Questions

What is the ideal percentage of revenue you should apply to a marketing budget for a new business?

Need suggestions for my start-up please :)

4answers

I think differently about this, because of two reasons:

1) I've always (and only) been involved in bootstrapped startups; and

2) I've been lucky that those startups grew organically and fast (enough) which minimized our need on marketing spend.

Instead of deciding on a specific budget for this, I would instead look at your current priorities (in terms of budgeting and re-investment into your team):

1. Build a great team.
2. Build a great product.
3. Craft incredible customer experiences.
4. Spend money on marketing.

If you've already hit all 3 top priorities and you can't reinvest any further into those, then you should start spending money on marketing.

If you don't have revenues today and you are hoping to generate revenues through marketing spend, you're on slippery slope (says the bootstrapper). Whilst not wrong, this is tricky and you'd need to take a realistic look at your customer acquisition cost (CAC) and how much you can invest into acquiring new customers.


Answered 6 years ago

It's difficult to answer this question for a couple of reasons:
1. When you're a startup -- it's quite possible your revenue will be little or nothing at first. 100% of nothing is still...well...you get the idea.
2. Every business is different -- and requires a different approach at marketing.

I'd ask yourself these questions:
1. Where do you see your startup going in the next couple of years? Is your goal to bootstrap? Is it to raise funding from VC's?
2. What marketing activities can help you get to the important threshold you're setting for your company (whether that's achieving profitability -- raising a Series A VC round -- etc)?
3. How much do those marketing activities cost?

It could be perfectly reasonable to spend $50 - $100K in marketing (or more) when you expect zero in revenue IF you're achieving other milestones that will help you achieve a Series A investment (and that's your goal).

However, if you're bootstrapping a business and your goal is reaching profitability as soon as possible, it could STILL be reasonable to spend $100K in marketing, IF you're confident that every dollar invested returns 2.

Short answer: There's no magic percentage to your question. I'd spend more time being thoughtful about the type of marketing activities you think would be helpful, and what end result those activities lead to than planning for a percentage of sales.

I hope this is helpful.


Answered 6 years ago

I think all of these answers offer a lot of value, but I have another perspective - what if you thought about spend in terms of time, not money? I wrote a blog post on the distilled.net blog earlier this year talking about the types of equity you can spend - time, money, talent.

Instead of thinking about how much money you can or should spend, think about what you can do that costs little money, but might take more talent or time.

In the online marketing world, this is mostly around content. You can do any of the following for free (or cheap) monetarily:
- videos, both product and educational (like Moz's Whiteboard Fridays);
- guest blog content, starting on websites of people you know then using that to get into other websites;
- sponsor local meetups in your area to gain hometown name recognition and users;
- use services like Clarity to showcase your expert knowledge in your area.

These are a few areas that you can invest in. If you want some more ideas, feel free to contact me!


Answered 6 years ago

Start with market research first for your type of products and services. Check with similar products, replacement ones, etc. Market prices are the most important. You should know your cost prices of course.
Make P&L calculation, checking with different quantities and leaving certain money for marketing. At the end you will have several options. This puzzle will help you to decide which one is the feasible, and go for it. Do not take unnecessary risk, but look for revenue always.
all the best
Val


Answered 8 months ago

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