If you are a small business owner (or are currently handling the marketing efforts for a small business) then you definitely want to know you are getting as much out of your marketing budget as possible. Unfortunately, it is rarely easy to tell if you actually are. There are SO many factors that can play into the effectiveness of your marketing efforts, and so much of your marketing is going to depend on your business with all of its unique quirks and seasonalities. You will likely not be able to find any blog or guide out there on the internet that can answer every question you have, nor will they be able to give you answers specific to your businesses or industry.
But today we are going to try to do so anyway!
This article is going to take 30 questions that get frequently asked about marketing budgets, ad spend, and what channels are best for marketing when it comes to small businesses. Keep in mind, these are good general guidelines, but the specific budget and needs of your business is going to vary wildly. Give us a call if you would like help getting more specific to your business, but in the meantime….
General Marketing Budget Questions
1. How much should I allocate to my marketing budget?
The amount you should allocate to your marketing budget depends on various factors, including your industry, business goals, and growth stage. A good general rule of thumb for small businesses is to allocate 7-8% of your gross revenue to marketing. This percentage can be higher for startups or businesses in growth mode, potentially reaching 10-20% of revenue.
2. What’s the average marketing spend for small businesses?
According to a survey by the U.S. Small Business Administration, small businesses with revenues less than $5 million should allocate 7-8% of their revenues to marketing. This includes both brand development costs and the costs of promoting your business.
Sooo if your business generates $1,000,000 in revenue (again, gross revenue, not profit here) then the U.S. Small Business Administration recommends $70,000 – $80,000 a year!
That old adage – you gotta spend money to make money – is true… mostly.
3. What percentage of revenue should go towards marketing?
As mentioned earlier, 7-8% of gross revenue is a common benchmark for small businesses. However, this can vary based on your industry and growth goals:
- B2B companies often spend 2-5% of revenue on marketing
- B2C companies typically spend 5-10% of revenue on marketing
- Startups might allocate 20% or more of revenue to marketing for rapid growth.
It all depends on your specific business and your goals.
4. How often should I review and adjust my marketing spend?
It’s best to review your marketing spend quarterly and make major adjustments annually. This allows you to:
- Assess the performance of your current strategies
- Respond to market changes and new opportunities
- Align your marketing budget with updated business goals
It’s good to remain flexible. It is also important to give your campaigns enough time to show results. Some campaigns (especially digital based campaigns) take time to get running effectively. Stopping early can result in lost budget that may have turned into results with just a bit of additional time.
Channel-Specific Marketing Spending
5. How much should I spend on Google Ads?
The amount you spend on Google Ads depends on your industry, competition, and goals. Start with a small daily budget (e.g., $10-$50) and gradually increase it based on performance. Many small businesses find success with monthly budgets ranging from $1,000 to $10,000. There are a ton of choices you will have to make as well, such as what type of ad you want to run, who your audience is, where you want to show your ad, what you want your audience to do after seeing your ad and so on, all that may impact how you will want to budget your ad spend.
6. How much should I spend on Facebook ads?
Similar to Google Ads, your Facebook ad spend will vary. A good starting point is $5-$10 per day for each campaign. As you learn what works, you can scale up. Many small businesses spend between $200 and $800 per month on Facebook ads.
7. How much do TikTok ads cost?
TikTok ads have a minimum campaign budget of $500 and a minimum ad group budget of $20 per day. Learn more here.
8. How much do Hulu ads cost?
Hulu ads typically require a minimum spend of $500 per campaign. For small businesses trying to reach a local audience, we recommend running at least $1,000 /mo to get started. Learn more here.
Also – Disney recently purchased Hulu, so the platform for running Hulu ads is actually the Disney Campaign Manager.
9. How much do Snapchat ads cost?
Snapchat ads start at $5 per day, making them accessible for small businesses. However, for meaningful results, consider budgeting $1,000 to $1,500 per month. See their page here.
10. How much do Instagram ads cost?
Instagram ad costs vary widely, but you can start with as little as $5 per day. Many small businesses find success spending $200 to $800 per month on Instagram ads. “Oh – that’s the same as the Facebook budget!” you might be thinking. Well you’re right! After Facebook bought Instagram and became Meta, they actually merged their ad platform so now its all managed under the Meta Ads Manager. This question might be better named “How much do Meta ads cost?”
11. What’s the ideal split between digital and traditional marketing spend?
The ideal split depends on your target audience and industry. Given the cost-effectiveness and measurability of digital marketing, many small businesses allocate 60-70% to digital and 30-40% to traditional marketing channels.
