How much should I be spending on marketing?
Your website isn’t the key to growing your business. Moving to a new location is also not likely to be the thing that grows your business. So what is?
It’s marketing. Plain and simple.
And for the longest time it was assumed that your marketing budget should be around 10% of your revenue. Most studies tend to lead towards the 10% mark when you’re selling from business to business. That figure tends to head up to around 16% when you’re selling direct to consumers. That’s probably because consumers are generally more fickle and tend to shop around more than businesses do.
But that’s not all you need to consider.
You need to review your marketing all the time. Not just every time your TV sales rep tells you that you need to sign a new 12-month contract. Which gives you a good chance to look at how your revenue is heading as well. If things are a little down, don’t just dump all your marketing – if anything, you may need to increase your spend to compensate. So take a look at how things are every quarter and swap stuff around a little if you have to.
You need to also consider where you at in the business lifecycle. If you’re a start-up, your marketing costs are gonna run at around 30% of your projected revenue. That’s because you’re new and no one knows you. Then your percentage goes down over time. IF you launch a new product, then treat it like a new business. You need to pump that marketing percentage back up again and get that thing out there.
And then you need to look at that the state of your business as well. If you’re making losses right now, spending more on marketing feels like a dumb thing to do. But marketing is an investment, not an outright cost. The problem is that small business is usually so damn bad at it so it becomes a money sink. So start by cutting back on the nonsense spending. The Friday drinks that run at $500 a week can buy you a bunch of advertising each month in this town. Rather than buying everyone a new iMac, hold back till the crisis is over. No one is gonna suddenly leave because they need to use their current computer for a month or three longer. Cut down on the non-essential work travel. Do you really need to fly to Melbourne next week? Or could that $3000 be better spent on getting in a specialist to do your marketing plan?
So while 10% seems like the goal, it’ll change here and there. The important bit is constantly reviewing your marketing so you know whether it’s doing any good or not… and so you can change direction if you need to.