How to create a marketing budget for your small business
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Posted: Wed 6th Sep 2023
Creating a marketing budget is an essential step in developing an effective marketing strategy. Without a well-planned budget, it can be challenging to allocate resources and track the success of your marketing efforts.
So, how can you put together a marketing budget that fits with your business's goals while giving you the best return on investment?
By taking a strategic approach and keeping some of the key considerations in mind, you can develop a budget that supports your marketing goals and helps you make informed decisions about where to dedicate your spending.
In this blog, we provide a step-by-step guide on how to create a marketing budget that's tailored to the unique needs of your business.
What is a marketing budget?
A marketing budget is a financial plan that outlines how you'll allocate money for various marketing activities that you're doing to achieve your business's goals. It serves as a roadmap for you to manage your marketing expenses and make sure you're using your resources in the most efficient way.
Having a separate marketing budget is essential, as it allows you to plan and prioritise your marketing efforts. Setting aside a specific amount of marketing spend makes sure you have all the resources you need to implement your marketing plan effectively.
Why does my business need a marketing budget?
The main purpose of a marketing budget is to guide your decision-making. It helps you determine how much you can put towards different marketing channels such as:
traditional advertising campaigns
By setting clear limits, you can avoid overspending, and make informed decisions about the best marketing tactics in which to invest.
As well as managing your marketing funds, a marketing budget also helps you measure the return on investment (ROI) for your work. Tracking the revenue that your marketing efforts generate means you can assess whether your strategies are effective and make any necessary adjustments.
When you have little money for marketing
One of the main challenges a lot of small businesses face is what to do when finances are tight. But this shouldn't deter you from investing in marketing. Instead, it should motivate you to focus on cost-effective strategies that can deliver the best possible results within your restricted budget.
With a well-planned marketing budget, you can identify the marketing channels and tactics that are most suited to both your target audience and your business's objectives.
That way, you avoid wasting marketing money on activities that may not lead to the outcomes you're looking for. By setting clear limits on your budget, you can make informed decisions about where to allocate your spending to achieve the best marketing ROI.
Watch this StartUp UK webinar to learn how to leverage social media and content marketing to grow your brand and attract more customers.
How to create a marketing budget in six steps
Below, we set out some of the key steps and considerations when putting an effective marketing budget together.
Following these steps and guidelines should help make sure your marketing budget matches your overall business goals and allows your marketing initiatives to have the biggest possible impact.
Step 1: Set goals for your marketing
Having clear marketing goals is vital. Without them, it becomes challenging to track performance and measure whether your marketing efforts are achieving what you're looking for.
By setting specific goals, you give yourself (and your marketing team, if you have one) a clear direction and purpose. The goals should fit with your business's overall objectives and revenue targets.
For example, if your business's objective is to increase sales by 20% in the next quarter, your marketing goal could be to generate a certain number of qualified leads or increase website traffic by a certain percentage.
Having well-defined marketing goals also helps you prioritise and allocate your resources effectively. It allows you to focus on the strategies and tactics that are most likely to yield the results you want.
Setting clear marketing goals also gives you a benchmark for assessing your performance, identify what's working (and what isn't), and making any necessary changes.
Step 2: Research your market
Conducting market research allows you to gather valuable insights about your target market, your competitors and any industry trends. These insights will help inform your marketing strategy and make sure you're allocating your budget in the most impactful way.
To gather data for market research, employ various methods such as surveys, interviews, focus groups and competitor analysis.
Target audience
To start the market research process, you need to identify and define your target audience. That means understanding exactly your potential customer base. Knowing this lets you tailor your marketing projects accordingly.
Competitors
Next, you need to analyse your competitors.
Who are your direct and indirect competitors?
What are their strengths and weaknesses?
How do they market themselves?
This competitive analysis will help you understand the industry landscape and set your brand apart from everyone else.
Industry trends
Industry trends play a crucial role in shaping marketing strategies. Stay updated on the latest trends, market shifts and consumer preferences.
Step 3: Develop your marketing campaign
This crucial step involves creating a message that fits your business's overall strategy and effectively communicates your brand's value proposition to your target audience.
Your aims
To start, define the main aim of your marketing campaign. Are you looking to increase brand awareness, boost your online presence, generate leads or increase sales revenue, for example? This objective will guide how you develop your messaging and choose which marketing techniques and tactics to employ.
Watch this StartUp UK webinar to learn how to leverage social media and content marketing to grow your brand and attract more customers.
