It’s good you’re asking this question first of all as you’ve identified the need for marketing your small business, it’s just a case of how much to spend? The answer isn’t black and white but I’ll lay out my thoughts on what % of your revenue you should be allocating from my experience of working with hundreds of small business owners.
Before we get into exactly what we’d advise in terms of spend it’s important to clarify your goals for growth. Do you want to achieve an % increase in revenue, are you looking to add to your team, prepare for an exit, etc.
Once you have clarity on your goals you can then work back to establish some outline costs for your marketing activity. Let’s say for example you want to increase your annual revenue by £120,000. And if you know your Google Ads budget of £2,000/month brings in 20 leads of which 5 you convert as new client at £5,000 annual revenue. Therefore to increase to these levels you’ll need another 2 clients per month so approximately £750/month or £9,000 increase in ad spend per year.
Hopefully you could follow that calculation and that’s just one channel which admittedly is probably easier to cost than some other channels. But the point being even if we can’t be 100% accurate we can start to flesh out a plan for what we need to spend to achieve our goals.
One thing to note (which sadly a lot of small businesses aren’t great at in my experience) is the importance of accurate tracking and analytics to get this information. For example do you know exactly where your leads come from and track them from campaigns through to closed won so you can assign a revenue value to individual marketing campaigns and channels? If not, you should do as it makes this exercise much easier but more importantly it means your marketing spend will be better spent and deliver more results for you.
So, ‘how much?’ I hear you ask! Well there is some school of thought you should invest 5% of your revenue into marketing, but again it’s quite vague and doesn’t take into account your individual business goals.
If your business turnover is £500,000 that would be a £25,000 investment into marketing or approximately £2,000 per month.
Ultimately assuming you want to grow your business if you see £2,000 per month is generating a positive return on investment (side note: that is exactly what marketing spend should be, an investment, when done correctly), then you’ll want to consider increasing the % of revenue you assign to marketing. It’s not as easy as increasing from £2k to £3k spend will drive a 50% increase in return but if everything is tracked correctly you’ll be able to see the impact and judge accordingly how much you want to spend.
As always if you have any questions or if you’d like help creating your marketing strategy request a consultation call with me today.