Team building.

How to Create a Startup Marketing Budget

A startup marketing budget is a big priority for a young business. The good news is that a marketing budget for startups doesn’t need to be huge. Big spendings don’t always lead to great results. Indeed, smaller budgets with shrewd management may vastly overperform the efforts of even your biggest competitors.

Like most things in business, rather than wading right in and spending on whatever manages to catch your eye first, it’s a fantastic idea to understand how much you must spend and where those funds are best used.

So, How Much Does Marketing Cost?

Any entrepreneur without prior marketing experience may find the concept overwhelming. However, they may understand that basic marketing includes buzzwords, social media marketing, website planning, and local promotion.

Before you start putting plans in place, it’s vital to understand that a startup marketing budget isn’t about how much you spend. It’s all about the return on investment. If your marketing budget doesn’t positively impact the bottom line, it may not fit the purpose. Fortunately, there’s always something new to try.

You probably started thinking about your startup marketing budget shortly after looking up how to start a business. You could have the most fantastic products and services in the world, but they’re unlikely to serve your bottom line well if nobody knows about them.

While it sounds obvious, you could spend nothing at all on marketing – and that doesn’t necessarily mean no promotion of your products and services. At the top end, you could spend several billion annually as Coca-Cola does.

Establishing the Initial Marketing Budget for a Small Business

The chances are you don’t have anything close to Coca-Cola’s marketing budget. If your business is brand new and cash flow is limited, you might even struggle to breach four figures in marketing spend each month. Of course, as noted already, it’s not always how much you spend, but often how you spend it. Nevertheless, it makes sense to have a number in mind to understand what you have to work with.

Consider the following:

Projected Revenues

Marketing budgets often closely align with revenue projections, no matter how large the company or how long it’s been in business. For example, a 2019 Deloitte report suggests that companies spend an average of 9.8% of their revenue on marketing and 12% of the total budget.

As a startup, you don’t have to stick rigidly to these numbers, but they can serve as a guideline. You’ll have other expenses and potentially disrupted cash flow to deal with at certain times. Try to be cautious with projections and avoid getting carried away with excessive marketing costs.

Business Age

Overhead view of young business professionals in a meeting.

Identifying your business as a startup doesn’t mean it was recently formed. Unfortunately, there’s no official definition whereby a business matures from the startup stage, and you may find yourself still using that tag over a decade following launch.

If you’re in the early stages, you might want to divert more capital towards marketing. Customers are easier to keep than gain, so spending more now may help establish your company. In the future, you may devote less to marketing costs and more to customer retention.

If you’re already somewhat established and well-known, you could cut back on spending or take more risks if you know your planned budget is secure.

The Return on Investment

Once again, if you’re working on a marketing budget plan, you need to consider forecasts. If marketing spending doesn’t positively impact your bottom line, it’s a waste. Generally, the profitable marketing spend ratio comes in at around five to one, with 10 to one being exceptional. So, if you can make $5 back for every $1 you spend, things are going well. As always, that varies between companies and sectors but can be a great starting point for those still in the planning stage.

Typical Marketing Costs for a Startup

Marketing costs at startups generally fall into one of three categories:

Salaries and Outsourcing Costs

Even if you’re only spending in the low four figures on marketing each month, the chances are you won’t have the time to effectively manage campaigns, strategy and reporting alongside everything else. Whether you use your own employees or hand marketing activities to a third party, everyone must be paid.

Subscription Costs

No matter how you decide to promote your business, there are likely further costs involved. This could include SEO tools, social media scheduling software, design tools, and much more. Most highly regarded services are well worth the investment, but there will inevitably come a time when you must decide what represents the best investment.

Campaign-Based Marketing Costs

The most flexible part of a marketing cost plan involves direct payments to advertising platforms and other essential resources. From pay-per-click advertising to link building and print ads to merchandise, everything you do in the marketing world is accompanied by a cost of some sort.

In-House or Outsourced?

Your startup marketing budget may not afford you enough cash to take on someone full-time. Outsourcing someone, even for a few hours a week, can make a world of difference in the startup stages.

Once your campaigns are underway and you’ve reached the ROI ratios you planned for, it may be time to bring things in-house. Indeed, you might already have the resources available.

Critical Elements of a Startup Marketing Budget

There is no silver bullet for successful marketing. What works for one company may not work for another, even if they share the same space. Nevertheless, when you create your budget, you should never overlook the following:

Search Engine Optimization

Great SEO takes time, money, and expertise, but it could represent the best early marketing investment you make. It’s easier to defend a ranking than claim one. Once you reach a particular position on Google and other search engines, you’ll enjoy a consistent, valuable flow of traffic to your online presence without explicitly paying for it.

