How to Create a Small Business Marketing Budget (With Free Templates)

Rieva Lesonsky

Rieva Lesonsky

Contributor at Fundera
Rieva Lesonsky is a small business contributor for Fundera and CEO of GrowBiz Media, a media company. She has spent 30+ years covering, consulting and speaking to small businesses owners and entrepreneurs.
Rieva Lesonsky

When you first launch your small business, there are one million different tasks to handle. One of the most important—and one that is often overlooked—is marketing your business. After all, how else are customers going to know you exist if you don’t get the word out?

Within the marketing bucket there are many additional tasks: Who am I going to market to? Where am I going to market? What are my marketing goals? These are all important questions to ask yourself, and they all roll up into one larger question: What is my marketing budget?

Your marketing budget is both informed and dictated by your marketing plan. This means developing a small business marketing budget is a critical step. Without one you could overspend and affect your broader business budget, or underspend and deprive yourself of the exposure you need to establish your business.

So let’s look at how to create a marketing budget. We’ll take you step-by-step so you can develop your own marketing budget plan. We’ll also provide you with some marketing budget templates to help you get started.

Creating a Small Business Marketing Budget

Every small business must invest in marketing in order to grow. But how much should you spend on marketing, and what should you spend it on? These questions can be tough to answer for new small business owners with no previous experience in creating a small business marketing budget.

Generally speaking, there is no correct amount to spend on marketing. Marketing is a highly subjective practice. Depending on your goals, customer base, market niche, branding, and simple preference, a marketing budget that works for one small business may not work at all for yours.

That said, there are a few marketing approaches generally accepted as worthwhile investments of time and money.

The following steps will help startup entrepreneurs and other novices devise a small business marketing budget that works.

Step 1: Create a Marketing Strategy

You should create a marketing strategy before you create your budget. This is because it helps to understand exactly what you need to spend to market the way you want. If later you determine that your ideal marketing campaign is outside your budget, so be it. Marketing is a variable expense, so just because you can’t afford to spend as much now, doesn’t mean you won’t be able to invest more when you are flush.

Goals

Your marketing strategy is made up of several components. The first component are your goals. Your goals are the results you want your marketing efforts to yield. Obviously the end goal with all marketing is to increase sales, but you want to try to be more specific so you can create the right strategy. Examples of marketing goals could be to drive traffic to your company website or increase engagement rates on social media posts.

Target Audience

Your target audience are the people you target with your marketing who you feel can be converted into paying customers. To do this you must perform market research: Call your existing customers to find out what they like about your company. Gather demographic information, and find out which platforms people discover your business through.

Distribution Method

Your distribution method are the channels through which you market your business. In the past this was done via TV, radio, and physical advertisements. Nowadays, it is most cost effective for small businesses to advertise online. There are many ways to advertise online, from buying ads to investing in social media marketing and search engine optimization. Knowing your target audience will tell you which distribution methods are going to be most successful.

Analytics

The goals you create with your marketing strategy have to be measurable. This is where analytics come into play. Any good marketing strategy leverages tools like Google Analytics to gauge the effectiveness of its efforts. Using analytics you can see where your marketing efforts are succeeding or failing, and make the necessary adjustments.

In short,  your marketing strategy is the what, why, and how of your marketing. It outlines your overall plan and the tactics you’ll use to hit your goals. Your marketing strategy is also part of your broader business plan

Step 2: Calculate Your Total Small Business Marketing Budget for the Year

Now that you know your strategy, you can identify the costs associated with your strategy. Although you might have to spend a little bit of money to determine your goals and identify your target audience, most of your expenses will come from your distribution method.

There are many marketing distribution methods, each with varying costs. TV, radio, and physical ads usually come with a fixed price depending on the ad type. Online ad costs vary depending on the type of ad, platform, and cadence of the ad. Other marketing methods can be done at little cost, such as social media or email marketing. Most marketing strategies will leverage a mixture of a few methods.

In terms of analytics, Google Analytics is a free service that provides good insight into a business’s marketing efforts. For more in depth analysis, your business can purchase a monthly subscription to a paid service

As we said earlier, there’s no hard-and-fast rule as to how much money a business should budget for marketing. It depends on your industry, stage in business, profit margins, and annual sales. Know this:

  • Many businesses base their marketing on a percentage of their gross revenues. The benefit of this approach is that your small business marketing budget will rise along with your sales. However, keep in mind that marketing generates sales—not the other way around. That means a startup business needs to budget a disproportionate percentage for marketing compared to its sales.
  • To calculate your marketing budget, look at your sales projections for your first year in business. (This should be part of your business plan.) Industry organizations, trade associations, publications, and websites will have benchmark information about the average marketing budget in your industry.
  • The Small Business Administration recommends spending 7% to 8% of your gross revenue for marketing and advertising if you’re doing less than $5 million a year in sales. This calculation assumes your net profit margin—after all expenses—is in the 10% to 12% range.

Small Business Marketing Budgets Are Expected to Rise

After increasing for three years in a row, the average marketing budget dipped slightly in 2018 to 11.2% of a company’s overall revenue, according to the Gartner 2018-2019 CMO Spend Survey. In 2017 the average marketing budget was 11.3% of a company’s overall revenue. However, 63% of CMOs expect their marketing budgets to rise in 2019.

Small Business Marketing Budget: Getting the Most Bang for Your Buck

Once you’ve estimated your annual marketing budget, use your marketing strategy to fine-tune it. Be realistic: If your budget isn’t large enough to cover all the elements of the marketing plan you had in mind, look for ways to do more with less. For example, could you run fewer paid ads and focus on free marketing like organic social media or organic SEO?

marketing budget

Of course, even “free” marketing tactics have time costs associated with them. Creating social media posts, monitoring them and responding to social media followers, for example, can take hours a day. Paid marketing and advertising tactics might have a better ROI than free tactics—even when you factor in their cost.

Now that you’ve created a marketing budget, commit to it. Many new business owners get nervous and pull back on marketing the minute their sales dwindle even a little. That’s the worst thing you can do: After all, marketing is what grows your sales.

Where to Find Free Marketing Budget Templates

Need help crafting your small business marketing budget? Try these downloadable, free marketing budget templates.

Now that you have everything you need to build your small business marketing budget—take advantage of it! Without marketing, it will be hard to scale your business. A marketing budget will help you to spend wisely as you build up your business.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
Rieva Lesonsky

Rieva Lesonsky

Contributor at Fundera
Rieva Lesonsky is a small business contributor for Fundera and CEO of GrowBiz Media, a media company. She has spent 30+ years covering, consulting and speaking to small businesses owners and entrepreneurs.
Rieva Lesonsky

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