Are you a small, locally owned business that understands the important of an appropriate and accurate local business marketing strategy for your online and offline outreach efforts, but you’re not quite sure how to establish a realistic budget? Or do you find that you’ve put a lot of energy into a local business marketing budget just to end up broke with no new prospective customers?
One of the most frequently asked questions we get from our clients is, “How can my business plan a surefire local business marketing strategy on a budget?” We find that there are some business realities and approaches to consider to design a marketing strategy that will create business growth and stomp your competition.
Shaping Your Local Business Marketing Budget for Success
To shape your marketing budget for success, you want to focus on the following six tips:
- Plan your local business marketing budget for at least one year. You’re creating a losing proposition if you don’t. Marketing solutions and branding take time to plan and to work, so plan well and give that plan some time to work. Sure, you’ll do some tactical changes and optimize your plan throughout the year, but budget for a year and let the plan evolve, grow and be optimized so you’re not floundering from one budget to the next.
- Budget for business realities. What’s going on with your business and the general macro environment that will affect how you think about budgeting?
- Develop programs that work together to create an integrated effect that builds momentum and a nice footprint for your business. In other words, don’t depend on one or two activities alone because you’ll be overspending and over relying on too few activities.
- Have measurable local business marketing goals. This is probably most important. You don’t want to change from one strategy to another from one quarter to another, but you do want to optimize your tactics from one quarter to the next so you have measurement tracking goals in place so you can optimize and reflect on those goals.
- Digital should be 35-50% of your budget depending on where you are in your digital marketing life cycle. If you’ve just started and you need to build out some areas for digital marketing, your budget will likely be in the higher end of the 30-50% budget suggested, but if you already have some good foundational pieces, like a website, social media sites, etc, in place, then may be on the lower end of that percentage. At the end of the day, those who will buy your service or product are people who will go on line and research, so digital is a very important aspect and foundational element of you marketing program.
- Think of local business marketing as an investment, not an expense.
Establishing a Local Business Marketing Budget
Establishing a budget focuses on the percent of revenue dedicated to marketing for your company. And with the new economy we’re in and the realities of it, many companies have shifted more and more to the more efficient tactics of marketing, like social media, email, SEO, and building websites on new content management systems that make them more dynamic; and your business ought to be doing this as well. Again, look at your digital marketing components and make sure they’re taking advantage of the items that will make your local business marketing program more robust in the digital world.
Steps for Budget Planning and Factoring in Markup
Factoring in mark-up for your budget can be a really important factor in determining the final percentage of revenue dedicated to marketing. because you want to base what you’re spending on your profitability per new customer or new project.
- Take the appropriate gross percentage by Gross Sales.
- Then factor in markup (markup times adjusted gross revenue).
- So markup is the gross profit above cost, expressed as a percentage of cost (Example: Sell a service for $150, but costs you $100 to perform. Markup is 50%, but margin is 33.3%).
So the nest number of the 33% times your adjusted gross revenue is your marketing budget (this net number is your marketing budget).
EXAMPLE: Budget Factoring in Markup
- A business does $1M in annual sales; profit margin of 48%.
- First take 10-12% of annual revenue ($100K-$120K respectively).
- Second, convert 48% profit margin into a markup by dividing gross profits by cost; dividing $480K gross profit by $520K (hard cost) shows a 48% margin is a 92.3% markup.
- Multiply 92.3 times $100K and $120K and you get your marketing budget range.
Using this formula in addition to adding in the factors shaping and determining your local business marketing budget discussed above are a great start as you begin to shape what your marketing budget should look like for the upcoming New Year.