How Much Should My Marketing Budget Be?

“A man who stops advertising to save money is like a man who stops a clock to save time.” — Henry Ford

Have you, as a small business owner, ever asked yourself this important question: How much should my marketing budget be?

I think you should, and here’s why:

You Should Spend Money on Marketing

The good news is, the dollar amount you spend on your business will be low. But it will not be zero. Your marketing budget includes fees you spend on marketing groups, memberships in organizations, costs associated with your website, business cards, and more. The bad news is that you are not going after your ideal client and you may be making less money as a result.

Take-home: There are very few, if any, businesses, that spend zero dollars on marketing.

How Much Are You Spending on Marketing?

Once you’ve set up a process to capture your data, you’ll start to have a handle on how much you currently spend on marketing and where those dollars are going. It’s not a budget, exactly, because it’s based on the reality of what you currently spend, and not what you think you should be spending.

Take-home: Know how much you currently spend on marketing.

Is Your Marketing Dollar Working For You?

Know Your Average Revenue Per Customer

Average revenue per customer = Yearly revenue divided by customer count.

In other words, take your total yearly revenue and divide it by the number of customers you had (or purchases if your business is ecommerce) et voilà, you’ll know your average revenue per customer. One thing to consider: If your business, like Colibri Digital Marketing’s business, has a wide range of offerings, you might want to segment this number. For example, we have subscription-based clients and project-based clients so, for us, it makes sense to calculate those averages separately.

Take-home: Average revenue per client is a good number to know, and it gives you a foundation for taking the next step in your journey to marketing awesomeness.

Know Your Cost Per Acquisition (CPA)

I suggest that you quit reading this post right now and go calculate your numbers. Depending on how organized you are, it will take under an hour. Having that number on hand, rough as it is, will make you feel powerful! And, believe it or not, you will be one of the few small business owners in America who has even this level of insight into their own business finances.

Here are the steps:

  1. Calculate your average revenue per client
  2. Calculate your average marketing cost per client
  3. Subtract average marketing cost per client from average revenue per client

Now you have a rough idea of how much it costs you to acquire a client, which will help you answer the question: How much should my marketing budget be?

Take-home: Stay ahead of the curve — and your competition — by knowing your CPA.

Marketing Budget Common Cents

If you don’t have the time or the ability to create a marketing budget based on data, you can start by looking at industry averages and then determining, after you have covered the fixed costs of your business (overhead), how much you have left over for marketing.

For an in-depth look at the numbers, read this fascinating article from Vital’s Alley Blog. Some companies reinvest as much as 53% of their revenues into their marketing and see growth of as much as a 111% as a result. Across the board, companies spend an average of 10% of their revenues on marketing. Are you?

Need Help Answering the Question How Much Should My Marketing Budget Be?

How can I know that number for anyone’s business but my own? The answer is that, beyond a number greater than zero, I can’t. But I can help you figure out, based on your numbers, what’s right for you and your business depending on whether you’re looking to plan for the future, build a platform for success, or grow your business now.

If you want help figuring out the best marketing budget for you, set up a complimentary digital strategy with Anna Colibri (that’s me!).

Click Here to Schedule

This article was originally published at colibridigitalmarketing.com and republished here with permission from Anna Colibri.

I work to make the web a more beautiful, accessible, and functional place. I use dreams as a form of planning. And I play because it’s fun.

I work to make the web a more beautiful, accessible, and functional place. I use dreams as a form of planning. And I play because it’s fun.