How much should a small business spend on marketing?
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August 8, 2017

How much should a small business spend on marketing?

Refine your marketing budget and invest in your company's marketing efforts.

Refine your marketing budget and invest in your company's marketing efforts.

Do you know how much money you should invest in your company’s marketing efforts? Here are a few guidelines to help you refine your marketing budget.

How much should a small business spend on marketing?

Refine your marketing budget and invest in your company's marketing efforts.

There are two ways you should view your small business marketing budget:

Your Actual Investment

So, how much should a small business spend on marketing in terms of dollars and cents? For businesses earning $5 million or less annually, the United States Small Business Administration recommends spending between seven and eight percent of your gross revenue on marketing.

Your Goal

Your marketing budget goal is simple: you want to get the most out of the budget you have. But, simply spending seven or eight percent of your revenue on marketing won’t automatically get the ROI you’re after. To compete with large business’s marketing budgets, you need to spend your marketing dollars strategically.

To accomplish your goal, you need to:

Identify your target audience.

Before investing in marketing and advertising, identify your ideal customers (your target audience). How old are they? What do they like and dislike? Where can you reach them? How do they consume content (blogs, videos, infographics, etc.). How can your products or services solve their problems?

Once you understand your target audience, you can strategically use your marketing budget to reach and connect with your best clients. If you don’t do this, you’re wasting your marketing dollars.

Lower your cost per lead.

How much you spend to reach your target audience is called your cost per lead (CPL). To calculate your cost per lead, divide your ad budget by how many leads it generates. It looks like this:

Amount Spent on Marketing ÷ Number of Leads Generated = Cost Per Lead

Here’s an example. Let’s say you spend $100 on a Facebook advertisement, and 50 people click on the ad and fill out the contact form. This means your cost per lead is $2.

To lower your cost per lead, you need to strategically develop content that resonates with your target audience. The more effective or valuable your content is, the more likely people are to engage with your blog, fill out a form, download a resource, or do whatever it is you’re asking them to do to turn the individual into a lead.

Once you have great content developed, you can use your ad budget to strategically push content to your target audience at the lowest cost per lead. This is how you maximize your ROI for your small business’ marketing budget.

How should I spend my ad budget?

Refine your marketing budget and invest in your company's marketing efforts.

Where exactly you spend your ad budget varies from business to business. But, almost all businesses can benefit from inbound marketing methods.

Inbound marketing has proven to be less expensive and more effective than traditional methods (radio ads, newspaper ads, etc.). We believe inbound marketing is the most valuable tool a small business has to compete with larger businesses.

Strategic Website

The first place you should invest your marketing budget is a strategic website. The goal of web marketing is simple: you want your company’s website to appear at the top of search engine rankings. Achieving this is the equivalent of having the largest newspaper ad or the “primetime” television commercial spot in the 1980s. Reaching the first page of search engine rankings is so important because according to SmartInsights, the first page of search results gets more than 75% of the clicks.

To get your website to the top of the search rankings, you’ll need a strategically developed website—a website that is user and mobile friendly and contains keywords that search engines will find when people search for your products/services.

Learn five reasons why a small business needs a strategic website.

Content Marketing

Refine your marketing budget and invest in your company's marketing efforts.

Content marketing involves creating content—blogs, videos, social media posts, etc.—that generate interest in your product or service.

Content marketing is a great way for you to help your potential customers solve a problem they have and establish your business as a trusted source. Your content can help your target audience define their problem, consider solutions to the problem, and ultimately take action to solve their problem with your products or services. If you can move a customer through this process with content marketing, you can potentially generate a lot of leads for very little money.

Social Media

Refine your marketing budget and invest in your company's marketing efforts.

Social media marketing is one of the most effective ways for small businesses to compete with larger companies that have more resources. Facebook alone has 1.86 billion active users that you can advertise to. Not to mention, Facebook ads allow you to target specific audiences that are likely to use your product or service. You can’t say the same about traditional advertising methods like newspapers and radio.

In addition to being an effective advertising platform, social media marketing is one of the best ways for your small business to increase brand awareness, promote products and services, and connect with your target audience. To learn more, check out “5 Social Media Must-Dos for Small Businesses”!  

The trick to running a successful, cost-effective marketing campaign can be summed up in one word: strategy. There should be research and planning behind every cent you spend on marketing and advertising. There are thousands of ways to spend your marketing budget, but we recommend that small businesses start with strategic websites, content marketing, and social media. Nothing happens overnight, but if you stick to these processes, you will begin to see significant results!

Treefrog Marketing is a marketing agency focused on small business and located in Lafayette, Indiana. We specialize in strategic marketing and advertising, graphic design, web design, social media, SEO, and more. For more information, please visit our website. You can also connect with us on Twitter, Facebook, LinkedIn, and Instagram.