I have been asked this question recently: How much should I spend on ads? on freelancers? on tools?
In this post, I'll try to give you some of my views on it. Of course, these are only guidelines.
What others are saying
This WordStream Article suggest that new companies spend 12 to 20% on marketing. I think it's a good range. Of course it could be less or more.
This Vital article show the wide range of marketing expenditure. Apple at 6% and Salesforce at 46%. And let's not forget that Tesla spends no dollars on advertising.
What to include in a marketing budget
Here's a common breakdown from small businesses
- Software Tools
- Content Creation
- Advertising Cost
- Strategy and Planning
- Coaching/Training
If you are starting out, it might make sense to include the following:
- Online Payment processing fees
How to pick a marketing budget
If you don't have the cash flow, I would find free creative ways around it.
If you have the cash available, it can make sense to spend some of it on ads. Doing it online is great, as you can spend a small daily budget and get immediate feedback (you get leads or you don't). And you can talk to those leads immediately to see if you are targeting the right people.
It's all about balancing expenses, revenue and time.
Here's an example
The 3 numbers to look after
Expenses (% of revenue)
- Payment processing (3%)
- Tools (2%)
- Advertising Cost (12%).
Alternatively could be spent in courses and time to do manual outreach. - Freelancers (4%)
- Strategy and Planning (1%)
- Coaching/Training (1%)
Time
- Asset Creation (15%)
- Marketing (15%)
- Conversations with leads (20%)
- Service Delivery (50%).
Revenue
Finding your own numbers will take time as it's a guessing game at first. I have seen people having businesses with ad expenses at 90%. And some people spending close to zero on it.
Some of the variables to consider
- The stage you are at.
- Your audience (if any).
- Your partners (if any).
- Your business experience.
- The level of competition in your niche.
How to justify your marketing budget
- Focus on finding clients and generating revenue.
- Follow your ROI closely.
- Find a niche.
