How to Create a Startup Marketing Budget

A startup marketing budget is a big priority for a young business. Take a cue from Hotmail’s playbook – a startup that transformed the landscape of email services with a clever, budget-friendly marketing strategy. 

With every email sent, a small line at the bottom read, “Get your free email at Hotmail.” This ingenious tactic, costing next to nothing, turned every user into a brand ambassador, rapidly expanding their user base.

As we dive into the strategies of crafting a startup marketing budget, let’s keep in mind that sometimes, the simplest tactics can lead to the most extraordinary results.

How Much Should a Startup Spend on Marketing?

Determining the right amount for a startup marketing budget depends on various factors, including the age of the business, the target market, the industry, and specific business goals.

You probably started thinking about your startup marketing budget shortly after looking up how to start a business. Startups might need to invest more aggressively in marketing to establish their presence. However, the emphasis should be on strategic spending rather than the amount, focusing on tactics that offer the best potential return on investment (ROI) for your situation.

On the one hand, it’s possible to spend minimal amounts strategically using free or low-cost marketing channels such as social media, word-of-mouth, or organic digital marketing. On the other hand, corporations like Coca-Cola exemplify the upper echelon of marketing budgets, investing billions annually.

How to Determine Your Marketing Budget

The chances are you don’t have anything close to Coca-Cola’s marketing budget. If your business is brand new and cash flow is limited, you might even struggle to breach four figures in marketing spent each month.

Of course, as noted already, it’s not always how much you spend, but often how you spend it. Nevertheless, it makes sense to have a number in mind to understand what you have to work with.

Consider the following:

Projected Revenues

Marketing budgets often closely align with revenue projections, no matter how large the company or how long it’s been in business. The average marketing cost for a startup in 2024 should be about 10% of overall revenue. This allocation is considered sufficient for building brand awareness and attracting leads.

Factor in the scalability of your marketing tactics. Some tactics, like SEO, may require more investment upfront but offer greater long-term value. Regularly review and adjust your budget based on the actual performance and growth of your startup, ensuring that your marketing investments are both efficient and effective in driving business growth.

Business Age

Identifying your business as a startup doesn’t mean it was recently formed. Unfortunately, there’s no official definition whereby a business matures from the startup stage, and you may find yourself still using that tag over a decade following launch.

If you’re in the early stages, you might want to divert more capital toward marketing. Customers are easier to keep than gain, so spending more now may help establish your company. In the future, you may devote less to your startup marketing costs and more to customer retention.

If you’re already somewhat established and well-known, you could cut back on spending or take more risks if you know your planned budget is secure.

The Return on Investment

Once again, if you’re working on a marketing budget plan, you need to consider forecasts. If marketing spend doesn’t positively impact your bottom line, it’s a waste. Generally, the profitable marketing spend ratio comes in at around five to one, with 10 to one being exceptional.

So, if you can make $5 back for every $1 you spend, things are going well. As always, that varies between companies and sectors but can be a great starting point for those still in the planning stage.

Typical Marketing Budget for a Startup

Marketing costs for startups generally fall into one of three categories:

Salaries and Outsourcing Costs

Even if you’re only spending in the low four figures on marketing each month, the chances are you won’t have the time to effectively manage campaigns, strategy, and reporting alongside everything else. 

Whether you use your own employees or hand marketing activities to a third party, everyone must be paid. For small startups, yearly costs for a social media marketing manager can cost from $49,000 to $175,000, depending on the level of expertise and the scope of marketing activities.

Subscription Costs

No matter how you decide to promote your business, there are likely further costs involved. This could include SEO tools, social media scheduling software, web design tools, and much more, the initial costs of which can range from $100 to $150 per hour.

Most highly regarded services are well worth the investment, but there will inevitably come a time when you must decide what represents the best investment.

Campaign-Based Marketing Costs

The most flexible part of a marketing cost plan involves direct payments to advertising platforms and other resources. From pay-per-click advertising to link building and print ads to merchandise, the costs can start from as low as $500 and go up based on the scale and platforms used.

In-House or Outsourced?

Your startup marketing budget may not afford you enough cash to take on someone full-time. Outsourcing someone, even for a few hours a week, can make a world of difference in the startup stages.

For basic tasks, rates for an outsourced professional can start from $25 per hour, while more specialized services like advanced SEO or strategic planning may cost $100 per hour or more.

When hiring an outsourced team for tasks like marketing or sales, consider the relevant experience and proven results in previous projects. Moreover, pay attention to good communication skills and the ability to adapt to evolving needs of your startup.

Once your campaigns are underway and you’ve reached the ROI ratios you planned for, it may be time to bring things in-house. Indeed, you might already have the resources available.