Social Media Marketing Budget

Social media can lead to all the marketing benefits of SEO but opens additional opportunities. The key is consistency. An active social media account is an opportunity to showcase products and services, interact with new and existing customers, and make your business sound great.

Conversely, dormant social media accounts can do more harm than good. For example, if a page has been left unloved for years, it may show that a company is struggling.

A social media tool will often account for one of the subscriptions in your startup marketing budget. It might also be worth having your accounts professionally designed and curated in the early stages if you lack experience. From there, you or an employee can seek to stay on top of fresh, engaging content that gets the word out, and you can also experiment with paid ads and promoted posts.

Local Marketing

Every business has a local market, even if you operate from home. Reaching that audience doesn’t have to be exclusively online either. Attending networking events, handing out flyers, and engaging with the business community around you can all contribute to your marketing goals, but they often come at a cost. You should expect a return on investment just as with anything else.

Promotional Materials

This point won’t apply to every business, but most entrepreneurs love the idea of seeing their logo on custom clothing, stationery, and the multitude of other options available today. You can expect bulk discounts to keep costs low, but it’s often difficult to measure the impact of passing promotional materials out. They might be a necessity, especially if your business involves a lot of human interaction. However, if they’re an optional extra, they may need to wait until your budget matures.

Handling Expenses

When you have a budget to work with, it’s essential to always understand the numbers. Of course, that goes for outgoings and any income that can be attributed directly to those expenses. So, keep your spreadsheets up to date and consider using prepaid or virtual cards for incidental costs for ease of tracking.

Priority Number One: The Return on Investment

The marketing budget for your startup should focus on revenue generation. So don’t settle for asking, ‘how much does marketing cost?’ Instead, ask yourself how much money your company can generate with different spending levels.

There’s a lot to consider in a budgeting plan, but it’s okay to be optimistic. Don’t judge ideas and opportunities on how much they cost you today. Instead, measure them by how much they’re likely to make in the future.

Creating Your Startup Marketing Budget Plan

So, with the planning, theory, and considerations out of the way, let’s wrap up with a quick guide to making your marketing budget a reality.

1. Decide on Your Goals

Think about the most significant impact on your business and tailor your efforts to meet those specific goals. It could be increased profitability, higher search rankings, or more social media followers. Understand the priority and focus your marketing budget on the most relevant areas accordingly.

2. Set A Generous Budget You Know You Can Stick To

Your marketing budget is often dictated by cash flow and will remain that way until your efforts become self-funding. Your current financial circumstances will dictate the initial budget, but the budget can be subject to change depending on future growth

You need to be strict with this budget, both in your actions and those of your employees, but even if you plan a year out today, there’s nothing to say you can’t revisit the plan next month based on the latest information.

3. Plan How to Allocate Your Marketing Costs

Your plan should eliminate any temptation to pick up the latest software or follow special offers. When you first make a plan, try to account for every last dollar and understand precisely where it will be spent. There will be more flexibility in the future but, for now, everything you invest in needs to pull towards a common goal.

4. Create a General Schedule for the Next Year

As noted, you can plan for a year, and you could change that plan tomorrow if something comes up. However, a year is far enough out to give you time to experiment and identify the actual returns your marketing efforts have created.

This period also enables you to plan your budget around specific events. If your products make for great holiday gifts, you’ll need a bigger budget in later months. If you sell outdoor equipment, your advertising schedule will peak in the summer.

By laying out your strategy in advance, you know when to spend big and when to reduce your expenditure and save it for the most critical trading periods.

6. Keep an Eye on the Next Opportunity to Scale

Marketing, much like the business itself, is all about scale. Budgets are all about percentages and ratios. So, ideally, you’ll be able to put systems in place whereby you can trace all business income back to the marketing channel that made it possible. Then, as revenues increase, and you’ve made sure to see what’s driving them, you can reinvest.

After all, if and when you reach the five to one marketing ratio, and every dollar makes five, you could simply rinse and repeat for a thriving operation.

Wrapping Up

Successful businesses rely on efficient planning, and the marketing component is no exception. It’s among the more exciting parts of running a business, as it’s a justifiable way to tell everyone you can about your passion. However, underneath, it remains a numbers game. Fortunately, with the correct strategy, it doesn’t have to be a gamble.

Sure, not everything works for every business, and reaching profitability can take time. However, that’s the thrill of the chase, and if you can understand what you have available, how to spend it, and what you want to achieve, you’ve taken a massive step towards making it happen.

About Daniel Brown

Daniel Brown
Daniel Brown is an experienced and knowledgeable financial advisor at spoolah.com. He has been in this industry since 2008 and has a strong understanding of economic trends, all types of financial planning, ways of creating plans for meeting short-term and long-term financial goals, etc.

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