In my years with the Small Business Development Center, one question continually echoes from small business owners, “Is there a formula that businesses should use to determine their marketing budget for the year?”
I wish it were that easy. There are certainly guidelines available. Trade associations, RMA and others collect national data that provide averages on business operations, sales and marketing. Many businesses often use past years’ sales to either increase or decrease the amount they spend on marketing.
But, truth be told, the question itself uncovers an inherent problem in how a small business owner views marketing and its role in the organization. By relying on a percentage of sales, operating costs, or any other formula, marketing is relegated to what a business wants to spend, instead of what a business should spend. Marketing is not an operational cost, but rather an investment in the business. And as such, the investment needs to be based on good information, solid marketing strategies and clear goals.
Every year, at least, business should review their marketing plans. Have the target markets changed? How has the competitive field changed? Do we have new marketing goals and what promotional strategies need to be used to achieve them? Business is not stagnant and neither can your marketing efforts. By keeping the end goals in mind, owners have a better chance of reaching them.
Once the plan has been reviewed and new strategies and tactics developed, then the marketing investment can be established. The better question to ask is “How much is all this going to cost and can we afford it?” If the answer is yes, great! But if not, then a business has to determine what is crucial, what can wait, what has to go, or where can they get the money.
If marketing is seen as an investment rather than a cost, then the investment should also bring reward. A strong marketing plan with clear strategies and goals will oftentimes increase what a small business owner would have been willing to invest.
Once invested, every marketing cost should be measured for return. Every advertising campaign, sales promotion and direct sales strategies should bring revenue back to the business. But unlike many investments, small business owners tend not to measure marketing. It can be one of the biggest frustrations for the small business owner, because without this crucial evaluation, they don’t know what their money is doing.
If marketing begins to be treated as an investment, then the results become more apparent – and more real – to small business owners. In any business, there are no easy answers. But hopefully, we continue to ask the right questions.
Learn more about marketing for your small business at http://www.uwgb.edu/sbdc/html/programsDetail.asp?programID=106