Investing in a marketing strategy is an important business decision, but it can be challenging to decide how much to spend. Marketing is a vital part of any business’ growth. Developing a plan and spending your money wisely is critical when it comes to getting the most out of your marketing budget. Investing in a clever marketing strategy and giving careful consideration to how much you want to spend will reduce stress and provide greater returns for you and your business.
Where to start when creating a marketing strategy
Studies have shown that documenting an official marketing strategy leads to significantly higher success rates. If you set specific goals for your marketing activities, you are more likely to succeed. It’s nearly impossible to know if your efforts have been successful if you haven’t decided what success looks like. The idea of developing a marketing strategy may seem overwhelming, especially if marketing is not an area you are familiar with. It doesn’t need to be overly complicated to get started, but it does need to be thorough. There are plenty of resources available to help you prepare your own strategies including the Australian Government’s Marketing Plan Template. If you want extra help, there are marketing agencies that work alongside small businesses to develop your marketing strategies and plans.
Why a marketing strategy is important
Strategic marketing helps to define and develop the products and services that your business offers. It provides a way to connect with existing customers and attract new ones. Regardless of the kind of business you run, customers are your lifeblood, and good marketing should ultimately increase your bottom line. Investing in your marketing strategy also provides a new avenue for setting and achieving realistic and measurable objectives for growing your business. Developing a useful marketing strategy takes time, research and effort but can be a vital element of a business’ success.
Many smaller businesses don’t invest enough time or energy in their marketing. It is often perceived as something auxiliary to running a business. Building your brand is an essential element of building a successful business and marketing is a central component of that.
How to decide how much to invest in your marketing strategy
The next big hurdle when developing a marketing strategy is deciding how much to spend. Marketing is an important part of driving growth, but it can be tricky to find the balance of how much to spend on generating new revenue through marketing. For small businesses working within a tight budget, it can be an especially difficult decision to spend money on something as seemingly nebulous as ‘marketing’. Having a solid marketing strategy in place is essential for making your marketing budget stretch as far as possible. By understanding your goals, you can target your marketing investment to make it as efficient as possible and make every dollar spent count.
There are two main ways to decide on your marketing budget: a percentage of revenue or a fixed amount. Many businesses decide on their marketing budget based on a percentage of actual or projected gross revenues. What percentage you choose is dependent on several factors such as the industry you’re in, the size of your business and its growth stage. If you are still building your brand, it is common to spend more money on your marketing strategy than you would maintaining your business. Different sources will suggest different amounts, but many small businesses invest anywhere between 2 and 20% on their marketing strategy. The percentage approach creates a flexible budget which grows and changes with your business. New businesses however rarely have concrete or reliable revenue numbers to base a percentage on. This is where a fixed amount marketing budget can be useful. A new business can decide on a figure that they know they can afford rather than basing their budget on theoretical revenue. This approach can also be beneficial for small businesses with slim or irregular margin who have to be careful with their money.
The rules are not set in stone when it comes to investing in a marketing strategy and deciding how much to spend on it. Regardless of whether you choose a fixed amount or a percentage of revenue when determining your marketing budget, it is central to prioritise marketing as part of your running costs rather than allocating funds out of what is left over when your other expenses are met.
For more detailed help and advice on determining the best marketing budget for your business, call us today on 1300 ARABON to chat with one of our experienced accountants about the best options for you.