How Much Do Small Businesses Spend on Marketing?
Here’s what you need to know about how much to spend on marketing, Facebook ads, SEO, and social media (and how to control your budgets).
There are so many things that can go into a small business’ marketing budget: software, freelancers, advertising, whether you’re B2C or B2B. And since no two small businesses are alike, how much you spend depends on your revenue and how you choose to market your product or service.
One thing is clear: marketing is an investment in sales (aka profits, aka MONEY). Your marketing budget should directly reflect what brings in the most cashola. That’s the best way to know where your marketing dollars are worth the investment, so keep that in mind as we go through this article.
P.S. Since some small businesses make less than $100,000 and others can make upwards of $1,000,000, talking about dollars and cents doesn’t make much sense (ahem). So we’ll be talking in general terms, using some examples to cement those points. Cool?
How much should small businesses spend on…
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How much do small businesses spend on marketing in general?
Marketing budgets vary greatly depending on your industry, your audience (B2B vs. B2C), how new you are, and your revenue.
Beyond the spend, how companies determine their marketing budget can change as well. For some companies, the marketing budget is:
- Based on a percentage of projected revenue
- Based on last year’s expenses
- Built from scratch every year
- Determined every month depending on their needs
If you’re a new small business, it’s hard to determine how much money is worth investing in marketing since you have nothing to base it on—no past revenue and no past spend. Consider where your ideal customer is. Are they on social media? If so, which channels do they prefer (Facebook is very different from Twitter or LinkedIn)?
Check out what competitors in your market and other markets are doing. If you’re an accountant in Detroit, where do you find other accountants (in Detroit but also Boise, Minneapolis, Philadelphia, etc.)?
If you’re an established business and want to maximize your marketing budget for the best return on investment (ROI), look at past spend and where most of your customers came from. Did your Facebook ads convert? Did customers find your website through Google?
P.S. Regardless of whether you’re a new or established business, always ask your customers how they found you. These anecdotal responses can help you down the road.
How much should a small business spend on Facebook ads?
The great thing about digital ads is you’re in control of the budget. If you only have $1 per day to spend, that’s how much you’ll spend. If you have $25 per day, then that’s what you set your budget to.
And Facebook is no different. To start with Facebook ads, you have to have a business page on Facebook. (These are different from your personal page.) You can determine whether you want to set a limit based on a particular campaign you’re running (this is helpful when you have more than one campaign running) or set an account limit (even if you have different campaigns).
How much a small business should spend on Facebook ads is hard to gauge. Again, it’s based on results. A great plan of action is to start small and test your audience.
Next, ask yourself how much you are willing to pay per lead? If your customers spend an average of $100, you don’t want to spend $100 for each lead you get. Are you willing to spend $1 (or 1%) or $10 (10%)? If you operate a service-based business, you have a greater profit margin. But a product-based business might not.
The Social Media Examiner suggests businesses should consider spending between 5-12% of their revenue on Facebook ads, whereas newer companies spend more to see “aggressive growth.”
How much should a small business spend on SEO?
As of January 2022, Google’s search engine market share is 85.55% (with Bing, a very distant second, at 7.61%). It’s estimated that Google processes around 63,000 search queries per second, or 5.6 billion searches per day.
That’s a lot of searches and a lot of keywords.
What does that mean for your small business? It means you need to be online, and customers need to be able to find you via Google (or other search engines, but really mostly Google). So how do you get found online? Search engine optimization, or SEO.
Some of the SEO functions you’ll want to conduct:
- Website analytics for your site and your competitors (to see what keywords they rank for)
- Website audits
- Backlink sources for your site and your competitors
- Keyword research, difficulty ranking, and search results tracking
- Social media, brand, and reputation monitoring and tracking
Technically, you can do SEO yourself and for free (meaning, no other costs than your own time). But like everything else, spending money on SEO can yield great dividends for your small business. You can hire a freelancer, an agency, or have someone in-house who specializes in SEO. Of course, all of these have costs associated with them. And pricing can vary from salary to hourly to retainer to commissions.
How much should a small business spend on social media marketing?
Some business owners don’t realize how much time and money go into having a solid and consistent social media strategy.
Yes, using most popular social media platforms is free, but there is a cost to doing business. When creating your social media strategy and budget, don’t forget to include the following items on your list:
- Content creation tools – photos, videos, writing, editing, e.g., Unsplash, Pexels
- Social media tools – posting, analyzing, competitive analysis, e.g., Hootsuite, Sprout Social
- Graphic design tools – creating graphics and videos, e.g., Canva, Biteable
How can small businesses control their marketing budget and spending?
Now that you see that marketing your small business is no joke (at least not the haha kind), how can you control your budget and make sure you don’t overspend?
ClearSpend’s Spend Control tools put you in charge of how much gets spent and let you get as down-in-the-weeds as you want. Seriously, get deep down in there. With daily, monthly, and per-transaction limits, your marketing team won’t ever go over budget. You can even create virtual cards for each of your budget line items—like, one card for Facebook ads and one card for freelance writers. Easy peasy, lemon squeezy.
With your ClearSpend dashboard, you (or anyone you assign) can manage and update the budgets for each of your cards on an as-needed basis. You and your team members can attach receipts directly in the ClearSpend app (so your accountant doesn’t ever have to ask you for receipts again). And, your expenses can automatically be categorized to make tax time a breeze.