Think You're Not Ready for a Marketing Budget? Think Again. Use these three steps -- whether you've got tons of capital or not -- to build up the all-essential marketing campaign.
By Robert Wallace Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
Ask nearly any startup founder what their marketing budget is, and you'll often be met with a chuckle and -- "Marketing budget? What marketing budget?".
Cash restraints and unpredictability can equate to rocky projections. And while the idea of having an actual marketing budget may seem unattainable for many early-stage companies, the good news is that today, marketing experimentation is relatively cost effective and approachable -- making it easier to build an actual budget.
Before you begin, your leadership team (even if it's just two of you) must outline clear strategic objectives and generate sales-revenue targets. From there, it comes down to brass tacks. The following tips will guide you through the marketing tactics that can help entrepreneurs and young ventures give budgeting for marketing a proper try.
Related: 5 Marketing Changes Small Businesses Need to Make in 2016
1. Start with standards.
There is no one-size-fits-all method for developing a marketing budget. Generally speaking, the amount you devote should be a percentage of revenue generated -- often between two to 10 percent, depending on industry standards. If the data is available, look at the past 12 months of revenue, and determine an appropriate percentage. Your established future sales goals will also come into play here. From there, use your monthly sales targets to determine a short-term budget that will enable you to reach those targets. Be sure you leave room for some flexibility.
It's not uncommon for newly seeded companies to naively throw funds into marketing and promotion without much aim or direction. This leads to unmeasured outcomes and a mentality of waste. Instead, think like you are bootstrapping the entire operation. This will force you to drive for effectiveness and push only for decisions that add real value.
2. Measure everything.
When the budget is small, you should have as much knowledge as possible before making spending decisions. It takes time, but the more you know about measurement, the more informed your decisions will be. Every dollar you allocate should have a specific purpose, and knowing how to check those dollars spent for effectiveness is imperative for early-stage companies. It will allow you to quickly pivot and adjust your tactics before you spend too much. Put quantitative measurements in place in order to help prioritize those designated dollars.
Related: Keep Your Business Finances in Order With These 6 Tips
Marketing budgets can be used on speaking engagements, sponsorships, advertising, promotion and beyond, and if you figure out how to gauge success, you'll be able to see which of these is most effective for your business. If you're lost on how to start, try inviting product managers and line owners who know the market intimately to offer their opinions as to prioritizing your marketing initiatives.
It's not always easy to draw a straight line from marketing efforts to the revenue generated from the dollars spent, but where you can measure, do so. Business-to-business firms can track new leads, while business-to-consumer firms might want to measure new users.
Growth hacking, a common term used in today's fast-growth organizations, simply means to experiment vigorously with various marketing tactics. This helps you to identify specific methods of measurement, see what's working and capitalize on repeating that process.
3. Stay flexible.
Once you've established what metrics matter to your company, you'll be able to stay on top of critical information that informs you when to adjust tactics. The benefit of tracking effectiveness is that it doesn't leave the marketing strategy to chance -- something many young ventures make the mistake of doing. It encourages and enables purposeful decisions, and keeps spending conservative and purpose-driven.
Experimenting with the marketing budget is an ongoing process that is rooted in hard data and refined with measurements. The most important thing to keep in mind is that the budget evolves with changes in the company, sales revenue, monthly goals and product launches. Recognizing this evolution helps any size venture make better budget estimates.
Related: 4 Marketing Principles to Dominate Your Target Market
