How Much Does Advertising Cost a Small Business?
It’s a question that comes up all the time: How much does advertising cost a small business like mine? There is no one-size-fits-all answer, but here is some real talk on the subject.
After a decade or so of experience in the digital era, and as a career professional marketer who’s made the transition from traditional advertising to today’s modern, digital platforms I can tell you the answer is more about your goals than your business itself.
Within any given industry with multiple competitors in the same market, there will always be those who are more aggressive and those who are more conservative (maybe even those who choose to ignore marketing altogether). Time and time again, it’s been proven that businesses that consistently advertise well lead and succeed over the long haul.
Ways to Consider What Your Advertising Budget Should Be
Most advertisers spend just enough to waste it. And that’s why the second most popular thing business owners tell us about marketing is, “We’ve tried that. It didn’t work.”
How much advertising costs a small business can be considered a few different ways:
Percentage of Gross Sales Goal. There is probably an average percentage of what businesses in your industry invest in advertising. Generically, it’s common to be allocating between 3-8% of gross sales to marketing activities.
Percentage of Gross Margin. But some companies spend a much larger or much smaller percentage of gross sales because margins can have a big impact. For example, it’s silly to spend a lot on marketing if you’re in a low-margin business unless you’re doing an absolute ton of volume. Gross margin makes a big difference.
Your Risk Tolerance. You may want to grow faster, or you may want to grow consistently over time. Whether you’re the tortoise, the hare, or somewhere in between there is a risk tolerance you’re willing to absorb. That affects budget decisions, too.
Cost Per Lead. We tend to focus most commonly on the value of a prospective new customer. That allows any business to easily calculate marketing ROI in real time.
How Much to Budget for Advertising Your Small Business
In recent years, we determined that 80% of our customers feel into a range of between $6,000/mo and $12,000/mo, with outliers who spend a little less or a lot more. The range was so distinct, though, that we simplified how we talk about budget and we created 3 standard packages around our belief that there are “basics” every business should be doing online to generate new customers and revenue growth.
About 80% of our new customers gravitate to one of our 3 Digital Basics packages:
- Digital Basics ($6,000/mo)
- Digital Basics PLUS ($9,000/mo)
- Digital Basics MAX (12,000/mo)
The other 20% need customization for one reason or another, which we’re always happy to do.
What’s the Right Budget for Your Small Business?
The truth is that no budget is right unless you’ve got a sound strategy in the first place. Otherwise, you’re back to spending just enough money to waste it. We avoid failure by following a structured method that begins with our Basic Marketing Formula. Essentially, everything we do has to fit that formula.
Next, we recognize that marketing has gotten more complex. And we need time to fine-tune any strategy for success. That’s why we developed our Bullseye Digital Marketing Method. It’s essentially a structure for testing ideas before they roll out full-scale. That way, you make sure it’s working before you go crazy. Our method starts with the most plausible ideas, and narrows the focus down onto the things that work best.
Lastly, you need to measure everything. One of the best things about modern digital marketing techniques is that you can know what’s working, what’s not, and you can try variations to see which works best. That way, you know you’re getting a solid marketing ROI before you really let it rip. Or, at least you know to stop something that’s not working before you keep making the same mistake over and over again…
Marketing has gotten more complex. But you can simplify it with a structured approach.
We’re Here to Help
We partner with great businesses who are awesome at what they do, and realize they need marketers who are awesome at what they do. And we’re willing to invest in our clients long before they invest in us; that means getting to know your business and what grows it profitably before we ever recommend anything.
It’s also why we don’t charge for our initial consultation. Schedule time with our experts today. Or at least subscribe to our free e-mail newsletter about local marketing so you get notified when we publish more articles like this one. You can also search our extensive archives here on almost any marketing topic.
Thank you for visiting today.