How to Best Manage Your Startup’s Marketing Expenses

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The Importance of Determining Your Startup Marketing Budget

It goes almost without saying that marketing matters. It educates and informs your customers about what you do, builds your reputation (people will link good, solid marketing with a good, solid business), and widens your net to drum up new business rather than solely relying on repeat customers – just to mention a handful of benefits. Simply put, it’s a key driver of revenue and an essential growth lever for any organization, no matter how big or small. 

But marketing also costs money. Not just that, but it potentially costs an unlimited amount of money, since it’s an area you could theoretically continue spending on forever – or until you ran out of it. Whether it’s a small targeted campaign or a broad primetime campaign designed to saturate the market with your messaging, there’s no simple answer to the question “how much does marketing cost?”

This is a question that’s tricky for any business to get to grips with, and even tougher for the proverbial scrappy, lean startup looking to get the most bang for their marketing buck, while still remaining in firm control of their finances.

In this article, we’ll take a look at the vital importance of determining your startup marketing budget – whether that’s figuring out your marketing expenses or tips to maximize your startup budget. 

Let’s get started!

How to determine your marketing budget

Before you decide where you’re going to spend your marketing dollars (or pounds or euros or…) you need to know how much you’ve got to spend. Or, if you’re the head of a marketing department in a company making a budget request to your C-suite team, how much you should ask for. 

When it comes to determining your marketing budget, consider these metrics:

  • What’s your annual revenue? You can’t spend what you don’t have, so it’s essential that before you consider marketing spend, you know your estimated or gross annual revenue. (Or, for pre-revenue startups, how much money you have to spend either from savings, fund raises, or other sources.) 

Once you know this, you can work out a percentage of revenue that will be taken up by marketing. Of course, this involves some additional nuance…

  • How long have you been around? Not every company is the same. If you’re an established company that’s been around for a while, you might not have to spend such a large percentage of gross revenue on marketing to see positive results and maintain your position. On the other hand, a newer company that wants to grow awareness should likely consider spending a higher percentage of its budget on marketing – especially if you’re competing against others with deep pockets. 

There’s no fixed formula carved in stone here. Some sources suggest a minimum monthly spend of $5,000 for a startup wanting to have some form of visibility, although that does not take into account the size of the startup or the market it is operating in. 

A smarter bet would be to spend as a percentage of overall revenue – so that the bigger the company gets, the more you spend. Many companies will reportedly spend as little as 1 percent on marketing. The U.S. Small Business Administration (SBA) recommends that, for businesses with sales of under $5 million per year and net profit margins of between 10-12 percent, you should spend approximately 7-8 percent of gross revenue on marketing. Ultimately, there are no hard and fast rules, but properly investigate your sector and competition and be prepared to spend up to 20 percent of gross revenue on marketing for a new entry. And about 20 percent of your time on marketing as well.

  • What are your goals? No one (or virtually no one) sets off on a journey without knowing where they’re going. This should also be true when it comes to marketing efforts. Knowing what your goals are will let you set a budget in order to have a realistic chance of achieving those stated goals. Typical goals in this area might be increasing your number of leads, earning more sales or subscribers, increasing awareness of your brand, and more. 

Be as specific as possible (e.g. how much do you want to increase sales: by 5 percent, 20 percent, or 50 percent in the next year?) so that you can accurately measure how well these goals have been achieved. Once you know your goal, you can then invest in the best marketing strategies and tools to help.

Figuring out your expenses

It’s easy to say that you should spend, for example, 11.5 percent of your gross revenue on marketing. But what exactly does this go towards in terms of marketing efforts? Before you even consider the content of your marketing message, ensure that you’re aware of the expenses that you’ll be shelling out for.

These expenses will typically be constant, meaning that they will be recurring costs for as long as you’re continuing your marketing efforts. While that means you’ll be expected to pay over and over, it also means that you can come up with a pretty accurate forecast of what your expenditure will be in a typical month. 

The three main areas will be as follows:

  • Salaries: Wages for marketing staff and freelancers.
  • Subscriptions for marketing tools: Think demoing and webinar software, Dropbox subscriptions, social media management, SEO tools, email marketing platforms like Mailchimp, website hosting, and more. You’ll need to keep on top of these rolling subscriptions.
  • Individual campaign costs: Variable costs associated with launching and executing campaigns..

