Determine an Efficient Marketing Budget for Your Startup: A Brief Guide

SMB budget graphs

Forecasting marketing expenses can be really difficult to predict, especially for inexperienced entrepreneurs. However, there’s no denying that marketing is one of the most essential components of growing a small business quickly. New startups can lack insight into how much of their limited budget should go into marketing efforts. They also struggle to figure out what to invest in first, so that returns come relatively quickly.

So how can you best optimize your investments in advertising, branding, public relations, content strategy, and media planning? And how to achieve the greatest results? You’ll find out in this article!

Identify Your Marketing Budget

You may be looking to hand this difficult task over to a digital marketing agency. But if you feel ready to be in charge of allocating money for marketing activities, you should know how much money you need. To find out, take a look at the two main indicators in determining your marketing budget:

  • Consider the age of the company. Newer companies should spend more money on marketing to accelerate growth.
  • Learn about your (estimated or gross) annual income. You should make your marketing budget a percentage of revenue, so you must know what your base is in general.

Do you have this figured out? As mentioned, these may be estimated amounts. Remember, sometimes you will need to modify your assumptions and budgets and adjust them to current events. With that said, let’s move on.

According to Wordstream, younger companies (up to 5 years old) should spend 12-20% of gross revenue on their marketing activities. Older ones ( assuming they have already reached a certain level of market share) should allocate 6-12%.

Consider the Margin

Just saying that you should spend 12 or 20% of your profits is not enough. And unfortunately, it is not realistic either. So consider this as a starting guideline and always have in mind another thing. The margin.

How high your margin is determines how much you can actually invest. If it is very high (e.g., 80%), you can invest more in marketing strategy. If it’s low (e.g. 15%) – less.

As a new business, you need to consider how much, let’s say, $200,000 in sales is worth (in terms of further investment). Think about it, and put your efforts into investing in a few selected areas first. Then, as you gain traction, expand to others.

Determine Your Marketing Expenses

You will essentially need a few things to run your digital marketing campaigns. These don’t change too often. You will need marketing staff, strategies, and specific tools. And just as budgets can fluctuate over time and you may have doubts about ‘how much’ you will spend. As for the following, i.e. ‘what’ you will spend, you can be more certain.

Marketers’ Salaries

Now, we won’t determine how much you should spend on it, nor will we tell you how big your team should be. Especially since the CEO’s good intentions and commitment alone are enough to successfully achieve marketing goals.

However, if you want growth, you must also expect additional people on board soon.

You can also outsource many tasks. Working with marketing agencies for content marketing or social media management often proves more cost-effective than hiring full-time employees.

However, if you’re deciding on having a team, it’s not their salaries that you should be most focused on. Rather, look toward the costs their decisions generate.

Marketing Tools and Subscriptions

Your marketing team, in order to do their job well, must be given a budget for the tools necessary for their daily tasks.

CRM platforms like HubSpot make marketers’ lives much easier. Collecting all that important data and analyzing it right in front of our eyes… How did people live before these gems were invented?

Indeed, these tools sometimes prove to be essential. And what is worse, their authors know that fact very well. That’s why they charge a lot for their services. And in the end, subscriptions to analytical tools turn out to be the most expensive when planning online marketing budgets.

And then there are costs such as:

  • Social media marketing management tools
  • Subscriptions for webinar platforms
  • Graphic design software
  • Email marketing platforms (like Mailchimp)
  • Hosting your domain

Search Engine Optimization

Your company would probably suffer without SEO, the ongoing process that helps you reach new customers in organic (non-paid) searches on Google. And it doesn’t matter if it’s on-site SEO, where every website is optimized to rank for a specific keyword. Or whether it’s off-site SEO, which ensures that search engines find links to your website from other high quality, relevant resources.

So again, you have to spend money although this should probably be better left to an agency. Specialized startup SEO services ensure your company is getting more organic exposure, sessions and visits, and ultimately, conversions. But to achieve this, your strategy has to be focused on targeting the right audience and that you’re providing valuable content for users that will generate higher conversion rates.

Experiments and Testing

The key to a successfully planned and efficient marketing budget is constant adjustments and reevaluation. Don’t let an early failure in planning and budget implementation clip your wings. This is the beginning, so you can experiment a bit.

The most important thing is to regularly check the effectiveness of your strategy. For example, Google Adwords can help you with this. With this tool, you can conduct A/B tests and check which of the techniques you use converts best. Or which one is most effective in raising brand awareness.

Once you’ve run your tests, keep updating your budget to be as effective as possible. Be creative and don’t be afraid to use solutions that haven’t worked for others. Your product and audience can differ on many levels.

The Bottom Line

How you will raise the money for its operation is not your only concern when running a startup. You need to think just as hard about how to spend it wisely. Expense management is challenging for everyone.

But having a clear gameplan on how to control these assets will allow you to sleep soundly at night. This is possible if you know the most common digital marketing expenses. So now, with a breakdown of everything, you will be able to navigate the contents of your company’s wallet with ease.

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