If you’re starting a new business, then you probably have a dream in your head of what that business should look like in the future. You know what it’s going to be called, how much product you’ll need to sell every week, and how much money your company will bring in. But even when you’ve thought about all these things before starting the business, there are still always unknowns that happen along the way. One of those unknowns is where to spend your limited budget. Of course, every business needs to spend its budget on something, but how much should you spend on marketing? Too much, and you could be risking bankruptcy, but too little and your business could flop.
Let’s jump right into it. Let’s say that you’ve just finished launching your new business idea. You’ve set up an official website, created an amazing logo, and researched the market for people desiring what you’re selling. Finally, you’re ready to start marketing your product or service to these people.
But where do you start? How much of your budget should you allocate to advertising/marketing?
This is a ubiquitous question that I’m sure everyone has asked themselves before starting a new venture. However, the answer is not as simple as it seems. First, you need to determine what parts of your marketing would be considered advertising and how much some of these things cost.
For example, let’s say you want to run a radio advertisement on a local radio station. Costs for this vary depending on the size of the radio market you live in, but let’s assume that it cost $500 per 30-second spot. Let’s also imagine that one commercial spot was enough to get people interested in your product and make them want to go out and buy it. In that case, you would have to consider that you’ll need to spend $500 every time you want to get a new customer.
When you’re considering where to spend your budget, it’s important to keep in mind the advertising results. In this case, for every customer you bring in through radio spots, other customers will also show interest in your product. So if every 30-second spot costs $500 and each spot brings in 2 customers, then your adverting will cost $1,000 per customer. That doesn’t sound too good, does it? That’s why it’s so important not to forget about other ways to advertise your business besides just radio ads.
In addition to radio ads, you could also use social media to your advantage. Social media sites such as Facebook, Twitter, and Google+ have been used by many businesses to help propel their company in a positive direction. Twitter, in particular, has been a great tool for young startups in recent years. You may not have noticed this if you’re not on the site yourself, but tons of big companies have taken over Twitter and used it as a way to communicate directly with their customers. So there is definitely money to be made from using social media for your business.
Let’s say that you’ve decided that you want to focus on using Twitter as a way to grow your business. You decide that you want to tweet about your product every day. You also decide that you want to use pictures or infographics along with each tweet that you post. This cost $0 since it only involved time, which was probably already spent on Twitter anyways.
So now let’s say that you’ve posted 10 tweets about your product which all had an accompanying picture or infographic. And let’s also say that 1% of the people who came across this post became interested in what they saw and decided to buy your product. In this case, we’re going to assume that 1% of the viewers interested in your posts were customers. So that would mean you have a 1% conversion rate, meaning 1 out of 100 people who saw your post would become a customer.
So if this new customer came in through a tweet on Twitter, you’d be spending $0 for this person, but they’d have gotten to see your product ad for free on Twitter. So, in addition to reaching customers on Twitter, you’re also saving yourself from having to spend money on traditional advertisements, which might not bring in new customers anyway.
Now you might be thinking that there’s also the cost of hosting and maintaining your website and doing other things related to marketing. These are all important little things, but they do not take up a large part of your budget. It could be more beneficial to sell your product on consignment at a local flea market instead of spending time and money setting up an entire website when you’re starting.
So how much should you spend on advertising?
The answer’s simple: it depends on what your budget is. If the budget is low, focus only on traditional advertisements such as radio ads to get customers in the door. If your budget is high, you should start using social media sites to reach people interested in what you have to offer. And of course, the more advertising you do, the cheaper it’ll be per customer since you’ll be reaching more new customers.
So there’s also something else that you should be thinking about when it comes to budgeting for your business. Too much is not good for your company, but so is too little. There are so many things that could go wrong with a company if they don’t have enough money to run their business properly. They could run out of money before they’ve made any profit. If this happens, they can go bankrupt and lose everything they worked so hard to build up. This usually happens to small business owners who are not prepared or do not have solid plans in place for their business before starting it up.
You don’t need to spend a lot on marketing your business, but you do need to spend enough so that your business can grow. You have to have a solid marketing plan before you start your business, or your company’s success will be in jeopardy.
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