Setting an effective marketing budget is tough and necessary for growing small businesses. There’s no such thing as free marketing. Effective marketing for small businesses requires wearing many hats, and with the rise of digital marketing, that has only gotten more complex.
Social media, paid advertising, data analysis, graphic design, web design, and strategy all play key roles in a strong marketing plan, but few small businesses can afford to hire someone skilled in each of these areas. Even finding a single marketing professional proficient in all these aspects is a challenge.
So, how do you set a small business marketing budget that covers all bases without breaking the bank?
Understanding the core costs of marketing
Before you can build a marketing budget, it’s important to understand where your money needs to go. Beyond hiring staff, there are several core costs that every small business should consider, especially in today’s digital-first world. Some of the core costs over and above labour costs associated with design, social media management, website maintenance, etc. include:
- Advertising: Whether you’re running Google Ads or ads on social media, paid digital advertising is essential to get your brand in front of the right audience.
- Web hosting and digital security: Your website is your most important point of contact with potential customers, so reliable hosting and strong security measures are very important.
- Software and marketing tools: Tools for scheduling social media posts, tracking analytics, and managing customer data can quickly add up. Platforms like BLAST!, Mailchimp, HubSpot, and Hootsuite are just a few examples.
- Community donations and sponsorships: Supporting local events and organizations strengthens brand’s presence in the community and builds goodwill with your audience.
New businesses also face additional costs, such as investing in visual identity and branding, website development, establishing social media and other marketing channels, and brand awareness advertising.
This list is far from comprehensive, these are the broad strokes.
How much should you spend on marketing?
When it comes to setting your marketing budget, a good rule of thumb is to spend around 10% of your revenue on marketing. For businesses with annual sales over $250,000, this allows for enough budget to hire outside help for areas where you lack internal resources. Companies on a major growth push may choose to spend more, while businesses in certain industries can get away with spending as little as 6-8%.
The chart below, sourced from BDC, provides an industry breakdown of average marketing spend as a percentage of revenue:
| Industry | Percentage of Revenue |
|---|---|
| Retail | 10% |
| Consumer Services | 12% |
| Business Services | 8% |
| Manufacturing | 6% |
| Healthcare | 11% |
How to align your budget with available resources
When setting a marketing budget, small businesses need to be realistic about their available resources. Trying to hire talent internally for each marketing need is often too expensive. Most businesses won’t be able to afford a dedicated social media manager, graphic designer, data analyst, and web developer, all while also paying for the necessary tools and advertising.
This is where working with an agency comes into play. Agencies offer a solution for small businesses that need a wide range of services but don’t have the resources to hire full-time staff for each. A local, boutique marketing agency like Boom12 offers a multi-service approach, which allows you to benefit from high-performing marketing without the costs of hiring several specialists. Plus, agencies bring experience, creative strategies, and specialized skills that a single hire might not be able to provide.
Why a boutique marketing agency is the answer
For Halifax-based businesses with sales above $250,000, partnering with a boutique agency like Boom12 is a smart investment. Boom12 offers a comprehensive suite of services tailored for growing businesses, including marketing strategy and planning, creative design, web design and development, and digital marketing with a focus on paid digital, SEO, social media, and email marketing.
Our approach to digital marketing is designed to drive results while maintaining flexibility. We split paid digital strategies into high-impact initiatives while leveraging a nimble, multi-service offering. This ensures we can adjust strategies in real time, avoiding rigid approaches that might not yield the best results for your business. And with measurable results aligned to your business goals, we act as a true partner in your growth journey.
Maximize your marketing dollars
Spending a percentage of revenue on marketing works well for most businesses because it gives them the budget they need to hire outside help where they can’t afford in-house talent while ensuring they live within their means. If you are a very small business, with revenues under $200,000 you need to identify strategies to get your sales up in order to be able to afford outside help. Experts are costly but the investment is worth it.
By partnering with a local boutique marketing agency like Boom12, you get the best of both worlds—expertise in a range of marketing specialties and the ability to scale your efforts with a team dedicated to driving growth.
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