We all know marketing is necessary to grow a business, and it truly is an investment into your small business’ future. The work and money you put in now can give you new clients and ongoing business (we often say the work you do now you’ll see the results in about 90 days!).

But how much money should you really be setting aside? It can be confusing with other costs to manage like operations, contractors, taxes, and everything else (we know—the list of people and software who want your money is endless!).

Don’t worry though—there is a sweet spot! Here’s exactly how you can determine what to spend on marketing your small business. We’ll cover: 

• Why marketing budgeting matters
• General rules of thumb when it comes to budgeting on marketing
• Factors that influence your marketing budget
• Step-by-step guide to setting your budget
• Mistakes to avoid
• Tools to help you stick to your budget 

Why Marketing Budgeting Matters

Duh—you can get a huge return on your marketing investment if you plan your budget wisely. But that means you need to pay attention to exactly how you’re using your money and where you’re using it. Because on the flip side? You can also dump a bunch of money into something without seeing any return. Nobody wants that.

Marketing budgeting is one of the most important decisions you need to make in your business so that:

• You can make sure your marketing spending is going toward your business goals
• You’ll know what’s working (and what isn’t) when you see where your budget is spent most efficiently
• You can make the most of your money by prioritizing efforts that cost the least but have the highest results
• You can establish a more consistent cash flow once you know how much to spend each month 

General Rules of Thumb When Setting a Budget For Your Marketing

So what should you start thinking about in terms of numbers? 

First, take a look at your current revenue. If you’re a new business, you don’t want to spend more than 12-20% on your marketing budget. But if you’re more established, you can scale back to 6-12%. (Surprised these numbers aren’t smaller? Yeah, someone put something in the water that made small business owners think they can have a $0 marketing budget. That ain’t reality.)

Because new businesses need to spend more time to get the word out, it’s okay to ramp up your spending. As long as you’re tracking everything carefully, you can spend your money wisely. 

Having a higher budget as a new business will also help you vet your offer faster too. With more eyes on you, it’s easier to figure out how well your offer converts (and where the gap in your sales funnel might be). If you’re a more established business, you should already have a working sales funnel and know what converts, so you shouldn’t need to spend as much.

Even with these guidelines, keep in mind that it’s not one-size-fits-all (is anything in this world really?). We know successful small businesses that spend a lot more and a lot less—we’ll let you guess what category we fall in.

If you sell any type of product, your spending will probably need to be higher so you can consistently get new customers. On the other hand, service-based businesses like photographers or designers can get away with spending a little less in favor of other efforts, like generating referrals or building up their SEO, since they typically need (and can support) fewer customers.

Factors That Influence Your Marketing Budget

One thing to know about your marketing budget: it’s very personal! Budgeting rules of thumb give you a good starting point, but you still have to look at your own business and the numbers you’re working with. Here are some factors that should play a role in your marketing strategy and budget.  

1. Your business goals

What do you want to achieve? Is it getting your name out there (brand awareness) or growing your email list (lead generation)? Or maybe you want to quickly boost sales or retain more customers. Whatever it is, there’s a marketing tactic for it. 

If you want quick sales, you’ll benefit from ad campaigns, but if you want to start increasing the average lifetime spend, you’ll likely want to invest in email marketing. Once you know which tactics make sense, you’ll know where to spend your money. 

2. The competition

Ok, we know we said budgeting is personal, but it is a little about keeping up with the Joneses too. It doesn’t hurt to see how other businesses are finding their success, especially if they’re in the same industry. Take a look at a handful of businesses like yours and see what they’re doing online. 

Yeah, that means you probably need to be on social media.

What works for someone else in your industry isn’t a guarantee it’ll work for you, but it can give a nudge in the right direction. And if they’re spending a lot more than you, it goes without saying that their sales will likely reflect that!

3. Your audience

Your marketing is for your audience, so don’t forget about them! Imagine paying for Facebook ads when your entire audience is Gen Z (yikes!). Do some research to see where they are, whether it’s on different social platforms or even in online communities or in-person events. 

4. Your sales cycle

Lastly, your sales cycle will help you determine when you need to spend money and where. If you know it takes a long time to book new leads, maybe you need to invest in a robust email nurture campaign. Or, if your customers tend to book instantly with you, an ad campaign could be your best bet. 

Want a tip? You don’t have to think about this all on your own! With tools like Enji’s Marketing Strategy Generator, you can get an actionable marketing strategy in minutes to start budgeting. 

Step-by-Step Guide to Setting Your Budget

Ready to set your specific marketing budget? 

Here’s how to get started: 

1. Look at how much you currently spend to get new customers 

We know math isn’t everyone’s strong suit, but a simple equation can give you your customer acquisition cost (CAC). Just take how much you currently spend on marketing each month and divide the number of new customers you get. 

2. Look at your profit margins

No one needs to go into debt over marketing. Make sure you’re spending what you can by looking at your profit margins. If you have a little more wiggle room, maybe it’s a good time to invest more, and vice versa if you don’t have too much leeway right now. Again, we don’t know who started the rumor that marketing should be free, because that definitely isn’t the case (with any of the small business owners we’ve talked to!).

3. Decide what to invest in

Based on the factors above (your goals, audience, sales cycle, etc.), decide where to spend your marketing budget. It could be a mix of marketing channels or sticking with the one that works best. Don’t forget to factor in software too! Enji can be a great investment if you need help with literally anything in your marketing right now (learn more about everything we include in our all-in-one marketing software).

4. Determine what KPIs to track 

Lastly, to spend your money wisely, you need to track it! Set some goals and key performance indicators (KPIs) that you can track to determine if your money is well spent. You’ll want to watch things like the conversion from ads, pageviews on your website, return on ad spend (ROAS), and the value of new clients. 

Marketing analytics can be an endless hole–it’s so easy to get lost in everything there is to track! Take some of the stress away with Enji’s KPI Dashboard so you can easily understand what’s working and what isn’t. 

Mistakes to Avoid

Once you’ve set your budget and start investing in your marketing, clients don’t just magically appear (sorry—we wish that were the case too). Trust yourself and the work you’ve put in, but be careful to avoid these pitfalls: 

• “I can just get enough clients through free marketing!” If you’re thinking marketing should be free, we have some bad news. Even if you don’t invest in ads, you still need to rely on the right software, design, copywriting, and more to get the job done. Not to mention your time! It all costs, but that’s what your marketing budget is for. 

• “I just spent $500 on Instagram, I should have 10 new clients this month.” Thanks to Amazon we all expect instant gratification these days, even in business. But expecting an immediate ROI isn’t realistic. You will need to continuously tweak your marketing and improve to make sure you get the results you want. 

• “If I build it, they will come.” Nope, sorry! This age-old myth is easy to believe, but simply posting on social media or creating a website isn’t enough. As you’re building your budget, really think about what will bring you value. 

Tools to Help You Stick to Your Budget

Your budget is a solid guideline to get your marketing strategy up and running without overspending, so stick with it! 

To save time, you can use Enji’s Marketing Strategy Generator to identify the tactics that make sense for your business or our Marketing Campaign Templates that give you a great starting point for any tactic. 

As it all comes together, make sure you track your spending and performance with something like Enji’s KPI Dashboard as well. 

We’re looking forward to seeing your marketing in the wild!