You have your marketing strategy down, including both organic and paid channels. You’ve mapped out your content plan and goals for each quarter. The only missing piece is your budget. For any small business, figuring out the right budget for your marketing campaigns is crucial. How much goes into your digital strategies vs offline marketing? Here, we’ll help figure out these questions as you learn how to set up a marketing budget for your small business.
Before going into the process of setting up your business’ marketing budget, download our free template below, which has guide questions that follow the steps in this article. Use it as you follow the steps below to set up your small business marketing budget:
Factors to Consider in Your Small Business Marketing Budget
Setting up a marketing budget for small businesses needs careful planning because each marketing strategy has unique factors that affect its overall cost. For instance, you can start blogging free of charge to build your brand presence. But if you plan to advertise on social media later on, you will need to shell out some money for your ads.
There are different factors like these at play in any marketing strategy. That’s why it’s important to take note of them all first before getting started on your budget. Here are some of the biggest factors that will affect your budget for marketing:
- Your marketing platforms: This is one of the biggest factors affecting your marketing costs. Every marketing strategy has a platform (blogging platforms, social media, television, and so on), and some will cost more than others. The platforms you choose will depend on your overall marketing strategies (more on this below).
- Your marketing team: Marketing strategies require marketing people to run them. If you don’t have enough marketing people on your team, you may need to hire more or outsource to freelancers or agencies. Again, this will depend on your overall marketing needs.
- Your business revenue: You don’t want to spend more money on marketing than you’re making. That’s why your overall revenue should also be one of your biggest considerations when learning how to set a marketing budget for your small business. You’ll also need to consider how it fits into other business costs.
- Your overall marketing goals: Finally, no budget is completely set in stone. There’s always room for adjustments along the way. The only question is how far you’re willing to adjust your budget for each strategy, which will ultimately depend on your overall marketing goals.
How to Set Up a Marketing Budget for Your Small Business in 5 Steps
Now that you know the biggest factors affecting your budget, keep reading to learn how to set up your small business’ marketing budget in five steps.
Step 1: Identify Your Marketing Objectives & Strategies
The first step in setting your budget is identifying your business’ primary marketing objectives. For instance, do you want to generate more leads or simply grow your brand awareness and engagement online? It helps if you already have a marketing plan for your small business. Defining your objectives first is essential, as your objectives will shape your marketing strategies, which in turn will shape your budget.
For example, if your marketing objective is to grow brand awareness in your local community, your strategies might include growing your local SEO, joining local events, and setting up local billboards. Therefore, those strategies are what your marketing budget will cover. You need not focus so much on sending press releases to national news outlets or setting up Google Ads.
Here’s an example of what those strategies and objectives might look like in your marketing plan.
Outlining these strategies is essential because marketing strategies have different costs, and identifying the ones you need most will help you build an accurate marketing budget.
After outlining your marketing strategies, you can then identify which ones will require more cost than others. For instance, from the example above, the strategies that will likely require a larger budget are putting up billboards and growing your local SEO, while joining local events would likely incur less cost.
Step 2: Set a Budget Duration
Because your budget for marketing is finite (even if you wish it weren’t), you’ll also need to set its total duration, aka how long it will run in total, whether it’s for an entire year or just one quarter. Setting your budget’s total duration will help you track and measure it accurately later on. It’ll also help create more efficient and effective marketing strategies in the future.
For instance, from the example above, say your total budget duration for the objective of growing your local brand awareness is one year. This means that, ideally, you’ll achieve that objective with your set budget within one year. Having a clear duration for your budget makes it much easier to measure later on.
Step 3: Calculate Your Previous Business Costs & Set New Metrics
This step is where the math part of learning how to set up a marketing budget for your business comes in. Figuring out the total marketing cost for small businesses isn’t about picking a random number and then hoping it’s accurate. Your budget needs to be carefully calculated because it’s only one portion of your entire business cost.
Two numbers can help you figure your budget out: your total business revenue and your previous average marketing costs (e.g., your previous cost-per-click [CPC], cost-per-lead [CPL], return on ad spend [ROAS], and so on). If this is your first time building a marketing plan and budget, knowing your total company revenue (or initial business capital) is enough.
Say for example that your total business revenue is $20,000. This is the entire figure your marketing budget will be taken from. Meanwhile, your average marketing costs and metrics from the past year are as follows:
- Average CPC: $1
- Average CPL: $2.50
- Average cost per conversion: $4
- Total ROAS (from both online and offline ads): $2,000
Ideally, you want to set a budget with lower average costs and higher returns than your previous numbers, while still fulfilling your current marketing objectives. Use your previous figures to set new goals for your marketing campaigns. From the above example, here are the new goals you might set for each metric:
Keep in mind that your figures might differ depending on your total revenue, metrics, and objectives—each business is unique. What’s important is to outline your metrics clearly as they’ll help keep you in line with your budget as you build your campaigns.
