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Lesson #1: How much should a small business spend on advertising?


You can watch the video here, or read the transcript below.

Do you own a business? Do you wonder how much of your revenue you should be spending on your marketing efforts?

I believe that local small companies often overlook the importance and power of effective marketing and being able to succeed in a market because of their marketing. And so it’s my goal to help small businesses know how to effectively market their companies and succeed at a high level. My name is Ryan Spelts and I’m a small business owner and I’m a marketing student and I love all things marketing and have used marketing effectively and helped many of my clients use marketing effectively. And I’m here to help you know how to do that for your small business. The challenge of knowing how to market your business is one that I have seen many, many times and it’s why I started writing my book. The little booklets that I designed for my clients called The Marketing Playbook. I wanted to help my clients think effectively, strategically, and create marketing that is effective and has long-term effect.

I actually own a local publishing company. We publish five local city magazines and we know from talking to clients how daunting marketing can be for them. They’ll often tell me that I feel like I’m wasting money. I don’t know what to do or say in my marketing. I’m not sure if anybody’s hearing or saying what I’m saying. So the point of these videos is going to be to help you be effective in your marketing. Big businesses have an advantage over small businesses in that they have money and they’re able to spend a lot more in marketing. But there’s a unique flare and an approach that small businesses can take to make sure that they are known in a market, that they have a brand that people know and trust, and that people are willing to call them and to do business with them.

We’re gonna discuss some of those things over this series. And so, this first one I just want to talk about budget. How much should you spend on marketing? It’s a good question. The small business administration says you should spend between 7% and 8% of your monthly revenue on marketing. That means if you’re doing 10,000 a month, you should spend $700 or $800 a month. If you’re gonna do a hundred, thousand dollars a month, you should spend $7,000 to $8,000 a month on marketing. That’s money that should be budgeted, set aside and spent no matter what. You should make sure you spend money on marketing. Now, some businesses might take a little less than that. Some businesses it might take more than that to, to be effective. Startup businesses have to spend a lot more than that, especially if it’s a new concept or a new idea that’s unfamiliar.

If you’re coming into a market that has familiar competitors, then you need to market against those competitors. So we’ll talk about the ins and outs of marketing in this series and talk about how to be effective in your local market. I had a client one time that was a home services company. They did home services like plumbing, heating and air conditioning and electrical. And they were growing. They were very successful in the local market and were doing millions of dollars a year in revenue and business. And so they decided to buy another home services company in Colorado, a neighboring state. And because of the investment there, they decided to take their advertising dollars that they were using in Utah and apply those dollars to the market in Colorado because they felt like we’ve been in Utah for 20 years, it will be ok. We’ve been very effective here. Everybody knows who we are, they know what we do. We don’t need to advertise like we were doing before.

Unfortunately, that that mistake, that decision, led to a major drop in revenue for their Utah market. And they realized their mistake in that people need to be reminded of who you are, what you do, and why you do it. And so when they left the advertising market, they immediately had to return to the Utah market and start advertising again just to make sure that they could keep their numbers up and their sales could continue to, to grow and to succeed. And then of course, they had to market in Colorado as well. So those are two different businesses and locations they had to market for both of them separately.

Henry Ford said, stopping advertising to save money is like stopping your watch to save time. We want to talk about how to be effective with your marketing and how to make things work. So start with a budget. Set aside amount of money that you can spend on marketing and let’s make sure and spend it effectively. If you’d like a free copy of the Marketing Playbook, you can get it @ ryanspelts.com and each week we’re gonna bring you marketing tips and know how. Follow along.

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