How Much Money Should Small Businesses Spend on Marketing during Recession?

How Much Money Should Small Businesses Spend on Marketing during Recession?
by Angel and Burt on July 14, 2009

Do you have a marketing budget set aside to promote your small business each year? Marketing experts typically recommend that you reserve as much as 10% of your small business’ gross sales for marketing. That includes advertising such as online coupons, promotions, direct mail, giveaways like magnets and such, promotional signage, and so on. The question is whether or not 10% is realistic for your small business or not.

There are several factors to consider when determining your annual marketing budget:

FIRST, the amount of money you spend on marketing should be directly related to the growth stage of your business. Is your business still in its infancy, or is your business mature and well-known? The stage of your business certainly impacts how much money you need to spend to promote it. What industry does your business operate in? Different industries require varying marketing investments to remain competitive. On that note, what are your competitors doing? It’s important to maintain a level playing field at the very least.

Marketing experts generally advise, on average, that NEW BUSINESSES spend 10% on advertising and marketing the first year. After the first year , ad budgets should be around 5% of gross sales, on average. The 5% figure should be maintained indefinitely, even in good times. In slow, recessionary times as we’re in now, advertising should be maintained, if not increased, according to experts. Many make the mistake of cutting back on advertising when business is slow, only to see business drop further. Recessions are actually a good time to advertise when competition is NOT advertising, thus, resulting in a stronger share of the market. In a recent survey, over 50% of small busineess advertisers said they plan to spend the same or more on the following: ONLINE ADVERTISING (including Coupons) – 69%, DIRECT MAIL (including Coupons) – 51%

SECOND, you need to plan what new products, services or enhancements you’ll introduce to your small business in the upcoming year. Naturally, if you’re launching a new product, you’ll need to invest enough in the marketing of that product to raise awareness and recognition of it.

THIRD, you need to determine what business goals you have set. If you want to grow your business by a certain amount within the next year, you need to invest enough money in promotional efforts to help you get there.

Bottom-line, you should invest 5%-10% of your gross sales into your marketing budget. Make a plan and stick to it. Set aside a bit of your budget for opportunities that might arise throughout the year. Most importantly, use your marketing budget. It might sound like a great idea to hold onto that money during these slow times but just the opposite is true. Advertising can and will bring in that missing business and set you apart from your competition, which is NOT advertising.


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