How do you determine the right marketing budgets? That single question remains one of the most perplexing for small businesses in Canada. With opinions varying widely and numerous variables to consider, it’s no wonder that establishing a marketing budget can seem daunting.
While online resources suggest allocating anywhere from 2% to 25% of your revenue to marketing, Kiers Marketing advocates for a more focused range of 3-5%. Why? To keep things focused and to not overwhelm. However, if your business goal was a market expansion to a new region or product line, we’d suggest up to 25% of revenue. This article delves into the nuances of setting a marketing budget that aligns with your business goals, geographic location, and size.
Understanding the Budget Spectrum
The Debate on Marketing Spend
The broad spectrum of recommended marketing budgets—ranging from 2% to 25% of revenue—highlights the lack of consensus among experts. Marketing can be mind-numbingly complex, even for people who claim to understand it. This disparity stems from different industry dynamics, competitive landscapes, and the diverse objectives of businesses. It underscores the importance of tailoring your marketing budget to your specific business context rather than adhering to a one-size-fits-all percentage.
If you’re unsure where to start when setting a budget, follow your data. To put it into practice, we recently analyzed client data to determine that for B2B business we work with in New Brunswick, maybe a mobile-friendly site isn’t your best investment. Why? We found the majority, 74%, of people visiting B2B sites were doing so on a desktop, bucking the general global trend of mobile-friendly websites being a necessity. We continuously mention the importance of data-informed decisions in marketing and more can be found on the subject here.
Kiers Marketing Perspective
At Kiers Marketing, we recommend a more conservative range of 2-5% of revenue for marketing spend. This recommendation is designed to provide small businesses with a sustainable model that balances visibility and growth with financial prudence.
Factors Influencing Your Marketing Budget
Business Goals
Your marketing budget should reflect your business objective(s). Whether you’re looking to increase brand awareness, boost sales, or enter new markets, your goals will directly influence how much you need to invest in marketing to achieve these outcomes.
While it’s nice to be everywhere all at once, you don’t need to be. Small businesses here in Atlantic Canada should focus their budgets as it will also help your mental health by not overwhelming you with the possibilities. Start with ONE goal and go from there.
Any time we are trying to decide if we should try a new marketing tactic, we always keep the modern sales funnel in mind. Why? Because every time you try a new tactic or enter a new space, you have to bring your audience, even the ones who know you, all the way from the top to the bottom and that takes either time or money. People need to be Aware of you. Then they need to get Interested in what you’re buying. Then they buy. Also, as soon as you stop providing those nebulous algorithms with data, they stop analyzing and you’ll need to start almost from scratch again when you pick things back up.
Geographic Location
The location of your business plays a crucial role in determining your marketing spend. Companies in highly competitive urban areas will need to allocate more resources to stand out, while those in smaller towns may achieve their objectives with a smaller budget.
To put this into practice using paid advertising, depending on the time of year, if you’re looking to get a Facebook fan in all of Canada, you’ll spend anywhere from $0.70-$2.50/follower. However, in a recent ad campaign we did for a local farm, we managed to get followers from New Brunswick for an average of $0.40/follower.
Business Size and Revenue
The size of your business and your revenue are practical considerations that should guide your marketing budget. Investing a portion of your revenue into marketing ensures that your budget grows in proportion to your business, maintaining a balance between investment and sustainability.
Even with this, there is seemingly standard advice for business owners as it differs from region to region. Make sure you’re reading Canadian resources when searching for your marketing advice. Why? Well, what is a small business? In Canada, it’s a business that employs between 0-99 employees. In the U.S., it’s between 0-1,500 employees.
- A small business has one to 99 paid employees
- A medium-sized business has 100 to 499 paid employees
- A large business has 500 or more paid employees—these companies are not considered SMEs
- Small business: Most businesses in the U.S. fall under this category. The typical characteristics of a small business are having no more than 1,500 employees and an annual revenue of $38.5 million at most.
- Medium-sized enterprise: These organizations are larger than small businesses but smaller than large enterprises. They generally employ between 1,500 and 2,000 people and have annual revenue between $38.5 million and $1 billion.
- Large enterprise: These organizations are relatively few, but their size and ability to dominate a particular market means that they produce the majority of total revenue when taking into account all business sizes in the U.S.
Navigating Marketing Investment in Canada
Industry Benchmarks
While our recommendation of between 3-5% of revenue offers a starting point, it’s beneficial to also consider industry benchmarks. Different sectors may have varying norms for marketing spend, providing further context for your budgeting decisions.
For example, the Business Development Bank of Canada (BDC) advocates a range of between 2-5% for B2B companies and between 5-10% for B2C companies.
Digital vs. Traditional Marketing
The allocation between digital and traditional marketing channels is another vital consideration. Digital marketing often offers more targeted and measurable results, which may influence how you distribute your budget.
The Role of Analytics
Investing in marketing analytics can help small businesses in Canada optimize their marketing spend. By understanding which channels and strategies yield the best ROI, businesses can allocate their budget more effectively.
Remember, you need to start gathering data and gathering it now because in order to make accurate predictions in data analysis, you need years of data, not months. If you want to learn more about the importance of data, check out our article, Data Analytics: Your Most Important Tool for Your Marketing Efforts in 2024.
The Case for Flexibility
Adapting to Change
The dynamic nature of the market demands flexibility in how you approach your marketing budget. Be prepared to adjust your spending in response to new opportunities, competitive pressures, or changes in your business environment.
Evaluating Performance
Regularly reviewing the performance of your marketing initiatives is crucial. This ongoing evaluation allows you to shift resources to the most effective strategies, ensuring that your marketing budgets are always working hard for your business.
For small businesses in Canada, determining the right amount to spend on marketing involves a careful consideration of business goals, geographic location, business size, and industry norms. While the debate on the exact percentage continues, aiming for a sustainable range of 2-5% of revenue, as recommended by Kiers Marketing, provides a solid foundation. By remaining adaptable and data-driven, small businesses can ensure that their marketing budget is not only a cost but an investment in their growth and success.
Are you looking for marketing solutions? Do you need an analytics audit on one or all of your digital media accounts? Do you need help understanding your market better? At Kiers Marketing, we’ve been helping small businesses in New Brunswick for over 40 years. Reach out today if you need help.