine your efforts.

What are you doing now to market yourself? How much does it cost, and how well do you think it works for you?
Are you a part of any networking groups? What is the expense of these groups? How much TIME is it going to cost you?
How long does it take you to create a blog post? How much is that TIME worth?
Do you spend money on social media advertisements?
Do you spend money on Google Ads? Do you hire someone to do it?

You should also look at as much of your marketing spend history as possible. Is there anything that stands out? Did you see an increase in sales when you increased your marketing budget? How have your profits changed over time as a result of your marketing investments?

Final Thoughts

Whether you’re a startup or a well-established firm trying to expand, marketing will play a critical role in your success. But it doesn’t imply it has to be expensive.

You can find the most cost-effective strategy to adopt the most efficient adjustments by tackling your marketing needs strategically. When it comes to marketing, what you learn now can be applied for years to come, making the one-time financial expenditure a one-time expense for a long-term profit.