Critical Elements of a Startup Marketing Budget

There is no silver bullet for successful marketing. What works for one company may not work for another, even if they share the same space. Nevertheless, when you create your budget, you should never overlook the following:

Search Engine Optimization

For effective SEO in your startup marketing budget, focus on key areas like keyword research, content creation, and website optimization. Invest in tools and services for identifying relevant keywords and phrases that your target audience is searching for.

Additionally, budget for technical SEO to ensure your website is search-engine friendly, with fast load times, mobile optimization, and user-friendly navigation. The marketing benefits of good SEO include higher search engine rankings, increased organic traffic, and improved credibility and trust with potential customers.

Social Media Marketing Budget

Social media can lead to all the marketing benefits of SEO but open additional opportunities. The key is consistency. An active social media account is an opportunity to showcase products and services, interact with new and existing customers, and make your business sound great.

Conversely, dormant social media accounts can do more harm than good. For example, if a page has been left unloved for years, it may show that a company is struggling.

A social media tool will often account for one of the subscriptions in your startup marketing budget. It might also be worth having your accounts professionally designed and curated in the early stages if you lack experience. From there, you or an employee can seek to stay on top of fresh, engaging content that gets the word out, and you can also experiment with paid ads and promoted posts.

Local Marketing

Every business has a local market, even if you operate from home. Reaching that audience doesn’t have to be exclusively online, either. Attending networking events, handing out flyers, and engaging with the business community around you can all contribute to your marketing goals, but they often come at a cost. You should expect a return on investment just as with anything else.

Promotional Materials

This point won’t apply to every business, but most entrepreneurs love the idea of seeing their logo on custom clothing, stationery, and the multitude of other options available today. You can expect bulk discounts to keep costs low, but it’s often difficult to measure the impact of passing promotional materials out. 

They might be a necessity, especially if your business involves a lot of human interaction. However, if they’re optional extras, they may need to wait until your budget matures.

Handling Expenses

When you have a budget to work with, it’s always better to understand the numbers. Of course, that goes for outgoings and any income that can be attributed directly to those expenses. So, keep your spreadsheets up to date and consider using prepaid or virtual cards for incidental costs for ease of tracking.

What Percent of Revenue Should Be Spent on Marketing?

The percentage of revenue a startup should spend on marketing can vary, but a general guideline is around 10% to 20% of their revenue. However, for startups, especially in their early stages or in competitive industries, this percentage might be higher to establish a market presence.

Creating Your Small Business Marketing Budget Plan

So, with the planning, theory, and considerations out of the way, let’s wrap up with a quick guide to making your small business marketing budget a reality.

1. Decide on Your Goals

Think about the most significant impact on your business and tailor your efforts to meet those specific goals. It could be increased profitability, higher search rankings, or more social media followers. Understand the priority and focus your marketing budget on the most relevant areas accordingly.

2. Set A Generous Budget You Know You Can Stick To

Your marketing budget is often dictated by cash flow and will remain that way until your efforts become self-funding. Your current financial circumstances will dictate the initial budget, but the budget can be subject to change depending on future growth

You need to be strict with this budget, both in your actions and those of your employees, but even if you plan a year out today, there’s nothing to say you can’t revisit the plan next month based on the latest information.

3. Plan How to Allocate Your Marketing Costs

Your plan should eliminate any temptation to pick up the latest software or follow special offers. When you first make a plan, try to account for every last dollar and understand precisely where it will be spent. There will be more flexibility in the future, but for now, everything you invest in needs to pull towards a common goal.

4. Create a General Schedule for the Next Year

As noted, you can plan for a year, and you could change that plan tomorrow if something comes up. However, a year is far enough to give you time to experiment and identify the actual returns your marketing efforts have created.

This period also enables you to plan your budget around specific events. If your products make for great holiday gifts, you’ll need a bigger budget in later months. If you sell outdoor equipment, your advertising schedule will peak in the summer.

By laying out your strategy in advance, you know when to spend big and when to reduce your expenditure and save it for the most critical trading periods.

5. Keep an Eye on the Next Opportunity to Scale

Marketing, much like the business itself, is all about scale. Budgets are all about percentages and ratios. So, ideally, you’ll be able to put systems in place whereby you can trace all business income back to the marketing channel that made it possible. Then, as revenues increase and you’ve made sure to see what’s driving them, you can reinvest.

After all, if and when you reach the five-to-one marketing ratio, and every dollar makes five, you could simply rinse and repeat for a thriving operation.

Wrapping Up

Successful businesses rely on efficient planning, and the marketing component is no exception. It’s among the more exciting parts of running a business, as it’s a justifiable way to tell everyone you can about your passion. However, underneath, it remains a numbers game. Fortunately, with the correct strategy, it doesn’t have to be a gamble.

Sure, not everything works for every business, and reaching profitability can take time. However, that’s the thrill of the chase, and if you can understand what you have available, how to spend it, and what you want to achieve, you’ve taken a massive step toward making it happen.