The last of these three is the big variable. A big summer or holiday marketing push will mean a big spike in expenditure versus a quieter month. But the first two are likely to remain relatively stable throughout the year, especially when dealing with figures like wages for full-time staff. You just need to make sure that you keep on top of them. In a busy startup environment, that’s easier said than done…

Choosing which types of marketing to invest in

So you know roughly how much you’ve got to spend. You think you’ve got a grasp on your likely recurring expenses. Now what should you actually spend money on? While some founders (often ones who are way too smart to be making this mistake) will assume that building a great product is all it will take to get word of mouth working for them, the reality is that marketers need to spend money to make money. But out of the veritable buffet of options, what should you spend on? 

Here are some of the big ones:

  • Social media: Yes, social media is ostensibly free in the sense that anyone can post a Facebook message on their page or send out a tweet that will be read by people who are already friends with you/following your channels. But if you want to reach out to people who don’t already know you, spending on social media to “boost” the impact of your message and its reach is essential. Although prices may vary, this can be done for just a few hundred dollars each month.
  • Google ads/content marketing: If a tree falls in the forest and there’s no one around to hear it, does it make a sound? In terms of there being eardrums to register the sound, no it doesn’t. Alongside social media, the digital equivalent to this is paying for added findability on the likes of Google and Bing, both of which make money by selling ads that can land your business in front of potential customers. This also likely requires that you invest in some high quality content marketing to reap the rewards of possible click throughs.
  • Expos and conferences: Whether it’s sponsoring an event or trade show or just paying for a booth at one, these live events (fortunately becoming a thing once more in the world following the pandemic) are the real-life equivalent of good ranking on Google: They put you in front of the right people. The results can be good press, new customers and access to experts or others who can help your business.
  • Event marketing: This sounds expensive and, depending on what you decide on, it very well could be. But it doesn’t have to be expensive and the results can be more than worth it. A launch party with an open bar for the press, financial rewards for early adopters, or a competition of some sort can help drum up coverage. It’s not paying for coverage, but it’s certainly the case that people may be more willing to try out – and cover – a startup’s product if they view it as benefiting them in some way. It’s just human nature.

Tips to help startups stretch their marketing budget

No matter what scale you’re operating on, from a small pre-revenue startup trying to build a name for yourself or an established business, maximizing your marketing budget is of equal importance. After all, you always want to be certain that your hard-earned money is stretching as far as it possibly can. So what are some of the pointers that can help you make the most of whatever marketing budget you have to spend? Here are seven of them.

1. Spend prudently

Every day, in every facet of life, we have to separate the immediate essentials from the longer term “nice to haves.” Perhaps, as a startup founder, you’d like to IPO and exit at the same time, hopefully with enough money in the bank that you could retire if you so wished. But, as a more immediate concern, you’d like to have a cash-positive company with a twelve-month runway. Maybe you’d like an office with its own elevator and a good view of the San Francisco skyline. But, for now, you’d be happy to have enough money to lease office space for your team.

Exactly the same prioritizing should take place when it comes to marketing. While the need to spend money is unavoidable, there are certain expenditures that are more immediately pressing than others. Think about spending by placing it into buckets labeled “need,” “would like” and “have the ability to wait to buy.” You might ultimately wish to commit funds to all of these, but by prioritizing spend in this way you can figure out what needs to be done today, what can wait until tomorrow, and what would be nice to achieve six months from now.

2. Ditch what isn’t working

That brilliant marketing strategy you had planned that just doesn’t seem to be working? Ditch it. While it’s important to realize that some strategies (for example, SEO initiatives) can take some time to develop and see the positive effects of, in other cases you’ll realize quickly when one strategy isn’t doing as well as others you’re investing in. Even if you’re not losing money – but simply not doing as well from an ROI perspective as other efforts – ditching failing strategies early will save you money.

3. Quality over quantity

This is a big one – and a challenge for startups that want to try and be everywhere at once, lest they miss out on a great platform or opportunity for spreading the word about what they’re doing. But make sure that, whatever you do, you’re prioritizing quality over quantity.

Content writing, for example, should be well-written and address the correct audience in the way they want to be reached. Marketing is, in many cases, the first department that will be experienced by a potential customer. In the same way that a hotel guest may have the tone for their stay set by the way their check-in is handled, the quality of a marketing message will convey something about the quality of the company it’s representing.

Make a good impression right away and you’ve already done much to win over the customer. Fail to address their needs and you could drive them away before they even have the chance to work out if they’d be a good fit for what you’re offering.

