Marketing Budgets Made Easy: A Step-by-Step Guide for Very Small Businesses

As a savvy small business owner, you understand the importance of managing your finances wisely. While you’ve mastered many aspects of running your business, setting up a marketing budget might be a new challenge. Don't worry! Creating a marketing budget is crucial for strategic growth, ensuring every dollar you invest in marketing counts. It helps increase your visibility, engage your customers, and drive business success. Let’s explore the basics of crafting a marketing budget that suits your needs perfectly.

1. Marketing budget basics

Your marketing expenses are a subset of your overall operating expenses, and you need to budget them so you’re intentional about your marketing investments. Doing so forces you to plan ahead, giving you a guide so you don’t over- (or under-) spend. For small businesses, a good rule of thumb is to allocate about 2-10% of your revenue to marketing. If your business is new, you might need to spend more to build brand awareness and attract customers.

2. What to include in your marketing budget

When planning your marketing budget, be sure to account for all related expenses, including labor. If you outsource your marketing, tracking these labor costs is straightforward. For in-house staff, include their wages in your marketing line item, even if they only spend part of their time on marketing—estimate the percentage and allocate accordingly.

Here's a list of common types of marketing expenses to include in your budget:

• Labor costs (in-house staff and outsourced services)

• Marketing technology (email software, social media scheduling tools, CRM platform, website hosting, domain hosting, email hosting, graphic design software like Canva or Adobe, video editing software)

• Digital advertising (social media ads, Google Ads)

• Print advertising (industry pubs, magazines, newspaper)

• Promotional merchandise (branded items to give away)

• Printing costs (flyers, brochures, business cards, banners)

• Event sponsorships (local events, trade shows)

3. Setting clear marketing goals

Defining specific and measurable marketing goals is crucial for creating an effective budget. These goals should guide your spending and help ensure your marketing efforts are focused on what matters most to you. Use the Get-Keep-Grow customer relationship funnel to shape your goals, and don't forget to consider seasonality in your planning. Here are some examples of clear marketing goals:

• Increase revenue by X% year-over-year

• Grow your membership/subscriber base by X%

• Reduce customer churn by targeting a X% decrease

• Increase staff/capacity utilization by X% year-over-year

Be sure you have these fundamentals at hand as you build out your goals:

• The relative profit margins of your products and services

• Last year’s revenue (broken down by products/services as appropriate) & projections for the coming year

• Membership/subscriber data

• Data about customer retention & staff/capacity utilization

4. How to allocate your budget

We recommend you align your spending with the Get-Keep-Grow funnel, ensuring your budget supports your strategy. For solo entrepreneurs and very small local businesses, we recommend a baseline investment in the following areas that span most or all of the funnel:

• your digital presence (website, online business listings & SEO)

• content marketing

• social media marketing

• reputation management (soliciting reviews and responding to them)

• email marketing

All technology needed to support your marketing efforts should be included in this ‘baseline’ figure. We encourage you to read more about our approach to prioritizing your marketing efforts using the customer relationship funnel.

Examples of ‘Get Customer’ budget line items:

• digital advertising (social/search/partner opps)

• influencer/partner marketing

• event/cause marketing - sponsorship opportunities

• PR

• Print advertising (industry publications, magazines, newspapers)

• Other printing/signage (flyers, brochures, business cards, banners)

• Promotional merchandise

• Guest article placement

Examples of ‘Keep Customer’ budget line items:

• Loyalty programs

• User community/member only perks & programs

• Survey outreach/check-in calls

Examples of ‘Grow Customer’ budget line items:

• Cross-selling/up-selling campaigns

• User-generated content programs

5. Measuring return on investment (ROI)

Very small businesses can’t afford to spend marketing dollars on efforts that can’t be measured. Therefore, it is important to pick tactics that lend themselves to tracking. One effective method is to include calls-to-action (CTAs) in all your communication pieces, whether digital or print, that direct traffic to a landing page on your website. Use Campaign URL Builder to add trackable codes to the URL (the web address) which can then be viewed in Google Analytics. For printed materials, use QR codes with these coded URLs, and embed these coded URLs into any CTA buttons and links in digital materials. This allows you to see in Google Analytics which communication pieces resulted in traffic to your website.

Calculate your response rate by dividing the clicks to the page from that source by the total number of pieces distributed. If you sell products or services online, you will want to set up “key events” in GA4 that track important conversions, showing the next step in your customer’s buying journey.

Since you might not run multiple similar campaigns for side-by-side analysis, look at the general effectiveness of each tactic. Ask questions like:

• Did this effort drive any, some, or a lot of traffic?

• Were there any, some, or a lot of conversions?

• Can you monetize the web conversions and calculate at least a break-even or better from the effort?

Here’s a simple break-even calculation:

Total conversions × Estimated revenue per conversion / Total expenses ≥ 1

A more precise calculation factors in profit margin:

Total conversions × Estimated profit margin per conversion / Total expenses ≥ 1

Answers to these questions will help you decide whether to stick with certain tactics or try new ones.

6. Budget monitoring and adjustments

You’re likely already tracking your top-line numbers and overall expenses. It's important to also monitor your marketing-specific spending closely. We suggest reviewing this monthly and planning for the next three months. Keep an eye on your total spend and adjust your budget quarterly as needed and as opportunities arise.

Maintain a spreadsheet that tracks revenue, unit sales, memberships, and any other metrics related to your goals, along with marketing expenses. Calculate your marketing spend as a percentage of revenue to ensure it stays within your target range. Also, consider any seasonality that may cause spikes or dips in revenue, memberships, or marketing spending, such as annual events.

Need some help getting started? Download our Google Sheet Marketing Budget template!

Download Instructions

• Download: Click on the DOWNLOAD TEMPLATE button provided to open the Google Sheet template.

• Access the Template: Once the template opens in Google Sheets, click on "File" in the top left corner of the screen.

• Make a Copy: Select "Make a copy" from the dropdown menu.

• Rename and Save: A new window will pop up. Rename your copy if you wish, choose the folder in your Google Drive where you want to save it, and click "OK."

• Start Using Your Template: Your own copy of the template will open in a new tab, ready for you to customize and use.