The failure rate for startups in 2019 was about 90%. That level of failure is due to many factors. Some businesses lack cash flow, while others invested heavily in the wrong things.
If you want to avoid failure, you need to get clients without going overboard. The marketing budget for a startup is one of your most pressing financial challenges.
Yes, marketing drives revenue. If you don’t manage your budget, you’ll end up at a breakeven point or worse.
Do you want to avoid that fate? Keep reading to know how to create and manage a marketing budget for your startup.
How Much Should Startups Spend on Marketing?
Some estimates say that small businesses spend as little as 1% of revenue on marketing. That’s not going to be enough, even if you bootstrap your entire marketing plan.
What is the typical marketing budget for a startup? Most experts say that you should spend a certain percentage of revenue on marketing.
For a new startup trying to break into a crowded market, you should commit about 12% of revenue. You can do that for the first year, then cut back to 8% once you gain market share.
Create a Marketing Plan
Your marketing plan is just as detailed and as important as your business plan. It goes over your target market, goals, messaging, and strategy.
The middle of the marketing plan contains the tactics. These are the things that accomplish the goals. Common tactics are social media, SEO, event marketing, networking, and video marketing.
Then create a budget for each tactic. This is a long process because you have to break down the components of each tactic.
For example, for a social media post, you’ll calculate the cost of scheduling software, time to write the content, graphic design or video production, and community management.
You also need to account for staff salaries, tracking software, and marketing tools. Too many startups don’t count the cost of salaries in their budgets, which is why they go over budget and eventually fail.
Draw the True Marketing Budget
Your marketing plan is like a dream list of everything that you want to do. Now is the time to come down to earth.
If you take a look at your marketing budget, you’re likely to find that it’s way over what you can and should spend.
That’s OK. This is the time to bring your team together and scale back the marketing plan and budget.
This process is painful at times, but it ensures that your marketing tactics are laser-focused and are the things that drive the bottom line.
For example, your team makes the argument that content creation for social media is worth keeping. You look at the budget and realize that the costs are high because of staff time.
You decide that it’s better to have paid ad campaigns that convert first. They cost less and deliver immediate results.
Automate As Much As Possible
You might find that no one is happy about your marketing plan because you had to scale it back so much.
There is one way to win back your team. Focus on efficiency. The more efficient your marketing efforts are, the more you can spend in other areas.
The best way to make your marketing more efficient is to automate.
Do you need to invest in a webinar platform, email marketing platform, and funnel delivery service, and sales pages? Technically, yes.
Don’t worry, your marketing budget isn’t going to balloon again. There are all-in-one platforms like Kartra that automates all of these steps. Automation411.com has the 411 on Kartra.
Always Add Contingency Costs
Just like building a house, something can always go wrong with your marketing plan. External forces could suddenly cause ad costs to skyrocket.
The best way to manage a startup marketing budget is to be prepared for anything. Let’s say that you invest thousands in event marketing, and there are travel restrictions because of the pandemic.
You never know what’s going to happen, so for each line item of your final marketing budget, add 15%-20%. For high-risk items, you might want to increase that percentage.
The Most Important Marketing Measurements
Do you plan to track your marketing success by using likes, followers, and engagement? Throw those figures out the window.
Those metrics don’t tell you about the effectiveness of your marketing. They’re really feel-good measurements that don’t impact the bottom line.
Instead, focus on metrics like cost per acquisition (CPA) and lifetime value of a customer (CLV). You’ll be able to translate your marketing investment into real value for the business. You can decide to shift marketing dollars into areas that lower your CPA.
The Marketing Cycle
Marketing is a continuous process of assessing, planning, and executing. This is something to keep in mind because you can’t approach startup marketing as a one-time thing. Treat it like a process and you’ll always stay within budget.
While you’re executing your startup marketing plan, you need to come up with your next campaign.
You should keep a running calendar of campaigns and budgets. Give yourself enough time to plan a campaign, create the budget, and execute the plan. Most campaigns are planned 3-12 months out, depending on the scope of the campaign.
The most important part is to continuously track performance. Go over your results with your team on a monthly basis. Determine what worked and what didn’t work.
Be honest as to why some things performed better than others. That assessment is information that you take to other campaigns. Your marketing dollars will be well-spent as a result of this process.
How to Manage a Marketing Budget for a Startup
Startup businesses don’t have it easy. You’re competing with companies that have been around longer and have bigger marketing budgets.
Managing a marketing budget for a startup takes planning and assessing. You have to focus your budget on the things that make the biggest contribution to your bottom line.
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