How Much Should I Spend on Marketing? A Practical Guide for Small Business Owners

If you're a business owner scratching your head over how much to invest in marketing, you're not alone.

It's one of the most common (and important) questions in the small biz world: 

'How much should I be spending on marketing, and what kind of return can I expect?'  

I love this question, which is good, because it pops up about as often as a magpie in spring.

And unpacking it is at least as exciting as dealing with the current buzz in my inbox around Instagram's new SEO updates. But I digress.

Before we dive into the ins and outs of setting and tracking your marketing budget, let's acknowledge the elephant in the room, aka the old adage, 'You've got to spend money to make money.' Sure, there's an ounce of truth in that.

The Good Old Elephant In The Room!

But the returns on your marketing spend, both financial and reputational, aren't necessarily directly or immediately proportional to the dollars you invest. That said, none of this is as simple as throwing a few dollars at the wall and hoping something sticks.

Now, let's unpack this clever strategic question.

How much? The Million-Dollar Question

(Without the Million-Dollar Price Tag!)

First up, and sorry, not sorry, there's no one-size-fits-all answer to 'How much should I be spending?' And be wary of anyone who tells you otherwise.  

Every business is different. What works for a bustling Pilates Studio might not cut it for a bespoke Disability Care Organisation. If you're in a highly competitive market, you'll probably need to spend more than if you're more 'niche' where you can spend less but still stand out.

Here are 4 standard guidelines to follow to help you figure out what'll work for you:

Suss Out Your Industry Benchmarks: Because average spends vary from sector to sector. Research what businesses like yours are investing in. By that, I mean, snoop on their social media and check out their campaigns.This blog by marketing analysts Nielsen has some good tips on what to look forNeed to know what you can learn from your competitors' ads?

Match your marketing spend to your business stage: Are you a fresh-faced start-up looking to make a splash, or an established business aiming to maintain growth? New businesses needing to build brand awareness often need a higher initial investment during their first 1 – 3 years. The percentages provided in this blog are higher than I would suggest, but the overview of what to allocate at each stage of your business life cycle is useful.What should your marketing budget really be – a life cycle approach

Match your spend to your marketing goals: What are you aiming to achieve? More leads? Increased sales? Brand recognition? Your marketing budget should directly align with your objectives. If you're aiming for the stars, you might need a bigger budget!Not sure how to set these goals, here's how

The 5-10% (ish) rule: A general rule of thumb for small to medium-sized businesses is to allocate around 5-10% of your revenue to marketing. If you're looking for aggressive growth, you might want to push this higher. But remember, this is a guide, not gospel!

Return on Investment, marketing's holy grail! While it's tricky to put an exact number on ideal ROI for every single marketing activity, here's how to wrangle your ROI:

Set Measurable Goals: Before you spend a cent, define what success looks like. Is it 'X' number of new inquiries? A 'Y%' increase in online sales? 'Z' new newsletter subscribers?	Track Everything: From website traffic to social media engagement to email open rates, if you can measure it, track it! Tools like Google Analytics and your email marketing platform are your best mates here.
Calculate Your Customer Lifetime Value: Understand how much a customer is worth to your business over time. Say a marketing campaign costs you $100 to acquire a new customer. If that customer spends $1000 with you over a year, that's a brilliant ROI!	Don't Forget Brand Building: Not all marketing ROI is immediate and tangible. Growing brand awareness and increasing customer loyalty might not show up in next month's sales figures, but they're crucial for long-term success. Think of this like planting a beautiful flowering gum tree, it takes time to grow. But the attention it attracts and the shade it provides are invaluable.

Ready to Get Smart About Your Marketing Spend?

Finding your marketing budget sweet spot is all about testing, learning, and fine-tuning. What works for your competitors, partners or your mate down the road might not work for you. Take a good, long look at what they're doing, but don't let it distract you. Set some solid goals that match the stage of your business's life cycle and your specific marketing aims.

Track and tweak the hell out of everything, and et voilà, you'll soon discover what brings home the bacon for your business!

Need a hand fine-tuning your budget, setting marketing goals, or choosing the right channels for your business? I’d love to help!

Let’s chat about how to make your marketing spend work smarter, not harder.

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Because your business deserves a plan that brings in more than just likes, it should bring real results.