Step 4: Set & Allocate Your Marketing Budget
With your target goals and marketing strategies identified, you can then set a number for your budget. There is no one-size-fits-all budget for every business—only you can decide how much you’ll allocate to reach your objectives.
However, most businesses spend over 9% of their total revenue on marketing, according to a recent study. That’s also within the general rule of thumb for small businesses, which spend between 7% and 10% of total revenue on marketing.
From the example above, if your total business revenue was $20,000, you could spend between $1,400 and $2,000 on your marketing. However, studies also show that marketing budgets overall are projected to rise, thanks to new marketing opportunities like artificial intelligence (AI) and influencers.
Once you have determined your overall figure, the next step is to allocate it among the marketing strategies you set in step one. Because you’ll have multiple strategies and objectives to execute on a limited budget, you’ll need to arrange them by order of priority. Here’s an example of what your budget allocation might look like from the instances above:
You’ll notice from the example that it included a line item for extra expenses. That’s to give your budget some extra padding in case you run into unplanned expenses, like overhead costs, or if you want to try out any new strategies as you go along. It’s important to prepare for these situations so your budget doesn’t get too far off track.
To get a better idea of how marketing budgets tend to be allocated, here are where most marketers’ budgets are currently being spent, according to a study by The CMO from September 2023:
Data on marketers’ budget allocations (Source: The CMO Survey)
Step 5: Track Your Budget
Setting up a marketing budget for your small business doesn’t end once you’ve allocated all your costs. It’s equally important to keep track of your budget once you set your marketing strategies in motion. It helps to use a budgeting software like Zoho Books or even Google Sheets to help you track your numbers easily. You can also use the template above.
Besides your budget, also keep track of your target metrics from step three (your CPLs, CPCs, and so on). Record the metrics from each of your marketing campaigns to evaluate them later on against your targets.
Here’s an example of how you can keep track of all your numbers from the above steps, which you’ll also find in the template above:
Keeping track of your budget also isn’t exclusively about staying within preset numbers 100% of the time. Going over your budget from time to time is normal for any small business (as long as it isn’t too far off course).
What’s more important is to ensure you’re funneling money toward strategies that serve your objectives and business interests. And, record all your expenses to learn from experience. Marketing your small business is never a one-and-done process—it’s always a dynamic and ongoing journey.
Best Practices When Setting Your Marketing Budget
Marketing a business is no walk in the park, and setting a budget for it is rarely simple (especially if you aren’t a numbers person). But it’s not impossible. Before doing your budget calculations, here are some of the biggest tips and best practices to have in mind about setting marketing budgets.
- Set your targets for growth: The reason step three is all about outlining your previous marketing costs is so you could set new targets in step four that help your business grow. You want your business to grow efficiently over time, and choosing the right budget for each strategy can set you on the right track. This can mean gradually setting higher targets for lower budgets over time.
- Identify and communicate your marketing objectives clearly: Nothing successful in marketing ever happened without clear objectives. Be sure to set your marketing objectives before anything else, as they will guide the entirety of your marketing budget. Also, communicate them clearly with your marketing team.
- Keep your customers in mind: Good marketing is all about your customers. They should always be your number one priority in every marketing strategy and effort, including your budget. Consider if the strategies where you’re allocating most of your budget serve your customers’ wants and needs.
- Track your budget: Tracking your budget is key to your business’ growth. Be sure to record all your costs and metrics so you can evaluate your budget later on and identify areas to reconfigure and strategize.
- Don’t feel caged by your budget: Your small business is a living, dynamic entity that can sometimes derail your plans or budget. That’s normal. In fact, your plans should adjust to shifting landscapes. Therefore, don’t feel pressured to stick to your budget 100% of the time. Adjust it as needed, as long as your efforts serve your objectives.
Frequently Asked Questions
First, outline your main marketing objectives and KPIs, which will help you identify the marketing strategies your budget will revolve around. Then, set the total duration your budget will cover. Outline your total business revenue (or initial capital) and previous marketing costs, and use them to identify your total marketing budget. Allocate your total budget across your marketing strategies, and record and track it later on as you build your campaigns.
Typically, most businesses spend between 7% and 10% of their total revenue on their marketing plan. For example, if you have a total revenue of $20,000, your marketing budget can be between $1,400 and $2,000. However, this can vary for each business as each has its own marketing priorities. We recommend starting on the lower end of the range, and then gradually increasing as your business grows and you identify the strategies that work best.
The average marketing budget of startups is 11.2% of their overall revenue, according to Gartner. This is slightly higher than that of small businesses because startups often have a more aggressive marketing approach to secure funding. Many startups also have the extra challenge of educating audiences about their product or service, which costs more marketing effort and budget.
Bottom Line
There is no single correct answer to the right budget for marketing your business—only you can set it yourself because you know your business best. That’s why learning how to set up a marketing budget is crucial to your business’ longevity. It helps you not only to stay on track, but also to optimize and grow more efficiently. Follow the steps and download the template above to get started.
