When starting a company, so many things compete for an entrepreneur's time and attention that certain aspects of the business are put on the back burner. As it turns out, marketing is one of those business functions that often end up underfunded.
A new study from business financing specialist Kabbage and research firm Bredin makes a good case for prioritizing marketing in the early stages of a small business.
Kabbage and Bredin recently polled 500 small businesses in the U.S. in various stages of growth. Nearly a quarter (24 percent) had been around for more than 20 years and nearly a third (29 percent) had been in operation for 10 to 19 years. Another 29 percent were in business five to nine years while 15 percent were just starting their journey at one to four years. In 2017, more than half of those companies generated sales of $1 million to over $5 million.
The top challenge facing small business owners is finding new customers, the study revealed. This elevates the role of new marketing strategies to the top priority of workers focused on acquiring future customers and growing the business.
It's a logical if somewhat unsurprising finding, but priorities shift when it comes to the meeting the day-to-day demands of operating a small business.
Despite its crucial function, marketing is often near the bottom on the list of spending priorities, as low as five percent of annual expenditures, well below payroll, rent and IT investments. Although small business owners wish they had spent more on marketing — two to five times more in fact — they often fall short.
For example, during their first year in operation, marketing made up seven percent of all costs for small businesses, although owners wished they had spent 28 percent.
A similar story plays out as the years roll on, even for decades-old companies. Small businesses in operation for 20 years or more are devoting 11 percent of their spending to marketing. However, they wish they were devoting nearly a quarter (23 percent) of their spending to acquiring new customers.
When spending more on marketing isn't an option, how are small businesses supposed to get new customers through the door?
"I encourage business owners to start building their marketing programs early with no to minimal budgets by focusing on PR [public relations], reviews and social media," advised Victoria Treyger, Kabbage's chief revenue officer. "PR makes a big impact when just starting out, as it allows you tell your unique story to a broad audience at a low cost."
If you can manage a social media profile, you can take a big, low-cost step in the right direction.
"Small businesses can also use Facebook as a customer-relationship management tool," continued Treyger. "It is the perfect forum both to build a one-to-one experience with your customers and to demonstrate to potential customers how responsive you are."
When you can finally scrape together a marketing budget, build on the social media following you have already attracted.
"Once you have some budget, you can also start testing ads on Facebook and Instagram targeted to customers in your area. The best marketing is happy customers, so focus on providing outstanding service and encourage your customers to complete online reviews so that other customers can find you," Treyger said.
Visit the Kabbage report for more information, including insights on the most critical years for small business growth along with the cost of doing business and how access to capital can contribute to a company's success.