Organization is the most important trait of a good budget. When starting out as a small business, budgets are tight and options are usually limited. So, every dollar counts. Efficiently spending money is the most effective way to grow your business because the stakes are higher when you don't have a safety net of savings to fall back on. Staying on top of expenses and planning a budget can be difficult, so organizing the information in such a way that makes it easy and clear to read is immensely beneficial in the long run. This will ensure that you’re sticking to your budget and don't overlook unplanned expenses that otherwise could have been foreseen.
How Much Should I Spend?
There is a wide variance when considering how much money a business should allocate to their social media marketing budget depending on a variety of factors: such as business size, location, and industry. The average range that B2B businesses spend on marketing is 2-5% of their revenue. B2C businesses average a bit higher at 5-10% of their revenue. An important note to remember is that increased spending does not necessarily correlate to increased exposure and customer traffic.
To ensure your money is being spent wisely, you must calculate the return on investment (ROI) to measure how much money a particular strategy will make you for every dollar spent. For example, an advertisement or coupon in a local newspaper may cost you a thousand dollars depending on the size and placement. In order to calculate how effective that ad campaign is, we need to look at how many dollars were brought in specifically due to the ad. For paper marketing, it may be difficult to do this because there are fewer tools to measure where your customers come from. So, for this example, let's say one product or service, on average for the past six months, nets a business $5,500 per month. Using that as a baseline, this business needs to make at least $6,500 to break even - but, ideally, make a few hundred or thousand dollars in addition to that to make the advertisement worth company time to create and place in the paper.
If the ad is successful, and the advertised product or service generated say $8,300 in revenues for the month, the ROI would be calculated by subtracting $1,000 from $8,300 for the cost of the advertisement. Then, you subtract the 6 month average revenue of $5,500 from the current months remaining revenue of $7,300 to get $1,800, which is our net return on investment. Dividing the net return on investment ($1,800) by the cost of the investment ($1,000) and multiplying this by 100 gives us an ROI of 80%. This means their advertisement was money well spent. However, this is not always the case, so it is necessary to always calculate the ROI of an advertisement to ensure investments are worth the time and resources that a business invests in them.
What Are The Costs To Make My Own Ads?
There are a number of different components to social media marketing- all with different goals, costs, and benefits- so it is important to decide which ones are most beneficial for your business. Two necessary components to begin making and marketing your own advertisements are content creation and the software tools necessary to make said content (assuming you do the work yourself, you may need assistance depending on the demand of your other responsibilities).
Content creation is likely going to be the main expense when budgeting to create your own advertisements, and could be upwards of 50% or more of your budget. This is because of the variety of content that can be produced. Depending on your business’ needs, you may be able to save some money by only funneling resources into select types of content that work best for you. The main components of content creation are graphics, photography, and videography. As your business grows, you may be interested in producing more advanced content that may require copywriting, hired actors, models and influencers which also drastically increases production costs. Still, these are non-essential for smaller businesses who are not in the position to reasonably afford those expenses.
Software tools are necessary to edit and produce raw content that has been captured on a camera or imported to a computer. There are countless content creation and editing softwares available to download on the internet. Some are free and some require licenses which cost hundreds of dollars, such as Adobe Photoshop. Despite being free, some editing softwares such as Photopea- which allows you to edit images in your browser- can provide you with a great set of tools to produce amazing content and allow you to learn about the editing process at no cost. Afterwards, you can decide which paid applications you may be interested in purchasing. Although, it is important to remember that some more advanced tools and options will be limited to paid programs.
Happy budgeting! Do you have any questions? Comment below or email us so we can help!