Small Business B2B Marketing Blog

How Much Should I Spend Marketing My Small Business?

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How much should I spend marketing my small business? Many small businesses answer this question with - as little as possible. That is a wrong answer for sure. There is no simple or easy answer to this question. The correct answer is it depends on your company and particular situation.

Some people will tell you its simple it is a percentage of sales or an average percentage for your industry. They will quote you 2%, 5%, 10%. Still others will tell you can calculate marketing spend based on estimating customer acquisition cost and you can, if you have reliable numbers you are tracking. Nevertheless, it is still not enough information to make the best choice for your business.

While it is true, you can establish marketing spend based on your history, it will not help you analyze other factors that need to go into your decision-making like these:

• Current market environment
• Your competitor’s activities 
• Whether you are in a grow, defend or harvest market strategy
• Any changes to your sales mix 
• What previous marketing choices you used and are they relevant now

However, before we even begin the discussion on how to arrive at a reasonable marketing spend, the most important factor in successful small business marketing is not how much to spend, or even what to spend on, but simply to make the decision to invest in marketing.

Yes I said invest. Marketing is not a one shot deal. Successful small business B2B marketing is a long-term commitment that requires consistent dollars and constant effort. Once you commit to investing in marketing. The factors that you might want to evaluate in determining how much to invest for your small business should include the following.

Small Business Marketing Spend Factors

YOUR MARKET

Overall Size of Your Market – large markets more dollars, smaller markets maybe less

New Market or Mature Market

• New markets sometimes require less marketing dollars because all your potential customers are eager to buy.
   
• Sometimes new markets require more marketing dollars because while the market is virgin your customers are not rushing to buy your product or services.
   
• Mature markets sometimes require less marketing dollars because your potential customers do not have to be sold on what you are selling.
   
• Sometimes mature markets require more marketing dollars because there are fewer potential customers then when the market was new.

YOUR BUSINESS FACTORS

Type of Small Business

Business-to-Business (B2B) small business marketing requires different marketing distribution methods than business-to-consumer marketing (B2C). B2B Marketing distribution methods are generally less expensive with few dollars allocated to branding and more to B2B sales lead generation. B2C requires more dollars allocated to branding that is more expensive to reach their mass market .

Development Stage of Your Business

Start-Up New Business – usually require more initial marketing dollars as a percentage of your overall expense budget

Growth & Expansion – here marketing dollars for growth could require a doubling or more of your current expense

Mature Business – Usually once your business is established and there is no other, external factors to contend with you may require fewer marketing dollars, but not a guarantee.

Your Profit Margins

Obviously your profit margins will affect your marketing invest parameters. More profits would allow for more marketing dollars. Fewer profits constrain your marketing expenditures. In any case, as long as your profit margins are in line with your competitors the playing field is even.

• Small Less than 20% 
• Medium 20 to 40%
• Large Over 50%

Your Sales Mix

• Commercial Sales – usually require less marketing dollars
• Consumer Sales – more marketing dollars
• Government – less marketing dollars than commercial or consumer

MARKETING INVESTMENT

I have restrained from using any percentages of marketing and instead have referred only to marketing dollars. Any percentage I would give you or anyone else would suggest would be wrong, unless they were able to analyze your small business and your market.

I know most people say just give me an average. Well I learned a long time ago about averages. If you place one foot in a bucket of ice and the other in a bucket of fire on average you will be comfortable. So just, be very careful of averages.

It is only important that you are spending what is right for your business and your market. Moreover, that you invest in marketing and your business everyday. Lest I forget, there is one additional crucial aspect to this question that is regularly overlooked.

MARKETING CHOICES

How you spend your marketing dollars matters.

Be sure you do not chase the marketing fad of the minute. Please take the time to investigate and evaluate what is right for you. Do not just decide to select one form of marketing approach from another just because someone is offering you a price discount.

I spoke to one small business who told me that a radio station was offering them a “great deal” on a summer advertising package. For this business, this "great deal" was not great. It was the wrong media delivering only a fraction of the firm’s target audience if any, and at cost that would create a one shot deal. In addition, if it did not work the business would be out of marketing funds for months and would have jumping on the dreaded small business marketing roller coaster.

Takeaway
The best answer to the question, how much should I spend on marketing for my small business is not a percentage of anything? It is a commitment to invest in marketing your small business everyday based on what you can afford for your particular set of market circumstances.