When many small business owners start their business, one of the first things that they usually do is look for financing for their business. When one applies loan, the lender will want to understand a breakdown of how you will use the money. In most cases the owner is thinking about the capital equipment they need, a mortgage or lease, as well as the inventory for the first month of their business. In many cases, they completely forget about including funding to cover marketing and generating sales.
What happens in this case is the business owner will get the loan and purchase what they need to start the business. Once they do so they find out they do not have any money left over to generate awareness, leads, and sales for the business. Marketing and sales cannot be an afterthought when you start a business; it needs to be foremost in your mind. If you do not have customers having a building and equipment are irrelevant.
The minimum you should look to spend in marketing in the first year is 10-15% of your anticipated revenues. If you want to make $100,000 in gross sales your first year in business, you should expect to spent $10,000-$15,000 in generating sales for that business. Marketing is an investment in the future success of your business. There are many businesses that want to jumpstart their business and will spend twice that amount in the first year or two. Once a business is generating steady revenue, the amount you would spend would be closer to 5-10% annually depending on your industry.
The marketing spend above takes into consideration that you already completed a business plan with a marketing plan and understand what type of marketing is needed to target your prospects. Depending on the business, what you spend your marketing dollars on may differ, but in the first year, most companies will need many of the basics.
Branding is where your first marketing dollars should be spent. Your logo, your tagline, the colours and fonts you use, your overall design look, and your messaging are the first things that a potential buyer sees about your business and will make a judgement decision on whether it resonates with them. Make sure you have and use consistent branding throughout all of your marketing.
The second place you want to invest your marketing dollars is on a website. Every business no matter what they do requires an online presence. Around 90% of businesses and consumers search online before they call or visit a business or make a purchase. This is truly an investment in your business and you need to understand the importance and the cost to your business if you do not have a website.
For both your branding and your website, make sure this is done by professionals, as neither of these is an area to scrimp. It is important that you check out several companies that perform these services and get a quote based on your requirements, but you need to keep in mind that both are portraying your company image, so paying a student or a relative that is technical to save money will end up costing you in the long run. After that, the rest of your marketing spend can be used on advertising, direct mail, printed collaterals, events, networking, or additional digital marketing to name a few. This is all very dependent on the type of business you have, so it is important to understand what works in your industry and for your target market of potential customers.
The key is making sure that you invest in building and growing your business by generating sales and revenue for your business. In order to do this you need to make sure you set aside the funds required to generate the revenue you want whether you add this to the money your finance for your business or invest yourself.
RK Fischer & Associates