Creating a startup marketing budget: how much should you really spend on marketing?

Proper budgeting is crucial to the success of a startup, you don’t want to find out you are bled dry after a successful quarter, or you don’t want to end up with an irregular balance sheet every month. For startups, getting the word out is a priority, so spending on branding should always be budgeted. Luckily, there are a host of startup budget templates out there to use as a general guide for planning your finances.

When it comes to creating a startup marketing budget, here are three important questions you can ask.

  1. How much can a startup afford to spend on marketing?
  2. How to choose between PR, advertising, and marketing?
  3. How to determine if a startup is spending more than it should on marketing?

1. How much can a startup afford to spend on marketing?

startup marketing budget - how much you afford
When creating a startup marketing budget it is important to figure out how much you afford

Creating a startup marketing budget doesn’t have to be a daunting or complicated task. Budgeting simply allows you to estimate how much it will cost to run your startup. and how much of your marketing budget will be. A good startup marketing budget is important for the growth of your business. It can help you keep your spending under control and plan for future marketing campaigns. 

The first step is knowing your essential costs, overhead and variable costs, and understanding how much you can afford to spend.

Then, it’s vital to figure out your monthly spending. This can be done using a notebook and manually tallying up your expenses, or business accounting software can be used. A simple spreadsheet like Google Sheets or Excel will suffice. 

Set a target startup marketing budget upfront when you tally up must-have and nice-to-have purchases. Budgeting startups typically start with expenses as they’re easier to predict. 

Next, list your essential startup costs. These are priority expenses that are vital to keeping your business running. This includes: 

  • Startup assets: one-time purchases like furniture, computers, vehicles, and security deposits (these are not tax-deductible).
  • Startup expenses: fixed or variable expenses like rent and payroll (these are tax-deductible).

Determine your fixed costs (also known as overhead costs). Budgeting for your startup can include things such as payroll and benefits, business insurance, web hosting, bank fees, rent or mortgage, internet and phone, and other professional services. Working with a business insurance broker or other services can help reduce these costs if done right.

Determine your variable costs (these typically don’t have a set monthly cost). Budgeting startups can include things such as advertising spending, equipment, utilities, freelance services, travel and events, transport, raw materials, shipping costs, and business income taxes. If you plan on getting help, consider the salary of marketing managers as part of your costs.

Calculate your monthly revenue. Planning your startup marketing budget will require a couple of forecasts because no past sales data exists for your business. You’ll have an optimistic projection and a conservative one. Consider factors like repeat customers, potential market share, and the current conditions of the market are like. Keep it realistic and list out both your revenue and funding sources such as loans, savings, investment income, product or service sales, and business or corporate credit cards. 

On average, the startup marketing budget is 11.2% of its total revenue. How much should your startup spend on marketing depends on what type of business you are and how old your company is. B2C businesses usually spend more on marketing than a B2-B company, and newer companies should typically allocate more to marketing.

Younger companies (from 1-5 years old) should spend around 10% to 20% of their revenue on their marketing to garner brand awareness and generate leads. Generally speaking, the more marketing spend, the faster and more aggressive growth would be.

Tally up your total costs, review, and adjust. Finally, get a rough idea of your costs and revenue to determine your startup marketing budget. If your goal sounds better on paper, you can adjust before borrowing more capital. Label your expenses as necessary or discretionary.

2. How to choose between PR, advertising, and marketing?

startup marketing budget - choosing between PR, marketing and others
Your startup marketing budget is integral when choosing between PR, marketing and others

These three are actually very different, and the cost varies between them. Determine your objectives and how much you can afford. Your choice should be a balance between those two answers.

Marketing – Marketing is the overall process of boosting consumer awareness of a product, person, or service. For example, advertising and public relations are two methods that fall under the ‘marketing’ umbrella term. Some marketing activities include: conducting interviews and market research, creating website content, organising conferences or exhibitions, commissioning advertising, and creating new marketing concepts for products.