We are huge fans of digital channels (though traditional do still have an important place) for a number of reasons, including detailed targeting and great measurability! With digital, you can ensure your ad shows to the BEST audience for your product or service, and then find out EXACTLY how it performed.
ROI and Metrics for Measuring Marketing Campaigns
12. How do I measure the ROI of my marketing efforts?
To measure marketing ROI:
- Track total marketing spend
- Measure the revenue generated from marketing efforts
- Use this formula: ROI = (Revenue – Marketing Cost) / Marketing Cost
For example, if you spent $1,000 on a campaign that generated $5,000 in sales:
ROI = ($5,000 – $1,000) / $1,000 = 4 or 400%
13. What marketing metrics should I track to justify spend?
Key metrics to track include:
- Customer Acquisition Cost (CAC)
- Lifetime Value of a Customer (CLV or LTV)
- Conversion rates
- Return on Ad Spend (ROAS)
- Website traffic and engagement
- Social media engagement and growth
- Email open and click-through rates
14. How do I determine the lifetime value of a customer to inform marketing spend?
Calculate Lifetime Value (LTV) using this formula:
LTV = (Average Purchase Value x Purchase Frequency x Average Customer Lifespan)
For example, if a customer spends $100 per month, buys from you 10 times a year, and remains a customer for 3 years:
LTV = $100 x 10 x 3 = $3,000
We went into detail on this one a little while ago, and even have a calculator to help you calculate your CLV here!
15. What’s a good customer acquisition cost for my business?
A good Customer Acquisition Cost (CAC) should be significantly lower than your customer’s Lifetime Value (CLV). Aim for an CLV to CAC ratio of at least 3:1. This means if your CLV is $3,000, your CAC should be $1,000 or less.
16. How do I calculate the break-even point for my marketing campaigns?
To calculate the break-even point:
- Determine your fixed costs (FC) for the campaign
- Calculate your contribution margin (CM) per unit (selling price – variable costs)
- Use this formula: Break-even point = FC / CM
For example, if your fixed costs are $1,000 and your contribution margin is $50 per unit:
Break-even point = $1,000 / $50 = 20 units
Budget Optimization for Marketing Campaigns
17. Which marketing channels offer the best value for money?
The best value channels vary by business, but often include:
- Email marketing (high ROI, low cost)
- Content marketing (long-term value, builds authority)
- Social media marketing (good for brand awareness and engagement)
- Search engine optimization (long-term value, organic traffic)
18. How can I reduce marketing costs without sacrificing impact?
To reduce costs while maintaining impact:
- Focus on organic strategies like SEO and content marketing
- Leverage user-generated content and customer testimonials
- Optimize existing campaigns instead of constantly creating new ones
- Use marketing automation tools to improve efficiency
- Collaborate with other businesses for co-marketing opportunities
This one can get pretty nitty-gritty. There are a huge number of things you can do to optimize campaigns including narrowing targeting, refining (and testing) your marketing copy, and employing different behavioral biases into your campaigns to make your dollars go further.
If budget is tapped out, never forget that THE ABSOLUTE BEST marketing is brand and word of mouth. Blow your customers minds, be consistent, and interact with your customers as much as possible. Great brands become perpetual motion devices.
19. How do I create an effective marketing plan on a limited budget?
To create an effective plan with limited funds:
- Define clear, measurable goals
- Identify your target audience precisely
- Focus on one or two high-impact channels
- Leverage free or low-cost marketing tools
- Create valuable content to attract and retain customers
- Monitor results closely and adjust quickly
Hey – this is what we are best at! If you need help putting together a marketing plan give us a call 🙂
20. Should I outsource my marketing or keep it in-house?
Consider these factors when deciding:
- Expertise required: Outsource if you need specialized skills
- Budget: In-house can be more cost-effective long-term, but has higher upfront costs
- Control: In-house offers more control over processes and brand voice
- Scalability: Agencies can often scale efforts more quickly
Many small businesses use a hybrid approach, keeping some functions in-house and outsourcing others. We also recently dove a bit more in depth into this question in this article here. There are pros and cons to both!
21. How do I allocate budget between customer acquisition and retention?
A common rule is the 70-30 split: 70% on customer acquisition and 30% on retention. However, as your business matures, you might shift towards a 60-40 or even 50-50 split, recognizing the high value of customer retention.
Tools and Strategies for Marketing Success
22. What tools can help me track and optimize my marketing spend?
Useful tools include:
- Google Analytics (website performance)
- SEMrush or Ahrefs (SEO and competitor analysis)
- Hootsuite or Buffer (social media management)
- Mailchimp or Constant Contact (email marketing)
- HubSpot or Salesforce (CRM and marketing automation)
Don’t forget to use the free marketing resources out there, such as a Google Business Profile or Facebook page! Local listings (the yelps of the world) are also great ways to get your business’s name out into the ether (and customers into your building).
