Top 5 Marketing Budget Tips for Small Businesses

The number one thing most business owners want to know about marketing is how to cut their costs. But this is the absolute wrong way to look at marketing! Marketing is not just an expense. It’s a driver of revenue. A better method is to consider the return on investment (ROI) of each marketing expense.

If you’re doing marketing correctly, it’s making your business money. So, what you actually want to do is maximize your ROI with a comprehensive marketing budget. This will mean cutting marketing expenses that are not profitable. But it also means increasing and expanding marketing expenditures that have a positive ROI.

The first step is determining your ideal marketing budget. This will depend a lot on what your business is trying to achieve. It will also depend on your timeline and the resources your business has available.

Small Business Marketing Budget Tips

Luckily, we’ve discovered a few tips working with small business over the years. These tips can help most small businesses looking to succeed with marketing. They are mostly strategies best executed using digital marketing tactics, but they should be helpful for all businesses in one way or the other, regardless of their marketing strategy.

1. Have an Unlimited Budget

This may sound insane, but it’s not. It’s actually almost always a best practice in digital marketing to have an unlimited budget.

This is especially true for digital direct-response marketing campaigns with conversion tracking. With these campaigns, you know exactly how many dollars of revenue are generated from each dollar of advertising spend.

If you know your profit margin, you can easily calculate if these types of campaigns are profitable. If they are profitable, why not spend as much money as possible? You know the campaign will be profitable and generate even more money than you spend.

For example, consider a company that sells cookies on their website for $10 per package. Each package costs $3 for this company to produce. That leaves them $7 in gross profit. If the business spends $6.99 on advertising to get a single purchase, that would technically be profitable. Now, it wouldn’t be a good long term business strategy to make a penny per sale, but you wouldn’t lose money.

Practically speaking, you should come up with an ideal gross profit margin, and set your target there. For example, on the $10 cookie package you might want a 20% net profit margin. Take your gross margin of $7, and subtract your profit of $2 (20% of $10), and you’re left with $5 per package to spend on advertising or other marketing.

It’s also important to note that your company may have other operating expenses to proportion out among each sale, but that is beyond the scope of this post. If this is something you’re not sure about, you should talk to an expert. This may mean your accountant or a marketing or business consultant.

Let’s consider a marketing campaign on Google or Facebook for our cookie packages. If those campaigns can generate $10 per purchase for less than the $5 allocated for advertising, it will generate at least $2 per purchase in profit. Since each sale is profitable, you should be willing to spend unlimited money on this sort of advertising.

2. Split Test Everything

Another digital marketing staple is split testing, and your business should be doing it. Split testing is a marketing experiment. You are testing two or more marketing options and evaluating which is more effective or profitable.

You can use split testing with countless marketing endeavors. In the digital marketing realm, you can design two display banner ads and test which is more effective. You can also use the same technique with traditional marketing, and test two different magazine ad designs.

You just need to make sure you have a way to track the results from each split test option to determine which was more effective. It’s also important to ensure you have a statistically significant sample size.

This may seem complicated, and the truth is that it can be very complicated in certain situations. The math behind ensuring that your marketing experiments are valid is not trivial. If it’s beyond your area of expertise, you may want to consult with a marketing agency that has experts in statistical analysis.

There are also tools and reports that can help people run successful marketing split tests. The potential problem with any tool like this is that only statistics experts can evaluate their validity. So you still need an expert’s endorsement of the tool to ensure it’s a valid way to judge your marketing experiments.

3. Invest in Your Marketing Foundation

Certain elements of marketing are foundational. If you ignore them, you really hurt your ability to successfully market your business. It may seem like a good idea for your local business to use a website builder. And why waste time thinking about abstract things like nailing down who is in your target market?

You build your marketing foundation for the same reason you build a foundation for your house. Without a strong foundation, anything you build atop it will be weak and prone to collapse. Let’s take a look at a two must haves in your marketing foundation.


Your brand is the set of things that uniquely identifies you to your customers. This can include basic things like your name and logo. But it can also include anything in your marketing communication that sets you apart, especially communication that increases loyalty to and awareness of your brand.

The value created by your branding components is collectively referred to as your brand equity. This is why businesses spend so much time and energy building their brands. Look at Amazon, which, according to Brand Finance, was the world’s most valued brand at $150.8 billion in 2017.

It’s no accident that Amazon is a powerhouse brand. Jeff Bezos, Amazon founder and CEO, said in 1997 that the “[Amazon’s] goal remains to continue to solidify and extend our brand and customer base” (emphasis added). Amazon, the company, is now worth over 1,200 times as much money since that statement.

Amazon spent a lot of time and money creating a robust brand. You can do the same thing for your small business just on a smaller scale. You can invest early on in things like a creative name, a great logo, and other elements that people will remember. Your brand equity will compound over time, like interest, as your brand awareness and loyalty grows.

It’s easy to skip the branding step at the beginning, but you do so at the risk of missing out on brand equity. It’s true that you can always add branding elements later. But it’s like starting to save for retirement too late. You can never regain the lost brand equity that could have been generated in the early years of your business.


Having a website is another super important foundational element of marketing. If you expect to do any level of digital marketing, having a website is your absolute first step.

Some business owners think they can just create a social media account with Facebook or Instagram and use that as the digital hub for their business. This is a huge digital marketing mistake!

You want to be your own hub and own your own data. If you rely on someone like Facebook to keep track of your customers, you become locked into Facebook to communicate with your customers. They can change the rules at any time, and they have in the past.

Once upon on a time, Facebook would show almost all of the content businesses shared to their followers for free. Then overtime, they started showing less and less of the content for free and charging business owners more and more money to get their content to their own followers.

