How Much Should You Spend On Marketing Your Small Business?

The official answer to “how much to spend on marketing” is between 7% and 8% of your gross revenue, according to the U.S. Small Business Administration. This answer carries the stipulation that your net profit is in the 10% range and you’re doing less than $5 million in annual revenue.

Of course, there has to be more to the answer than that. The suggested advertising needs include both brand development, which is Internet marketing through social media, blogs, and website, and direct promotion, in advertising through media in general.

It’s interesting that this recommendation includes brand development because the Internet is a pretty cheap medium. It’s free to post on Twitter and Facebook, blogs are free, registered domain websites cost pennies, and even advertising on other websites is well within the average budget. So where does the money go? To pay social media and brand development experts to post appealing content on those media channels.

This SBA recommendation is actually subject to a lot of factors. If you have no way to handle a 150% increase in volume over the next year, there’s no sense in advertising like you will. Businesses that are still in their infancy may want to cut back to 2%. And some industries only depend so much on marketing.

A list of some brands we all know:

• Krispy Kreme
• Sriracha hot sauce
• Trader Joe’s
• Costco
• Spanx undergarments
• GoPro

What do all these brands have in common? An advertising budget of zero! Note that these are all product-based companies that got famous through word of mouth alone. In some cases, their product almost guaranteed this would happen. People talk to each other about clothes, consumers of GoPro are naturally going to post their video on YouTube, and fanatic hot sauce lovers are a niche market prone to pass their favorite condiments around.

For every one of these non-marketing brands, there are dozens more brands out there that spread through word-of-mouth within a small industry. Craftsman may not be a household name to you, but anybody in the mechanic trade knows the tool brand well. Dragon Shield will be a name you won’t know unless you just happen to have the hobby of collectible trading card games where you need reliable card sleeves to protect your valuable cards while you play them. These companies still market anyway, but with a tiny budget because a few magazine ads and trade show booths go a long way.

The takeaway from all this is that every business is different, and you have to consider your market, your industry, your competition, and what media streams might be most effective for your marketing. Then you have to advertise only within your growth capacity.

Tuning your marketing channels is an evolving process, something that’s good to re-examine and re-structure once in awhile. If you have the budget to splurge and you’re geared up for higher volume, by all means get the word out. No business was ever hurt by too much marketing.

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