Marketing mistake 2: not having a marketing budget for a small business
This season, I’m talking about the marketing mistakes I made with my first startup, and I hope you can benefit from my failures as well as my subsequent experience working with other entrepreneurs.
I didn’t realize this error while working on my first boot. But now that I am dealing with other entrepreneurs as a marketing consultant, I have noticed that a lot of people make this mistake. The mistake I’m referring to is not having a defined marketing budget for your small business.
Let’s start by sharing my own experience: Thinking back to my startup, I learned that I spend less than 1% on marketing. And, as you may know, marketing is what gets you noticed. It’s what informs people about what you do, what you sell, and how it can help them. And if you don’t spend enough, your message won’t reach the right people. Of course, this will have an effect on your sales.
Why do entrepreneurs fail to budget for marketing?
Many entrepreneurs make this mistake because marketing is intangible in the short term. In the short term, the real parts of your business are what you can see or measure. Things like operations, employee compensation, raw material costs, how much raw materials you buy, and what tools you invest in are all things to consider. Unfortunately, marketing isn’t very tangible in the short term because it takes a while to get your message across to your customer. As a result, many entrepreneurs give up too early in marketing because they see no results.
According to research from Harvard Business School, you should spend 20% of your total budget on marketing in the early years, as this is when you will need it most to build brand awareness. Once you’ve settled in and made enough sales, you can reduce it to 8-12%. However, if you spend less than that, it will take your post much longer to reach its target audience. And, if you are a small business, the longer it takes, the more money you will have spent on tangible things like operations, salaries, raw material purchases, etc. So if you’ve spent too much time on other things and not enough time on marketing, you won’t be able to make enough sales, and that may make you want to give up.
This is something I’m telling you because it happened to me. As an entrepreneur, I want you to know that this is a common occurrence for many startups. This is why many startups fail in the first 1-5 years of their existence. Be aware that if you don’t put enough effort into your marketing, it will impact your business performance in the long run.
What is the budget for marketing?
Now that you know how important it is to spend money on marketing, the next thing to consider is how much should you spend? I said you can spend 8-20%, but that’s just a guideline. And as a small business, you might not be able to spend that much. So how do you know how much you can spend?
Making a plan for what you want to do in marketing is something I highly recommend you do.
The channels that interest you might be the ones you want to target through marketing. You can be present on Instagram and Facebook, and this might be where you want to focus your efforts. Alternatively, you may have a website and want to use Google ads to drive visitors to it. Or you want to accomplish something completely offline, like attending networking events or investing in a booth at the appropriate event. Either way, you need to make this decision for your business. Which channels do you think will bring you sales?
Once you have a clear idea of where you want to go, you can start budgeting for it. And if you already know how much something will cost from previous experience, that’s fantastic. Otherwise, all of this information is readily available on the Internet.
So this is a method of calculating how much money you will need to spend on marketing. Another option is to assess your marketing budget and commit to a spending level that you can sustain over the next few months. For example, I made a commitment to spend 5,000 each month on marketing, and I’m sticking to that budget. And once a month I try new things to see how they work. So I tried Instagram promos for a month, spending all my marketing dollars on them to see what results I could get. Did it increase my awareness? Did this give me more sales or more subscribers? The next month, I switched to another channel, like Facebook Ads, and rated the results accordingly.
You can also spend your money on non-digital items. For example, I hired a three month intern who was only responsible for assisting me in creating marketing materials. And that’s how I spent my marketing budget during those three months. You don’t always have to create a specific marketing campaign. For two or three months, you can hire a visual designer to prepare all of your marketing materials, including brochures, business cards, website designs, and social media accounts, and anything else that is useful for marketing. Put that money into your marketing budget and stick to it over the next few months. This will allow you to stay focused on marketing on an ongoing basis. When you do this you’ll be thinking about marketing all the time, and after about six months you’ll have a better idea of what worked and what didn’t. Over time, you will be able to decide whether or not to focus on specific channels, and you will have a better understanding of how much to invest in those channels.
While it isn’t hard to budget for marketing, it’s one of those things that small business owners overlook. Having a clear marketing budget defined for your small business is essential, so that you can focus on marketing. If you haven’t established your marketing budget yet, I hope I’ve given you some tips that you can use to get started.
