Every small business has to advertise. Without advertising, it is extremely difficult for a company to succeed, especially if it is in a competitive market.
But one question that virtually every small business owner has is: how much should I spend on my marketing efforts? It is a tough question to answer. It is tough for a small business owner to shell out money on anything that doesn’t offer an immediate return, and advertising usually does not. Still, it is necessary, and it does cost money.
Here are a few tips to help you decide what to spend on marketing:
Trial and Error
You will usually not have a successful advertising campaign on your first try. You will probably have to try a few different approaches before finding one that has the biggest return on your investment. Print some brochures and see how they perform. Send out postcards to prospective customers. Try placing a classified ad, or a traditional print ad in your local papers. If you have the budget, record a radio ad.
The point is this: early on, when you are experimenting with your advertising options, don’t spend a whole lot of money. At that point, you are doing more “dabbling”, and you don’t want to get burned with a whole bunch of brochures that are not going to do you any good. So try out many different things, but in small portions.
Consider What You Can Spend
Think about what resources your company has. This includes both money and time, because time is just as valuable (if not more so) than cold hard cash. Put, in writing, how much your company is worth (per month) in time and money combined. These are the total resources available to you.
Aim For 20%
Once you are past the trial and error stage, and you know which advertising techniques work best for you, you can decide how much to spend. In general, most small businesses will want to spend about 20% of their monthly resources on marketing. This means that, if you have monthly revenue of $1000, you will want to spend about $200 on marketing. If you spend 100 hours per month on your business, you will want to focus 20 of them on marketing efforts.
Twenty percent may sound like a lot, and it is. But if you bite your lip and grit your way through it, spending that much on marketing should come back and benefit you in a big way. And feel free to tweak this percentage as you become more comfortable. Don’t be afraid to spend more if you feel it is necessary. Or, if you are getting overwhelmed with customers (which should never be the case – just work harder!) you can lower your marketing expenditures, too.
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