I hear this question all the time. How Much Does Marketing Cost? Marketing costs are an investment in your business. As a wise and practical business owner, this is a valid question. My response is usually the same, “It depends.” It depends on your strategy, purpose, and desired return on your investment. Marketing is a long-term investment, and you must maximize your dollars and invest your dollars in the right places. It also depends on how you categorize marketing costs and expenses.
Putting together your strategy first and then working through your budget is a better way to handle your business finances. Trying to piece things together and having no written plan is not a successful business practice. Write your strategic business and marketing plans, be flexible, but stick to your strategy. You don’t know where or what you should spend your money on until you know where you want to go. (Your written strategy.)
Brainstorming is a powerful and underutilized tool in today’s business environment. As a busy business owner, you want to make sure you are investing your dollars wisely and receiving the best return on your investment. I respect that. That’s good business sense. Taking the time to brainstorm is healthy for your business, but then write down those ideas and implement a marketing strategy. A plan helps guide you through the process and reminds you of the big picture. It’s easy to get stuck in the weeds.
With a written strategy, you will attach objectives, goals, deadlines, and champions to that strategy. Make this one-page strategy easy to review and implement. A written plan allows you to say “NO” to things that get thrown at you throughout the year (i.e. advertising requests, sponsorship requests, etc.). As the business owner, you are in control of your marketing dollars not the person that is requesting them.
You must, however, know who your target audience is and who you want to reach. Do you want to do more business with existing clients? Do you want to tap into a new market? Do you want to gain market share in an existing market? Do you want to add to the list of offered services? All of these questions should be answered about your business, among a laundry list of other questions. Writing down your marketing strategy allows a good budget to be assembled based on your plan. If your marketing strategy is robust and you are trying to tap into a new market or expand your geographic territory, then expect to spend more to implement your strategy. If you are maintaining your current marketing strategy, then you won’t have quite as big of investment. As you prioritize your marketing strategy, you prioritize your marketing cost and budget. Most of the time your desires are more than the business can afford. By writing down all your strategies and tactics (written marketing plan), you can determine the best ones to immediately invest in and the ones to put on hold for six, twelve, or twenty-four months.
So ultimately you are still asking, how much does marketing cost? The answer… it depends on your marketing strategy. Typically, businesses spend between 1% and 5% of their annual revenue on marketing. The wide range is a result of how different companies categorize marketing in their accounting system, too. Some companies track employee time (i.e. business development efforts) or employee events into marketing. (I believe investing in your employees is part of your marketing strategy, because it boosts employee morale. Happy employees = Happy clients = more business.) Your marketing costs should be seen as a long-term investment in the health of your company and tracked to determine what works and what doesn’t. Continually evaluating your marketing costs is being smart with your investments. (This is no different than any other type of business investment.)
No matter how you categorize your marketing costs and budget, you need to track it. It will help you know where your dollars are being spent. It will also allow you to allocate money to a different place, if you aren’t seeing results in a certain activity. You can utilize your current accounting system or utilize a spreadsheet. (For additional information on budgeting, click here.)
Budgets are important in every aspect of your business and marketing should be part of your investment in your business. Without marketing, your business will not be able to grow. Start today! It’s never too late.
Nu marketing provides business and marketing strategies and budgets for architects, engineers, contractor, and construction related businesses. We would be happy to sit down to learn more about your business and help you put your strategy and budget together.