23. How do I forecast the impact of increased marketing spend?
To forecast impact:
- Analyze historical data on spend vs. results
- Calculate your current ROI for each channel
- Estimate potential reach and conversion rates for increased spend
- Consider market saturation and diminishing returns
- Use scenario planning to project different outcomes
24. What’s the best way to test new marketing channels without overspending?
To test new channels efficiently:
- Start with a small, defined budget
- Set clear success metrics before starting
- A/B test different approaches within the channel
- Monitor results closely and frequently
- Be prepared to pivot or exit quickly if results are poor
- Gradually increase budget for successful channels
Know your numbers. If you are a marketer and do not know how much you are getting for your current marketing channels, then figure that out first. Sometimes things just work. If your current marketing efforts are crushing it, it might be best to hold off on the new shiny thing for a bit.
25. What are the most cost-effective marketing strategies for small businesses?
Cost-effective strategies often include:
- Content marketing and SEO
- Email marketing
- Social media marketing (organic)
- Referral programs
- Local partnerships and community involvement
- Networking and speaking engagements
Pro-tip: The #1 marketing strategy for small businesses – build relationships with those in your community. Seriously. Even if you don’t offer a referral program (which are great and you should), if you have a great product or service and provide exceptional customer service, people will not only come back but recommend you to their friends and family. That is the best marketing hands-down. Nothing will get you better return than just doing what you do best while giving your customers a great experience.
Common Pitfalls and Considerations
26. What are common marketing budget mistakes to avoid?
Common marketing budget mistakes include:
- Spreading budget too thin across many channels
- Neglecting to track and measure results
- Focusing solely on acquisition and ignoring retention
- Failing to adjust strategy based on data
- Overlooking the importance of consistent branding
Marketing can never be a set-it-and-forget-it type campaign. Check back frequently and adjust accordingly. Also – more budget does not equal more returns. If your marketing budget is inefficient, then increasing your budget just means more wasted dollars.
One last thing here – just as good customer experience can be your best marketing, bad customer experience can torpedo the best campaigns. Take the time to ensure you and your team are creating happy customers. Respond to customer reviews on Facebook and your Google Business Profile – ESPECIALLY THE BAD ONES. People see this, and a properly handled unhappy customer can build trust.
27. How do seasonal trends affect marketing spend decisions?
Seasonal trends can significantly impact marketing effectiveness. Consider:
- Increasing budget during your peak seasons
- Reducing spend during slow periods
- Adjusting messaging to align with seasonal themes
- Planning campaigns well in advance of major holidays or events
You will know best on this one. When are your busy seasons? Chances are that will be your best time to spend marketing dollars as well.
28. How do I balance short-term results with long-term brand building?
Guess what! You actually do not need to choose between the two here. Brand (according to Marty Neumeier – one of our favorite authors 🙂 ) is what customers think about your business. It is not a logo or a tagline or even your service. Every interaction a customer has with you, your team, and your business is brand building. Provide exceptional experiences to your customers and the branding will follow.
29. When should I consider increasing my marketing budget?
Consider increasing your budget when:
- You’re consistently achieving a positive ROI
- You’ve identified new growth opportunities
- Your current efforts are reaching saturation
- You’re entering new markets or launching new products
- Your competitors are outspending you significantly
If your marketing is working and you are netting positive returns on your marketing spend, it’s probably a good idea to increase that budget! Now there will come a point where more marketing spend does not improve the return so watch out. But until you hit that point, higher budgets (when well spent) should result in more customers.
30. How do I adapt my marketing spend during economic uncertainties?
During uncertain times:
- Focus on retention marketing to keep existing customers
- Emphasize value-based messaging
- Shift budget to measurable, performance-based channels
- Consider increasing share-of-voice if competitors are cutting back
- Be prepared to adjust quickly based on market conditions
Keep in mind, you can not (always) create a demand in customers if it is not there. There are times it might make sense to cut your budget entirely rather than spend marketing dollars on new customers who are not in a place financially to convert. Use the non-spend marketing channels to connect to your audience to stay top of mind.
Conclusion
Effective marketing spend management is super important for any small business to succeed. Marketing can be a beast. We are here to help you tame that beast. If you have additional questions, feel free to send us a message and we will do our best to answer 🙂 and if you are ready to partner with us to level up your marketing efforts, give us a call.