There is a way to combat this problem and save money in the long run. That is to have your own website and collect information you can use to target your existing and potential customers anywhere. Ask for the email address, phone number, and/or physical address.

You can then use this data to target your customers anywhere. You can contact them directly or upload this data into platforms like Google and Facebook to run remarketing advertising campaigns.

You should definitely still use popular social media platforms like Facebook and Instagram. Just make sure you are using these platforms to funnel your customers to your website or your physical location and not the other way around!


4. Don’t Ignore Digital Marketing Tools

You don’t have to do it all on your own, even if you don’t hire a marketing agency, business consultants, or other experts. There are a multitude of tools developed by marketing experts to help small business owners with their digital marketing efforts.

Let’s look at just a few tools that you should consider. Best of all, they’re all free, so there is no reason not to give some of them a try.

An Email Marketing Platform like MailChimp

As we mentioned earlier, you definitely want to control your own destiny by having a website and owning your list of customers or leads. But that will only get you so far. You also need an efficient way to contact these people on a regular basis.

This is where a tool like MailChimp comes into play! This tool will help you create beautiful looking email templates to reach out to people who’s email address you’ve collected. It’s super easy to use. If you have fewer than 2,000 subscribers, it’s free!

An Organization Tool like Trello

If you’ll be handling your own digital marketing, you’ll likely have a list of marketing tasks. Ideally, you’ll want those tasks organized and accessible to your entire team.

Here at Kapok Marketing, we use a tool called Trello. It lets us organize tasks into cards and lists that are placed on boards. It’s relatively easy to setup and takes very little time for people to learn how to use. Just like MailChimp, if you just needs the basics, it’s totally free!

A Social Media Management Tool like Hootsuite

Another challenging aspect of digital marketing is managing all of your social media accounts. If you’re serious about social media, your business is likely on several platforms. Each platform has slightly different requirements and best practices.

You can make managing your accounts slightly easier by using a tool like Hootsuite. This tool lets you manage up to 3 social profiles for free! All of your content will be in one place. You can also schedule your posts ahead of time. This allows you to work ahead and have an overview of what you’ll be posting.

Other Tools

There are countless tools beyond the few we mentioned. Just search on Google for “free marketing tools” or something similar. Many of them are great at helping marketers be more successful with their digital marketing efforts.

And if you’re a business owner and you don’t hire a marketing agency or team, you’ll need to be the one acting as the marketer of your business. If that’s the case, some of these tools are a perfect place to begin.

Best of all, many of these tools are free, which will help you save money within your marketing budget. Just make sure you value your time too. There is an opportunity cost to doing everything yourself. Sometimes, it’s best to let one of your employees, a freelancer, or an outside agency help with certain tasks.

5. Avoid Being Too Conservative

One of the best ways to avoid wasting money on digital marketing is to carefully consider each marketing endeavor that your business takes on. At the same time, you need to avoid being overly cautious and conservative with your marketing campaigns. Look at the actual numbers, and don’t just rely on gut instinct.

This is so important, because of a concept called risk aversion, which is studied in both economics and psychology. It’s the idea that most humans perceive the best option as the most certain option. Studies have found the preference time and time again. The big problem is that it’s often a horrible way to make choices.

Example of How People Are Too Risk Averse

One study found that people were willing to pay a median price of $25 for a $50 gift card. However, they were only willing to pay a median price of $5 for a lottery ticket that would yield a $50 gift card half of the time and a $100 gift card the other half of the time.

Mathematically speaking, if you want to maximize your payoff in the long term you need to focus on more than just certainty. You need to actually focus on what is called your expected payoff. To keep things simple, let’s look at an example with only two potential outcomes.

In the lottery ticket example, there were two outcomes, $50 or $100, and the probability of each was 50% or one-half. To calculate the expected payoff, you multiple each outcome by its probability of occuring, and then add those values together.

In our example, this means calculating this value: (50% * $50) + (50% * $100). One-half (or 50%) of $50 is $25, and likewise one-half (or 50%) of $100 is $50. So we get $25 + $50, which yields a $75 expected payout.

This means, your average person would pay one-half (or 50%) of the value of a gift card when they know the value of the gift card. They will pay $25 for a $50 gift card. However, when they are guaranteed to receive substantially more money, but the exact amount is uncertain, they are willing to pay one-fifteenth (6.7%) of the value of a gift card. They will pay $5 for the mathematical equivalent of a $75 gift card.

Risk Aversion Affects Your Marketing Budget

So all this math and psychology is great, but how does it help your business and its marketing budget? Well it can help in two big ways.

First, you need to be extra careful when making decisions based on uncertain results. Just because the payoff of a marketing campaign is not certain, it doesn’t mean it’s not profitable. It’s super important to look at the actual numbers and estimate your return on investment using a method similar to the way expected payoff is calculated.

Second, this is great news if you do decide to think this way and act in a risk neutral way with your business decisions. You will leap ahead of your risk averse competition. They may not want to pay $5 for those $75 gift cards, but you certainly should!

Review Your Marketing Budget Regularly

Following industry best practices and tips is a great start, but with all of these tips you need to monitor your marketing budget on a consistent basis. You also need to look at your actual results and compare them to your budgeted figures.

It’s very important to do this, because even when you have a great marketing budget things can go wrong. By regularly reviewing the budget and the results, you can make tweaks to your budget.

Hopefully, you’ll find marketing efforts that are going so well that you’ll need to spend more money on them to generate even more revenue. And if you see items that are not profitable, you may need to modify those endeavors or cut them from your budget. These changes should increase your profitability and save you money.

Have any other tips on squeezing the most out of your marketing budget? We’d be thrilled if you’d let us know in the comments.

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