One of the first questions I always get asked by an entrepreneur is, “How much should I spend on marketing?”
While it can vary, a good rule of thumb and place to start is that your marketing budget should be 20% of your revenue. This is a standard that I’ve been working with for almost 30 years, and it is still true today although the strategies available for use have changed over the years.
Your marketing budget is not limited to advertising
A lot of entrepreneurs hear that they should allocate 20% of their budget on marketing, and they may gasp because they may be thinking hat means 20% on paid advertising. They immediately think Pay-Per-Click ads and wonder “how can I afford that?”
Marketing is not advertising. Advertising is one small piece of marketing, and it can be an important piece to your overall marketing plan but is far from the only thing you should do. That should give you a quick sigh of relief!
Consider all of the pieces of your marketing
Your website is very important. No matter what type of business you have, today’s consumers all do one thing before they buy, and that is check out your online presence. Your website is the one main piece of your online footprint that YOU control, and therefore is extremely important.
The expense for hosting your website, for purchasing your domain name / URL, along with the cost of investing in having a professional set up your website if you aren’t doing it yourself.
If you have an assistant writing blog posts for you or doing other updates on your website, you will also want to include all of those related expenses.
Plan to participate in networking or community events? Print business cards, do some direct mail, send a small gift card to a past client for a referral? These are all marketing expenses.
Your marketing budget could include marketing training courses
Especially for entrepreneurs who are doing all of the work on their business themselves, your marketing budget may include the costs of some marketing classes and courses that help you learn how to implement those marketing strategies yourself.
Yes, these types of educational training can have their own separate line item in your accounting program, yet if they’re related to your business marketing, they can and should still have a place in your marketing budget.
Even if you plan to have staff or outsourced VAs actually doing the work, you need a basic understanding of what can and should be done and best practices to be able to guide them properly (or consider hiring a team that has the expertise for strategy plus affordable implementation … like us!)
Email marketing costs should be included
Your email vendor, such as our preferred Mailchimp, may be a small monthly cost (or could be larger depending upon how extensive your list is). Email marketing – and owning your own email list rather than simply relying upon connections you have on social media – is important for any small business, so you will want to make sure that you have budgeted for this expense.
Mailchimp does have a free level that still has a lot of great features, and is still very friendly to your budget once you need to increase.
Costs for using a marketing VA
If you’re paying a Virtual Assistant, or anyone else such as an employee you have on staff, for doing any portion of your marketing, this should be included in your marketing budget.
You may think that if it’s an employee already on the payroll, that you don’t need to account for the expense of the hours that they spend in your marketing budget since their salary is listed elsewhere on your financials. However, I always recommend that time spent (including your own) on marketing activities be budgeted into your marketing program, just like I recommend that time spent working on a new program or product be budgeted as expenses into those projects – that’s really the only way you can have a solid grasp on the true expense of any projects (and doing it this way is a standard practice for any successful business).
VAs can be a great way to get some of the normal recurring work completed, such as posting on social media or sending those emails to your list, or designing some basic graphics, as well as marketing clerical tasks such as putting leads into a spreadsheet if you don’t have that automated (and I recommend that you always include automation in your marketing where it makes sense).
20% is only a guideline
This level can change depending upon the lifecycle stage that your business is in.
Startup businesses are going to need a larger marketing budget. A startup will likely want to max out that 20 percent, and even perhaps increase that number to 25% or 30%.
You always hear that it takes 11 times for someone to see or hear your message before it even registers and they become aware of your business. Given that fact, you can see that you may need to spend more of your budget and focus on simply building awareness in the early stages of your business. This means a larger budget (whether that budget is advertising, paying a VA to post on social media, marketing strategy sessions, or the value of your time if you do these tactics yourself).
This is also similar when you introduce a new product or service. Those new offerings will need a large initial budget than they may at later stages of their product lifecycle.
The secret to bootstrapping your marketing budget
Some entrepreneurs are lucky and are independently wealthy with a healthy, if not seemingly unlimited, access to funds to start their business.
(I’m not one of them).
Others have a spouse who is not only emotionally supportive and cheering you on (like mine) but also financially supporting their business expenses.
(That’s also not me).
Some small business owners have a sizable nest egg or savings to cover their first year of business expenses … notably that goes beyond the 6-12 months of emergency living expenses that financial experts (like Dave Ramsey) recommend you have on hand to cover emergencies. You should NOT be dipping into this emergency savings to cover your expenses during the startup phase of your business, expecting that you’ll just repay it once your business is up and running.
(Not quite me … I had saved about 4 months of projected business expenses on top of that emergency savings to start into my first year of business, but you’ll really do best with 12 months or more.)
Yet others may have came into a decent inheritance, won the lottery, or have some other source of funds they can easily use to build their business without worry.
(Yet again, not me. I forgetting to buy those lottery tickets!)
For the rest of us, we need to bootstrap our business, which includes bootstrapping our marketing budget.
This is actually GREAT for your business. It keeps you from perhaps growing too quickly to a level that you can’t sustain, or perhaps finding somewhat unnatural ways to gain customers that doesn’t have sustainable retention.
When you first start your business, the best bootstrapping method is to budget 20% of every sale you make into marketing towards the next sale.
As an example, if your goal is to make $100,000 a year, you can expect that you need to charge about $50 per hour. If you consider a 20% marketing budget, then your actual fee needs to be $60 per hour (of course, if you’re wanting a take-home “salary” of $100,000, your hourly rate would need to be MUCH higher to account for all of the other business expenses you will have.)
The first sale you make, take 20% and put it towards your marketing budget
You will likely still have to pre-fund some of your marketing.
I always recommend that you start with a website.
You need, at a minimum, a basic website with your contact information, about page, and a page outlining your products and services.
If you calculate in the cost of a domain (start around $12/year if you aren’t stuck on having a .com) from somewhere such as NameCheap, BlueHost , Google Domains or GoDaddy, and hosting (I recommend BlueHost which is around $40/year or GoDaddy around $100/year). And we always recommend WordPress which is free.
(I don’t recommend platforms such as Shopify, Etsy <– see why, Wix or others that have your hosting and the layout and structure of the site itself all tied up into one platform for the same reason that I don’t recommend leaving all of your customers and prospects only on social media).
With a bit of research you can set up your own basic website fairly easily. For something more professional, you should consider a website pro – such as us with our highly affordable website rates! Request a website quote
Request our free Website Planning Worksheet – the same document we use with our clients
After you get your website set up, if you’re going to do your own marketing, I recommend that you invest in some marketing training courses. And when you’re ready, you will want to invest in some high-level marketing stategy and marketing VA services, such as offered by our company.
The next step to continuing your marketing efforts will depend upon your unique business needs. Rather than try to add everything at once – which isn’t realistic or sustainable – you should use a program such as our 3x3 Marketing Matrix™. This proprietary one-page marketing plan has a grid of 9 squares, and you work on adding new marketing strategies either across a row or down a column. This can really help you focus your time and your bootstrapped marketing budget in a way that helps you grow and that you are able to maintain.
What are your questions? Drop in the comments below.