Read more: Here are the top 5 digital marketing trends in Singapore.

PR – Public relations deals with maintaining a good company reputation in the media. Startups can opt for specialist PR consultancies since they are experienced and have a better bandwidth for communicating with the media. The overall goal of PR is to get positive press coverage. PR practitioners write press releases, contact media and inform them of news regarding their business, speak at public forums, write in-house magazines and newsletters, and keep records of whenever their company is mentioned in the press. To some, PR is considered more economical than advertising as it focuses on organic voices. However, it is important to note that they are not the same. Decide what is the best way to reach your objectives so that you do not end up wasting valuable resources.

Read more: What is public relations: How to explain the value of PR to your CEO.

Advertising – is persuading a target audience to buy a product. Usually, if the startup marketing budget allows for it, businesses can create and develop concepts, words, and artwork for adverts. Typically, when a marketing team sees a need for advertising in a campaign, it’ll turn to an advertising agency. 

3. How to determine if a startup marketing budget is too high?

startup marketing budget - is your budget too high
A problem when creating a startup marketing budget is figuring out if your budget is too high

As with any business expense, you should be clear on whether you are getting sufficient returns. Return on investment tells you how much you get back from putting this amount in, whether it is a target number of media articles, sales (traditionally), or other KPIs.

There is a combination of quantitative and qualitative measurements that can determine how effective your PR efforts are. First, you need to pick the right key performance indicators (KPIs). Essentially, what do you want to achieve and identify strategies to help you reach those objectives? 

KPI metrics include: 

  • Domain authority (higher ranking web pages)
  • The sentiment (qualitative measurement of opinions people have about your business that translates to brand perception)
  • Lead generation and earned traffic (tracking the number of website visitors, how well your social media performs, or the motivation behind customers completing call-to-actions)
  • Share of voice (or SOV, refers to the percentage of your coverage compared to your competitors – your brand’s visibility within its target market)
  • Penetration of key messages (top benefits of your product or solution being repeated for consistent brand perception – does the coverage reflect your company’s key messaging?)
  • Engagement with influencers (having a direct line from influencers to your target market that promotes positive, on-message coverage for your business)

Don’t ignore the more qualitative aspects of returns

It can be tricky to calculate the ROI for more qualitative aspects, especially those on social media. Although seemingly elusive, social media can give key insights to improve customer service, reputation management, and crisis communications. Getting first-hand responses from customers regarding how they use your product and the commentary around your branding efforts provides invaluable information that directly impacts business decisions in the future.

ROI is an important metric for knowing what is working, knowing what to budget, and knowing when to invest your resources elsewhere.

Another important metric to consider is the cost of customer acquisition (CAC). This refers to the amount of money your startup spends to get a new customer, and allows your startup to measure the effectiveness of your customer acquisition strategy.

Read also: How to tell whether your social media strategies are working.

It takes more than an idea and a good marketing strategy to succeed in today’s business environment. 

Your company needs a strong brand that consumers immediately recognise and trust. Great branding can propel your business to success; poor or nonexistent branding can leave you languishing at the back of the pack. 

At first glance, it might look like branding is an expense with no return, something you could do without if you had to. And yet great brands are born and sustained because they bring so much more to the table than mere recognition or social status — they gain customers’ loyalty over their competition. Being able to match your expenses with your revenue means cutting costs where it won’t hurt your long-term goals – and this includes branding.

Read more: How to write a brand story from the good folks at SYNC!

If you’re looking for a PR agency in Malaysia or PR agency in Singapore, or want to know more about how to make the most out of your startup marketing budget for PR and content marketing? Get in touch with us at [email protected]

1 Response
  1. Small businesses spend anywhere from 7-8 percent of their gross revenue on marketing and If you’re serious about getting more clients you should be spending at least 10 hours per week on your marketing efforts. That’s a minimum and in the beginning, it may be even more. If that number scares you, don’t worry! Marketing doesn’t have to feel gross.

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