By Karen Hoogenbosch 

Back in 2014, Forrester Research highlighted the fact that in 2016, the average company would be expected to allocate about 30% of their marketing budget to online marketing. This would need to increase in 2019 to 35%, and this is for firms that have been established for around 5 years.

What should a startup business, therefore, consider as feasible when aiming to launch their new product or service at a time when every cent counts? How much should you put aside for traditional marketing such as direct mail, marketing events, printed adverts and tradeshows, and what should you target in terms of digital marketing — social media, mobile marketing, SEO and email?

What Is a Feasible Budget?

First of all, you have to set out what it is you can afford and what it is you want to achieve. There are a number of ways in which a marketing budget can be calculated, one of which is to take the total sales figure and spend between 5-7% on marketing. Or you can look at your total budget for setting up the business and for the first year allocate around 20-25% to marketing, but drop this to an annual cost of around 7-10%. This latter method is similar to pump priming the business and getting the brand out there big time while you build up brand loyalty.

In the U.S., the Small Business Administration has recommended that for small businesses whose annual sales are less than $5 million, a marketing budget should be around 7-8% of revenue. CMO Spend is showing that on average, around 10% of company revenue is spent on marketing once established. Out of that amount of money, around 30% should be allocated to digital costs. Once you have established your revenue and projected sales then you will have at least a sensible figure to work with and you can move on to planning out the next stage.

Digital Marketing Costs

Now you have to determine how much of the online marketing costs go towards the following:

  • Website
  • Content and SEO marketing
  • Digital advertising
  • Team costs and infrastructure

Using information from CMO Spend, the allocation of costs can be broken down as follows (remember that it should be around 20-25% for the first year and then reduced to 10%):

  • 12% for the website including hosting and domain name
  • 12% for written content including search engine optimisation
  • 13% for digital advertising such as boosting your Facebook page, adverts and promotions
  • 63% for team costs such as monitoring, posting or research and infrastructure such as software or licensing

Remember as well that there are a number of online marketing strategies that are incredibly cost effective, social media being one such digital channel. If you are aiming for a demographic who spends a lot of time surfing the net, managing your company’s social profile and sharing/tweeting/blogging updates and news can be a brilliant way for a startup business to launch without needing much of a marketing budget at all.

Traditional Marketing Costs

The remaining 60% of your marketing budget (consisting of 20-25% of your revenue in the first year) therefore should be geared towards the more traditional methods of marketing. If you do have an actual store presence and the company generates footfall consumers, then this will include printed material such as point of sale leaflets, posters, banners and signs, and pricing material, as well as packaging and wrapping material. Get quotes in for these and you will be able to start allocating costs against each item on your wish list.

If you are delivering to customers or in the service industry, then you may have vans or sales cars that need the relevant branding or corporate design. Again any boxing or packaging will come under these costs, as well as branded uniforms for key staff. Printed matter from business cards to office stationery should be factored in too, and any mail outs, which are all part of the traditional marketing costs.

Local advertising in newspapers or trade magazines should be part of your costed plan, and while tradeshows can be expensive, it is worth doing your research to see whether it is going to be worth your while having a stand at one where your targeted demographic will attend. If you are a member of a professional body, they often offer a discount for associate members, and the local economic development office at the council might promote a new business in the council directory for a small fee if not for free.

Make a list of all the above methods of advertising and set out projected costs on a spreadsheet, then speak with your tax accountant to establish if you have missed any other marketing expense that can be offset against the business. There are also a number of software applications which can be downloaded either for a small fee or for free where you can plot out your marketing spend, break it down into digital and traditional categories, and further split them into monthly or quarterly costs.

Decide What to Prioritize

The most important thing to remember at the end of the day is that you are aiming first of all to get your plan and/or budget set out in front of you, and then to ensure it is a feasible one. Check the dates and timescales for any costs linked to your marketing against your projected income, and you can then start to revise your budget and marketing plan until it becomes cost effective and fit for your purpose. Good luck!