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'm hoping that you may benefit from my failures as well as my subsequent experience working with other entrepreneurs.
I didn't realise this mistake while I was working at my first startup. But now that I deal with other entrepreneurs as a marketing consultant, I've noticed that a lot of people make this error. The mistake I'm referring to is not having a defined marketing budget for your small business.
Let me start by sharing my own experience: when I looked back on my startup, I learned that I spent less than 1% on marketing. And, as you may be aware, marketing is what gets you noticed. It's what informs people about what you do, what you sell, and how it may help them. And if you're not spending enough, your message won't reach the right people. Naturally, this will have an effect on your sales.
Why do entrepreneurs miss making a marketing budget?
Many entrepreneurs make this error because marketing is intangible in the short run. In the short term, the concrete parts of your business are what you can see or measure. Things like operations, employee pay, raw material costs, how much raw material you're acquiring, and what tools you're investing in, are all things to consider. Unfortunately, marketing is not very tangible in the short term, as it takes some time to get your message over to your customer. As a result, many entrepreneurs give up too soon when it comes to marketing since they don't see any results.
According to Harvard Business School research, you should spend 20% of your total budget on marketing in the first few years because that's when you'll need it the most to create your brand awareness. After you've settled in and made enough sales, you can reduce it to 8 to 12%. However, if you spend less than that, your message will take much longer to reach its intended audience. And, if you're a small business, the longer it takes, the more money you'll have spent on tangible items like operations, salaries, raw material purchases, and so on. 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 it 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 be aware that this is a common occurrence for many startups. That is why many startups fail during the first 1 to 5 years of their existence. Be aware that if you don't put enough effort into your marketing, it will have an impact on how well your company does in the long run.
How much should you budget for marketing?
Now that you know how important it is to spend money on marketing, the next thing to consider is how do you know how much you need to spend? I did say you may spend between 8 and 20%, but that's only a guideline. And as a small business, you may not be able to spend that much. So, how do you figure out how much you can spend?
Making a plan for what you want to do in marketing is something I highly recommend doing.
The channels that you’re interested in could be what you want to target through marketing. You may have a presence on Instagram and Facebook, and perhaps that is where you want to focus your efforts. Alternatively, you may have a website and wish to use Google advertisements to drive visitors to it. Or you'd like to accomplish something fully offline like attend networking events or invest in a stall at the appropriate event. Whatever it is, you must make that decision for your company. What channels do you believe will bring you sales?
Once you have a clear picture 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 that's one method of calculating how much money you'll need to spend on marketing. Another option is to assess your marketing budget and commit to a spending level that you can sustain for the next few months. For instance, I've committed to spending ₹5000 every month on marketing, and I stick to that budget. And once a month, I try out new things to see how they work. So I tried with Instagram promos for a month, spending my whole marketing budget on them to see what results I might obtain. Was it increasing my awareness? Was it giving me more sales or more followers? The following month, I shifted to a different channel, such as Facebook ads, and evaluated the outcomes accordingly.
You might also spend your money on non-digital items. For example, I hired a three-month intern who was only responsible for assisting me in the creation of marketing collateral. And that's how I spent my marketing budget for those three months. It isn't necessary to always create a specific marketing campaign. For two or three months, you can hire a visual designer to prepare all of your marketing collateral, including brochures, business cards, website designs, and social media accounts, as well as anything else that helps to marketing. Put that money into your marketing budget and stick to it over the next few months. This will keep you focused on marketing on a continual basis. When you're doing this, you'll be thinking about marketing all of the time, and after six months or so, you'll have a better idea of what worked and what didn't. Over time, you’ll be able to decide whether or not to focus on specific channels, and you'll have a better understanding of how much to invest in those channels.
While building a marketing budget isn't difficult, it's one of those things that small business owners overlook. It is critical to have a clear marketing budget defined for your small business, so that you focus on marketing. If you haven't yet built your marketing budget yet, I hope I've given you some pointers that you can use to get started.
Want to brainstorm a marketing strategy to grow your business? Book a free consultation with me here.