The first and most important step in your marketing plan is your budget. Building a plan and then realizing that you can’t afford it often leads to no plan at all. So, if you are currently budgeting on the fly, consider some of these rules of thumb.
The Small Business Administration (SBA) states that a typical small business should spend 5 – 7% of revenue on marketing. This means a business with $3M in revenue should budget at least $15K/month for marketing to sustain and ideally grow. These numbers do vary widely. How mature the business is and how competitive the industry can weigh heavily on the budget decision. Also, what stage is the business in? Is it a new business that requires a higher spend to get to critical mass? Is it mature, but the owner is posturing to sell? Spiking growth before a sale makes sense for obvious reasons.
The SBA recommendations are based on a few caveats: the business is under $5M in revenue and generates 10%+ in net profit. Real numbers can vary from 1 – 20% but use the 5 – 7% guideline as your starting point on budgeting and then adjust from there.
The most important point is to set a budget and stick to it. Finding the marketing dollars on the fly each month is not a sustainable growth strategy. Once you have the budget pinned down, the tactics and overall strategy come next. We will keep it simple because simple plans get executed—complex plans gather dust.
More to come.