Marketing a startup can get tricky, because there is one big constraint: budget. Unlike marketing a well-established business, a startup still is in the stages of limited revenue. So, there isn’t much to work with for creative and expansive marketing approaches. As a result, it begs the question, if a startup can’t spend all that much, how much should a startup marketing budget be?
Related: SaaS Marketing: The Challenges and Their Solutions
There is no accurate way to determine a marketing budget. It is affected by a lot of factors including type of business, how old your company is, and revenue you are making, among others.
However, that doesn’t mean that you should guess. It also doesn’t mean that you can pull out the company credit card and keep on spending on everything you see fit.
Spend too much and you are looking at a company loss. On the other hand, spending too little could mean negligible and ineffective marketing approaches. The middle ground here is the maximum budget you can allot without compromising the business.
In order to do that, there are two factors you should consider to know how much money to allocate for startup marketing budget.
Table of Contents
1. Annual Revenue (Estimated/Gross)
Your marketing expense is an operational cost and you don’t want that going above the money that your company is making. Otherwise, you are at a lost. It would then be a matter of time before you go bankrupt.
If your startup is in the later stages, you can accurately come up with the gross annual income. It would be then easier and less risky to come up with your startup marketing budget.
In the event that you are still not making any sales, you are going to have to settle with an estimation. Consider the product you have and your potential market. How much do you think would be your annual sales for the year?
2. Company Age
The older the company, the more opportunity it has gotten having its name known. On the other hand, new ones tend to require more investment to get a jumpstart on their brand awareness.
Older companies would only have to market to convert leads to actually paying customers. As opposed to newer startups that first need to invest in audience reach.
How Much Should Your Startup Marketing Budget Be?
Putting the two factors together, it is estimated that companies aged 1-5 years old should spend 12-20% of gross revenue on marketing. The value goes down to 6-12% for older companies.
However, according to a survey, startup companies average at around 11.4%.
How much you decide to allot as your startup marketing budget is all up to you. These numbers only serve as a guide so you know where to start. It provides a basis that will allow you to act on your marketing campaigns without having to worry about compromising overall business revenue and status.
Startup Marketing Budget Expenses
Now that you know how much should your available budget be, where should you spend it? This is where things get a little trickier.
Marketing is composed of different approaches. There is an inexhaustive list of marketing campaigns and avenues that you can utilize. You are going to want one over the other, but in certain situations, there is the need for a little bit of everything.
With that said, it is quite easy to go overbudget then wondering where all the money went. So, take a look at the three main categories of startup marketing budget expenses. When you know each one well enough, it is easier to divide and allot the right amount.
1. Staff Salaries
Marketers, graphic designers, researchers, specialists, and everybody else that comprise your marketing team needs to be paid. Other than their skills, you are also looking at the resources they need such as an office, computer, and software.
2. Consider Marketing Subscriptions in Startup Marketing Budget
To accomplish effective marketing, you are going to need services specific for the role. You just can’t make use of conventional software. What you want are social media management tools, marketing automation, email marketing services, and so much more.
3. Campaign Costs
Once you start implementing your campaigns, you are going to need more budget. For example, Google Ads are going to cost you. Printing your posters, business cards, and everything else needs to be financed. Then there are opportunities you cannot miss like partnerships and collaborations.
Remember that every campaign is going to cost you. Even if you have a team and the necessary resources to have them working.
How to Maximize Startup Marketing Budget
Your startup marketing budget is limited and with so many things to spend on, what you want is to make the most out of it. Even if you don’t dwell into every marketing campaign, you can still get significant results. The only thing you need to do is to put your money where it matters the most.
The question is, how do you do that?
1. Choose Your Startup Marketing Budget Expenses
Always evaluate everything in front of you. Only if it is either urgent or extremely necessary do they get prioritized. Otherwise, rank which expense is more important than the other. In reality, there are campaigns that are more effective and it is better to invest on that first when your budget is limited.
2. Embrace Analytics
Nothing can beat what the numbers say. So, listen to campaign analytics. If something isn’t performing well, divert the budget to something else. No use spending on programs that are ineffective when the budget can be better used somewhere else.
3. Have Contacts
Knowing the right type of people can help alleviate the burden on your startup marketing budget. There are ones that can lend a helping hand to get you the resources you need. You can get discounts. Better yet, knowing influential people can give your company the publicity it needs without having to spend anything.
4. Keep Your Budget Updated
If you know how much budget you have left, the more accurately you can spend it. Having an indefinite idea of how much is left of your finances can easily cause you to go over your budget.
How to Create Your Startup Marketing Budget
With so many campaigns you can invest on and considerations to keep in mind, where do you begin to make your startup marketing budget?
Beginning to make your plan can get confusing. When you don’t have a guide to follow, you end up finding yourself at the start all over again.
If you are lost, follow this startup marketing budget guide.
1. Understand Your Business Plan
What are you selling? How long can you deliver the product? How expansive is your market?
Understanding your business is the most crucial step in creating your budget. If you know how fast your company can potentially grow and create revenue, the easier it is to know what should be marketing spend for startup.
If you are looking at a fast turnaround time, then you have the potential to put your budget at the upper limit. On the other hand, if you are dealing with complex machines and niche products, you need to be more conservative.
2. Estimate Your Sales
Knowing that your products have fast or slow turnaround time is not enough. You need to get your calculator and start solving for your potential sales.
The calculation you will come up with will set the baseline for your estimated revenue. When you have that, it is fairly easy to determine what part of that goes to your startup marketing budget.
3. Plan Your Marketing Campaigns
There is no way to know for sure if you have enough budget until you get a picture of what you intend to spend on. So, plan your marketing campaigns and lay out how much each is going to cost.
You either try to fit your marketing campaigns with your budget or you adjust to cater to your plans.
4. Compare Revenue and Marketing Costs
At this point, you already have a rough outline of your budget and your expenses. However, you aren’t completely done just yet. Compare the costs to your revenue and evaluate whether or not there is much left for you to go around. What you do in this stage is perform final adjustments by seeing the bigger picture
In Conclusion
It can be a struggle to come up with the right startup marketing budget for your company. Even startup marketing itself is no walk in the park.
Nevertheless, it is not impossible to have the right figures laid out. It only takes some planning and the right decisions.
Most people can get it right, but there are some who can’t. If you don’t want to take the risk, delegate startup marketing to the people who know how. What you need is the assistance of the best digital marketing agency. So, contact us today for a free strategy consultation.
