Marketing Mistake #2: Not having a marketing budget for a small business

This season I talk about the marketing mistakes I made with my first startup, and I hope you’ll learn from my failures as well as my subsequent experience working with other entrepreneurs.

I didn’t realize this mistake when I was working at my first startup. But now that I’ve dealt with other entrepreneurs as a marketing consultant, I’ve noticed that many people make this mistake. The mistake I’m pointing out is not having a specific marketing budget for your small business.

Let me start by sharing my own experience: When I took a look at my startup, I knew I had spent less than 1% on marketing. And as you know, marketing is what catches your eye. It’s what informs people of what you do, what you sell, and how it can help them. And if you don’t spend enough, your message won’t reach the right people. Naturally, this will have an impact on your sales.

Why do entrepreneurs miss making a marketing budget?

Many entrepreneurs make this mistake because marketing is intangible in the short term. In the short term, the tangible parts of your business are what you can see or measure. Things like operations, employee wages, raw material costs, the amount of raw materials you get, and the tools you invest in are all things to keep in mind. Unfortunately, marketing is not tangible in the short term, as it takes some time to get your message across to your customer. As a result, many entrepreneurs give up too soon when it comes to marketing because they don’t see any results.

According to Harvard Business School research, you should spend 20% of your total budget on marketing in the first few years because that is the time you will need most to create awareness of your brand. After stabilizing and achieving enough sales, you can reduce it to 8 to 12%. However, if you spend less than that, your message will take longer to reach its intended audience. And if you are a small business, the longer the time, the more money you will spend on tangible items like operations, salaries, raw material purchases, etc. So, if you spend too much time on other things and don’t have enough time in marketing, you won’t be able to generate enough sales, and it may make you give up.

This is something I’m telling you because it happened to me. As an entrepreneur, I want you to realize that this is common for many startups. This is the reason why many startups fail during their first 1-5 years of existence. Know that if you don’t put enough effort into your marketing, it will have an impact on how well your company will perform in the long run.

How much should you budget for marketing?

Now that you know how important it is to spend money on marketing, the next thing to consider is how do you know how much you need to spend? You said you could spend between 8 and 20%, but that’s just a guide. And as a small business, you may not be able to spend much. So, how do you know how much you can spend?

I highly recommend making a plan of what you want to do in marketing.

The channels you are interested in may be what you want to target with marketing. You may have a presence on Instagram and Facebook, and this is probably where you want to focus your efforts. Alternatively, you may have a website and want to use Google ads to drive visitors to it. Or you want to get something done completely offline, like attending networking events or investing in a booth at the right event. Whatever the case, you must make this decision for your company. What channels do you think will bring you sales?

Once you have a clear picture of where you want to go, you can start budgeting for it. And if you already know the cost of something from past experience, that’s great. Otherwise, all this information is easily available on the Internet.

So this is a way to calculate how much money you will need to spend on marketing. Another option is to evaluate your marketing budget and commit to a level of spending that you can afford for the next few months. For example, I have committed to spending INR 5,000 every month on marketing, and stick to this budget. And once a month, I try new things to see how they work. So I tried using Instagram promotions for a month, spending my entire marketing budget on them to see what results I might get. Was it increasing my consciousness? Was that giving me more sales or more followers? The following month, I switched to a different channel, such as Facebook Ads, and evaluated the results accordingly.

You can also spend your money on non-digital items. For example, I hired a three-month intern who was only responsible for helping me create marketing collateral. And that’s how I spent my marketing budget for those three months. It is not always necessary to create a specific marketing campaign. For two or three months, you can hire a visual designer to set up all of your marketing collateral, including brochures, business cards, website designs, and social media accounts, as well as anything else that helps with marketing. Put this money into your marketing budget and stick to it for the next few months. This will keep you focused on marketing on an ongoing basis. When you do this, you’ll be thinking about marketing all the time, and after six months or so, you’ll have a better idea of ​​what worked and what didn’t. Over time, you will be able to decide whether or not to focus on certain channels, and you will have a better understanding of how much to invest in those channels.

While creating a marketing budget is not difficult, it is one of the things small business owners often overlook. It is crucial to have a clear marketing budget defined for your small business, that you focus on marketing. If you haven’t created your marketing budget yet, I hope I have given you some pointers you can use to get started.

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