How Much Should Small Businessses Spend On Marketing?

Note: I had a few drinks so I don’t necessarily even agree with a lot of what is said here. Business is not cut and dry. There is no cookie-cutter ‘one-size-fits-all’ solution. That’s what makes it so interesting. You don’t need to be 50 years in business to know things either. With the amount of free resources available through the internet, entrepreneurs can cut their learning curves drastically by going to the best sources of information. Going from point A to point B becomes a lot clearer.



How Much Should Small Businessses Spend On Marketing? – Answer – Spend as much as you can to bring in customers with the highest long-term customer value, least headache, and lowest cost per acquisition. If you follow this strategy, you will be in a good place 5 years from now. If you don’t grow and reinvest then you could very well be out of business. Offering great customer support isn’t as good as focusing on customer acquisition. McDonalds didn’t become the most successful fast food franchise by focusing on serving their existing customer base and relying on word of mouth. They got there by systematizing their delivery and getting the word out through marketing. The company that spends the most on marketing generally wins (so to combat companies with more money – you just have to plan smarter). While people may say the average is 10-15% of annual revenues it is different for all industries. You might be the type of person who would rather invest for long-term gain. Most business owners ARE this way but make the mistake of hiring the wrong people to do the job. The online landscape is constantly evolving so you want to ensure that what you are doing is not something that ‘used’ to work in 2006 or 2013 but working NOW.

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Yes, the future is online BUT never ever forget offline. Less companies are advertising offline because they are going for the quick fix and getting distracted by everything like social media. Sure you want to do those things but if you are going to invest money, invest in direct response where you can get instant measurable results.

Businesses should spend enough to where they are building a solid foundation to set themselves up for FREE leads in the future.
You might be thinking this is impossible… But consider the fact that all of the websites that currently rank high on Google when people search for example “surgeons in (city)” that they are either ranking because they have been around for a while or because they hired someone to optimize their website and online presence for those particular keywords.

I’m here to tell you that FREE traffic is the best. But you don’t start out getting free traffic right off the bat. There is legwork involved and hiring an experienced marketer to get there is very important. If you fail to hire the right person that is both qualified and experienced with a proven track record then you will have spent the time and money for nothing (and time is more valuable than money as you can’t get it back once it’s spent!).

Therefore, it’s self evident that investing in marketing is important to your business growth. So to tackle the question of how much should small businesses spend on marketing per year? Some say 10% and others say 5%. Large companies with huge advertising budgets spend as much as they can for branding purposes. But small businesses need to see a return. Most small businesses will soon be out of business if they are not smart with their marketing budget.

There is more to this question. First you need to ensure that you have the right strategy. No amount of budgeting will work if you don’t have the right plan. So an actionable tip would be something like looking at where other companies in your vertical, niche, or industry get their clients from. 9 times out of 10 this is just through word of mouth or offline advertising because honestly, most companies ‘suck’ at online marketing. Furthermore I would guess that less than 10% of that 10% got there by planning. Most get there by luck when it comes to generating leads through search engines.

Word of mouth and referral marketing is excellent and a result of good service but you are also at the mercy of your customer base. What if instead you had the ability to turn on the ‘tap’ so to speak whenever you want? This is what marketing platforms such as Google Adwords allows companies to do (when their campaigns are properly set up of course). Most companies fail miserably when it comes to PPC because they find the cheapest provider to set up and manage their campaigns not realizing that in the long-run they are losing valuable time and money. You lose big-time in lost opportunity costs.

Where should you invest your budget?

There are many different areas with subsections per practice.

Digital, online advertising, search engine marketing
Content creation and management
Social media marketing
Search engine optimization
Website design and maintenance
Email marketing
And more…

What should you do? There are dozens of things per section that needs to be taken care of. How does the average business owner know what to look for when they are busy dealing with their clients? Fortunately there are consultants out there who live and breathe these things while putting them into practice to gather real world data.

Initially you want to ensure that all of your social media profiles are claimed. You want to claim your citations/directory listings, Google My Business profile listing, and begin to give Google more reasons to show your website. Add proper keywords and relevant pages to boost your web rankings in local search results. Ensure proper mobile friendly optimization strategies are put into play so that you have the best chance of ranking.

Before getting into PPC marketing, ensure that your website developer also understands the fundamentals of PPC or has experience with PPC itself so they can create compliant landing pages that are fast, mobile friendly, and geared for high conversions. Most websites fail miserably at converting clicks into leads because most web designers are not experts at PPC and conversion rate optimization – let alone search engine optimization. In fact, most web developers think search engine optimization is just about keywords and building a few links. This is why many web developers will perform their version of what they think SEO is only to find that their websites are deindexed in Google a few months down the road – blaming it on Google’s algorithms. If you are a good SEO, you don’t lose your sites to penalties and changes in algorithms but rather benefit as your competitors sites get pushed down the SERPs.

Back on track, I would say that digital marketing has a tremendous amount of ROI potential compared to offline advertising. It is also the best place to invest your money (your online real estate) because more and more people turn to Google, Yahoo, and Bing to quickly find what they need. Nobody carries a phone book around with them or takes a drive around town to look at various billboards until they find let’s say a plumber. No, they just pull out their phone and type Plumber +city and call the first company they find.

Should you outsource your marketing as a small business owner?
Yes, definitely! Initially you want to outsource your marketing to experts who will set things up properly and then show you how to manage it from there moving forward. It might cost more initially to have an expert handle it but you save time, get things done right, and your ‘inhouse worker’ can focus on the other tasks like helping take photos and videos (things that inhouse workers do). Inhouse workers will not have time nor experience to know how to set things up properly because they are limited in terms of hours in a day. You can demand everything but there are still only 8 hours for them to accomplish those tasks. When you pay someone by the hour you want to make sure they are spending most of their time on A level tasks that generate fast results.

Online vs Offline marketing for small businesses

Spend 80% online and 20% offline initially. When you scale and have more staff you can start to spend more on offline marketing.
Online marketing is much cheaper and easier to track/scale right now. I do recommend learning a bit of it yourself if possible so you know what you don’t know which helps you outsource more effectively. If you are looking for effective ways to advertise offline my recommendation would be mobile advertising e.g. guerilla marketing, yard signs (bandit signs – hey it works), vehicle signage, cross-promotions, and so on.

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Business is cutthroat and hard when you don’t have a clear strategy and plan. Not planning is like planning to fail and nobody starts a business to fail! Let Yaletown SEO based in Vancouver, BC help take you to the top of Google, Yahoo, Bing, spread the word about your services, and create a positive experience for your customers. Complete the form for a free audit today.

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