How much should a small business budget for marketing?
Believe it or not, there is an actual formula to answer this question.
Start with a business plan. If you've been in business for a while, make sure that business plan is up to date!
To estimate marketing expenses, calculate how much you need to generate in sales just to cover overhead costs (license, permit, rent, staff, supplies, taxes, etc). Once you have a number for what you’ll need to stay afloat, calculate 3-5% of that and use that figure as your marketing budget start point.
So for example, if your goal is to generate $100,000 monthly, 3% of that would be $3,000 for marketing monthly. If you’re in a comfortable spot, I definitely encourage you to go for a higher percentage; 5-7% is a much healthier goal than 3%.
If you’re thinking of spending some of that on Facebook/Instagram ads, a budget of $3,000 a month (or $100 a day) will reach two to eight thousand people daily. Facebook estimates that that may get you 50-145 link clicks, if your ad includes a link (which it always should). Marketing convention says that a typical person needs to see an ad seven times before committing to a purchase!
But you will likely want to spend some of your marketing budget on other kinds of ad buys as well, or perhaps on events to generate buzz. Influencers with some clout may charge as much as $2,000 for a project, so that’s another consideration.
If your sales have been stagnant for a while, or if you feel your competition getting the edge on you, it's time to look at your marketing. Either you haven't been investing in marketing, you haven't invested enough, or your ads simply are not effective.
