Seven top tips for understanding SMEs marketing budgets

Money is tight for small businesses: every pound’s a prisoner. They’re not making budget decisions, they’re making cash flow decisions: it’s an important emotional and practical distinction if you want to sell to them.

Marketing budgets are no exception and actually are often a little neglected by small and medium-sized enterprises (SMEs). More than two-thirds choose not to advertise at all, with 67 percent saying it’s because it’s ‘too expensive.’

This isn’t the best news for media companies hoping to tap into this 99 percent of businesses, but understanding their financial constraints is integral to working with them and helping them to see the benefit of advertising.

Here’s what you need to know about small business budgets.

  1. Often there isn’t a budget at all

    One in 25 SME’s don’t have a marketing budget. Out of those that do, less than a third are spending any of it on advertising. One reason could be that referrals generate new business for more than three-quarters (82 percent) of them. One way to turn this objection into a sales opportunity is to explain that advertising will help to recruit new customers and help to turn them into future brand ambassadors.

  2. Cash flow may be variable

    As many as 45 percent of SMEs admit that cash flow is a problem for them. Where marketing is concerned, it’s important to encourage SMEs to avoid the temptation of the cheapest option when funds are low. Investing in a cheap website or marketing materials can lead to no return and even prove detrimental to the brand, so the business pays twice to get it right.

  3. They spend less than larger companies

    For businesses earning less than $5 million in revenue, it’s recommended they spend between seven to eight percent on marketing. This steadily reduces to three to four percent for those making over $300 million. This means proportionally smaller companies should be spending more than larger ones, but in reality they are only spending 2 percent or less on advertising. Sharing best practice benchmarks like this can help SMEs reconsider their plans.

  4. They don’t have money to waste

    Two-thirds of SMEs that don’t advertise see advertising as risky. It’s important their budget is used wisely and strategically to address the worry of throwing money at something they won’t see a return on.

  5. The average ad spend

    Two-thirds of SMEs that don’t advertise see advertising as risky. It’s important their budget is used wisely and strategically to address the worry of throwing money at something they won’t see a return on.

  6. What they expect

    Almost three- quarters (71 percent) of small business owners define digital marketing success as increased sales and it’s likely that they have similar expectations from advertising. Budgets and strategies should reflect this goal

  7. How they’re spending

    By next year SME budget allocation for digital marketing is expected to reach 70 percent, leaving only 30 percent for traditional advertising. This is an opportunity to explain the benefits of traditional advertising and counter the misconceptions that online is easier and more effective.

A tight budget is still a budget and, spent wisely, it can have a huge impact on business growth and revenue. And success begets success: a successful low-budget campaign can lead to bigger budgets and more campaigns.