Deciding how much money to allocate to marketing can be one of the most challenging aspects of making a budget.
Our three-category framework may help you rethink the way you set up your marketing budget this year.
This includes the foundational stuff you use for all your marketing. Overhead costs are largely predictable and fixed.
The biggest chunk of your marketing overhead is likely to be what you pay the people who do your marketing. As a small business owner, it’s typically a portion of your own salary and it may also include a marketing helper, such as a marcom freelancer.
What your marketing overhead shouldn’t include is the cost to hire people to execute specific marketing campaigns. For example, if you host a big event and need to hire people to help with that event, you’ll want to assign the cost to hire those people to the event itself. By doing it this way, you can properly calculate your return on investment (ROI) for that event.
Other overhead costs include: website hosting and maintenance; business card printing; and software for things such as email marketing, design, and social media posting.
This is the money you invest to acquire leads and customers. This budget category is an investment because the more you spend, the more customers you should expect to get.
If you have a short sales cycle, it might be the money you invest in one month to win customers in the next month. If you have a long sales cycle, you may not realize the benefit of your investment for many months, as is often the case if you sell to large, “enterprise” businesses.
This category could include the cost to run advertising, outbound email, direct mail, or event campaigns.
Until your marketing campaigns are proven to be investments (when you spend one dollar, you get more than one dollar back), they are really just experiments.
Be sure to set funds aside specifically for running these kinds of tests. It’s by running controlled experiments, learning, iterating, and trying again that you eventually find those campaigns that deliver customers in an affordable, predictable way.