Every business owner knows how important marketing is for their business. But many find the process of setting a marketing budget extremely challenging.
With a limited amount of funds available, investing in marketing efforts can sometimes be tough to justify in many instances. But with a well-defined plan, you can spend your funds more effectively and realize your business goals.
1. Explore your sales funnel
Before you dive deeper into determining your marketing budget, understanding your sales funnel is key. The sales funnel is the series of steps your potential customers take before they purchase your products. It is vital to consider your sales funnel when designing marketing campaigns.
Important questions to ponder include:
- How do your customers find you?
- How many website visits do you get monthly?
- How many leads are you getting monthly?
- What percentage of your leads convert?
Factoring in your sales funnel can help identify successful strategies to employ to achieve your goals.
2. Determine your operational costs
This step is very straightforward. To figure out your operational costs, you need to make a spreadsheet that lists your current and expected expenses. Include in your list any professional fees, outsourced branding content, web hosting, taxes, as well as other costs associated with running your business.
It is important to account for your costs when determining your marketing budget.
3. Set your goals
For your marketing budget to be effective, you have to focus on realistic goals to answer questions like:
- How much revenue do you need to generate to make your campaign worthwhile?
- How many sales does it take to reach your revenue goals?
- How many leads would it take to reach the number of sales?
Also, try to think about your long-term goals. How do you picture your company five years from now? Many brand owners make the mistake of dedicating whatever funds remain after daily expenses as their marketing budget. The general rule is most companies that make less than $5 million annually should dedicate 7-8 percent of gross revenue to marketing efforts.
While your marketing budget may focus on your current business environment, you also need to factor in your future goals.
4. Examine your competition
Determine who the major players in your niche are. Then, check out the advertising avenues they use. Do they bank on digital ads or more physical mediums? Are they present in all marketing platforms? All of these considerations will determine what marketing materials work best for your company.
5. Think of marketing as an investment
The marketing budget is viewed as an expense for many companies. However, it should be treated as an investment since it will bring in a quantifiable return in the long run. It is crucial for growing your business and realizing increased future revenue.
6. Predict trends
As you might expect, the trend for this year will be entirely different from that of next year. Understanding the trends of your current and future marketing campaigns would help you form the right budget. Through this, you can keep up with changes in your industry. Validate and research how you can effectively reach customers effectively by utilizing the right media.
Don't Be Intimidated by Your Marketing Budget
Whether you have a small company or multinational giant, creating your marketing budget can be an overwhelming challenge. Even if you have a tight budget, this should not stop you from allowing your brand to grow.
The trick is to pinpoint specific parts of your marketing strategy that you are confident will provide your desired results. And tailor your marketing budget to focus company resources in these areas.