Costs
Next, consider what your marketing campaign will cost. This includes advertising materials such as graphics, images and videos, as well as any necessary design, art and photography work. These elements are essential for capturing your audience's attention and conveying your message effectively.
Make sure your message is consistent with your brand identity and values, and that it supports your business's strategic goals. This will not only strengthen your brand's positioning but also make it more likely your marketing efforts will succeed.
Step 4: Choose the most appropriate marketing channels
Here, you need to consider factors such as your target audience, your marketing goals and any budget-related constraints. The key is to choose effective channels for your target customers while making the absolute most of your budget.
Social media ads
This allows you to target specific demographics and interests. Social media platforms also offer a variety of ad formats to suit your marketing goals, whether it's raising brand awareness or driving sales, for instance.
Email marketing
Email marketing gives you a direct and personalised way to communicate. You can segment your audience and send targeted messages based on their preferences and behaviours, which helps drive engagement and conversions.
Video marketing
A popular choice, as it lets you tell your brand story in a visually compelling way. You can share videos across various channels, such as your website, social media platforms and YouTube, expanding your reach and increasing your brand's visibility.
Blogs
Blog posts are another effective marketing channel that can help drive organic traffic to your website. By regularly publishing relevant and valuable content, you can establish thought leadership and build trust with your audience.
Search engine optimisation (SEO)
Don't overlook SEO. Optimising your website and its content for search engines can help improve your organic search rankings, making it easier for your target audience to find you when searching for relevant keywords.
Watch this StartUp UK webinar to learn how to build your brand both online and off, with authority and consistency.
Step 5: Estimate what your marketing will cost
There are several things to consider here.
Advertising expenses
One is advertising expenses, which can include the costs associated with various marketing channels such as PPC advertising (online advertising), print ads and even adverts on radio or TV. These expenses can vary depending on the media you choose and the size of your campaign.
Marketing software
You also need to think about marketing software and how much that would take out of your budget. This includes costs associated with software like:
marketing automation software
email marketing software
analytics software (such as Google Analytics)
These software solutions can help make your marketing much more efficient, while providing valuable data for measuring your campaigns' success.
Content creation
The cost of creating content also comes into play. This includes the expenses incurred for creating various types of content such as blog posts, social media posts, videos and graphics.
On top of that, your content budget can include the cost of hiring writers, designers and videographers, as well as any necessary equipment or software.
Social media advertising
Finally, you must take account of the costs associated with social media advertising. How much are you spending to run targeted ads on platforms like Google Ads, Facebook (Meta), Instagram, Twitter (X) and LinkedIn?
These costs can vary based on factors such as the number of impressions or clicks you seek, the length of the campaign, and the options for audience targeting.
Step 6: Develop your marketing budget
Now it's time to actually create your marketing budget. This will set out the financial resources you'll allocate towards achieving your marketing goals. When you come to produce your budget, you can divide it into the following sections:
Marketing goals
In step 1, you already identified the specific outcomes you want to achieve through your marketing-related projects. Including these in the first part of your budget will help you establish a clear focus and prioritise your budget accordingly.
Target audience
The market research you carried out in step 2 should have told you who your target market is and where you can find them. Knowing this will help you choose the most effective marketing channels for reaching your ideal audience.
Marketing costs
Use your insights from step 5 and outline the costs associated with each marketing activity, such as advertising, content creation, social media and events.
Allocated budget
Prioritise your marketing activities based on their potential impact, and allocate your budget accordingly. Consider how effective different marketing channels will be in reaching your target audience.
ROI
Evaluate the potential return on investment (ROI) for each marketing activity. Assess the revenue you expect each activity to bring in, and compare it with the associated costs.
Continuously monitor the performance of your marketing tasks and adjust your budget as needed. This will help make your spending efficient and allow you to get the most out of your marketing budget.
Does a marketing budget need to be separate to my business budget?
Yes, and there are a few reasons for taking this approach.
Benefits
First, having a separate marketing budget gives you better control over your finances. It also makes it easier to track spending and analyse the effectiveness of your marketing. This helps you make sure you're allocating your marketing budget strategically and in line with your business goals.
Second, a separate marketing budget keeps you open and accountable. With a dedicated budget, you can clearly identify and communicate the specific amount of money you've set aside for certain marketing activities. This promotes transparency within your business, helps justify your spending and demonstrates the impact of your efforts.
Challenges
However, there may be some challenges associated with having a separate marketing budget. One key challenge is the risk that you may neglect other essential areas of the business if you're working with a limited budget overall. It's important to strike a balance and make sure you're adequately accounting for all necessary business expenses.
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