Here’s How (And How Much) Small Businesses Should Spend on Marketing

Here’s How (And How Much) Small Businesses Should Spend on Marketing

By Toby Scammell

Big-box stores and e-commerce companies like Amazon have their eyes set on Main Streets in every corner of America. The future is local, even for massive multinational companies.

For small, local businesses, that means it’s never been more important to have a thoughtful marketing strategy.

At Womply, we often speak with small business owners who think marketing isn’t for them because they don’t want to grow, don’t know how, or don’t think they can keep up with big-budget competitors.

The truth is, every business needs a marketing plan just to stay relevant in today’s rapidly changing landscape. Small businesses are no exception, but exactly how much to spend — and how to spend it — is very different than the Walmarts, Burger Kings, Jiffy Lubes, and Starbucks of the world.

We typically recommend that small businesses spend at least 7–8 percent of their annual sales on marketing every year. This is the basic amount required to stay relevant as customer interactions go digital.

What does that mean in practice? According to Womply’s Small Business Almanac, the average American small business earns almost $600,000 annually. So, the average small businesses should be spending $4,000 per month  or $48,000 annually on marketing.

That might seem like a lot, but consider that the average business is spending upwards of 10 percent on marketing — and some as much as 50 percent!

According to a study by Duke University and Deloitte, consumer goods companies tend to spend more than any other category at a quarter of revenue, and retail/wholesale businesses spend $1 in every $10 they make on marketing.

No small business can compete by outspending big companies or internet-based competitors. But, if you’re not putting some time and resources against it, your business is at risk. Start small, ramp up, and invest in phases.

For small, local businesses, old marketing methods like Yellow Pages ads or radio advertising no longer work.

To save time and make the most of your marketing budget, follow a new set of marketing priorities.

First, nail the basics. Take control of your online presence everywhere  so customers can always get in touch and easily find directions to your business.

Second, you should keep track of every customer and keep in contact with them automatically.

For most businesses, maintaining customer engagement when they leave the store leads to huge returns in the form of repeat revenue and word-of-mouth marketing.

Third, only after you’ve nailed steps one and two should you start investing in customer acquisition through advertising on sites like Facebook and Google. Doing so before you’ve laid a foundation is like throwing money away.

If you’re doing well, you might be getting dozens of reviews on sites like Google, Yelp, and Facebook every month. Engaging with those customers can have a direct impact on revenue, but who has the time?

Increasingly, the SaaS industry is creating easy-to-use systems built specifically for small businesses. Many of these systems don’t require any software installation — you just login to a website or download a mobile app.

Some SaaS systems, like accounting software, focus on the back office, but there’s a growing menu of options for making marketing easier and even automatic.

Put your precious marketing dollars to work against the top priorities first, and add additional systems over time.

Small businesses have never faced more ferocious competition, but they’ve also never been better positioned for success. The murky world of marketing is being demystified and made more accessible and affordable every day. Take a few simple steps today and build from there.