4. Stay up-to-date

Your marketing budget is a blueprint for what you plan to do and how much it will cost you to do so. But it’s not set in stone. Budgets are only forecasts, and you should ensure that these are updated regularly to revisit spend. Projections keep you on track and make you proactive instead of reactive. But you need to be able to react as more information becomes available as well. This can help you iron out inefficiencies and potentially reduce unnecessary spend.

5. Get into analytics

Marketing is an art as well as a science, but the science part – specifically data science – can really help. Analytics tools can help you better get to grips with the health of your marketing efforts. That might mean monitoring click through rates, website traffic, quantity of page views, customer satisfaction scores, generated leads, and much more.

The type of analytics most useful to you will vary depending on your overall strategy but, rest assured, whatever strategy you adopt, there are (often free or cheaper-than-you’d-expect) tools to help you. In an ideal world, these will tell you how brilliantly your marketing efforts are working. On the flipside, they might let you know when a particular tactic isn’t working – so you can more quickly pull the plug and avoid throwing good money after bad. In short, data analytics takes the guesswork out of marketing.

6. Choose strategies that complement one another

A willingness to experiment on different marketing strategies is good, but you can also get a more-than-the-sum-of-its-parts reward if you choose strategies which complement one another. For instance, when it comes to online marketing, a focus on SEO and content marketing could work as two separate strategies, but also work well together – with content marketing letting you build up engaging content for your selected SEO keywords, while SEO efforts will drive more eyeballs to this content.

Furthermore, consider strategies that will allow you to reuse or repurpose content from one medium to another. While you may need to make alterations depending on the requirements, this will help to cut down on costs.

7. Work your connections

Many of the most successful startups got their foot in the door cementing their product or offering by getting it adopted by others in the startup space. While marketing is great, winning new customers through money spent is, unsurprisingly, expensive. Connections who will help you promote, provide feedback on, and spread the word about what you’re doing means less need to spend on advertising – particularly early on. Especially if you’re in the B2B space, there are no shortage of free events and digital networks you can join to meet others who may be in need of your products. 

Misguided ways many startup marketers spend money

Early startup life can be chaotic and scrappy. We’re talking about long hours, pivots, fast iterations on concepts, and a race to scale before the whole enterprise runs out of runway with whatever finances it has secured. The lack of corporate structure can make startups speedier to react, being able to make rapid moves that much larger companies simply wouldn’t be able to thanks to their size and processes. Startup founders are more likely to throw caution to the wind and ask “why not?” when it comes to trying something new. In a lot of cases, that’s a great approach. But it can also be a problematic one – particularly when it comes to potentially wasted spend.

For example, consider the way that a startup may manage a new expense requirement for a piece of marketing software. After a member of the marketing team hears about it, they might run it past their immediate boss and then the CEO, before putting it on the company’s credit card as a monthly recurring fee. As anyone who has ever subscribed to a service knows, it’s easy to forget about monthly fees once you’ve started with them. 

While the marketing software in this illustration could be a godsend, there’s also a chance that it’s used once or twice and then forgotten about – with no one in the company fully accountable for the ROI it’s providing (or not providing), and its continued subscription not serving anyone particularly well. 

Worse, as the startup in question scales there’s the possibility that another person within the company finds a comparable tool and winds up subscribing to it; unaware that the company already has access to a tool or service that does much the same thing. The result? Wasted dollars that could be put to far better use.

Even in situations in which this spend is noticed, it can be a hassle to track down the origins of the spend, who is using it, and whether the right results are being gained. Either way, it’s a major headache. 

There’s a better way to manage your startup’s marketing expenses

Marketing is an essential part of any startup’s tool set, ensuring that the world gets to hear about the amazing work you’re doing – and benefit from it. Managing expenses in this area is of paramount importance. At Mesh, we want to make it easier for you to control the way you spend. Simply put, the simpler your expense process, the better it’s going to be as far as running a business is. 

We offer a complete corporate payment solution that is a perfect fit for marketing managers and budget owners, allowing them to take control. It’s a tailored solution that offers full visibility, control, and insights regarding every payment that you make – all in one place. It’s a game-changing spend management tool that will help streamline your marketing expense processes in a truly revolutionary way. 

Want to know more about Mesh? Get in touch, and our dedicated team would be more than happy to answer any questions you might have about our tools and how they can be of help. You can also book a demo so that you can see for yourself how transformative they can be.

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