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Marketing budget for SMEs BizPay

SME Budgeting Guide (Marketing)

Before you decide what and how to communicate with your target audience, you need to decide how much you are willing (and able) to invest in your marketing campaign.

The 4 factors that typically impact most heavily on this budgeting setting process are:

  1. The rate of growth in your market/ category
  2. The level of growth you want to achieve
  3. The level of competitive investment in marketing (share of voice)
  4. How much you can afford to spend.

Overall Budget Setting:

As a guide, depending on the level of competitive investment in your market, here is a range showing the total marketing investment required to achieve various growth objectives (expressed as a percentage of your total turnover)*:

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  1. That you are operating in a mature market growing at 1 – 3% pa. If you are operating in a high growth market you may be able to achieve the stated growth levels with a lower spend. Conversely, if you are operating in a declining market a higher spend will be required.
  2. That you invest your marketing dollars wisely, behind a persuasive and well directed message. Throwing money behind the wrong marketing technique and/or message will do nothing to help you achieve your growth objectives.

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Campaign Budget Setting:

Once you have established your total marketing budget for the year, this budget needs to be split and allocated to various marketing tasks and campaigns.

If the purpose of your campaign is to attract new customers it is essential that you complete the following exercise as part of your campaign budgeting process and a reality check …

Lifetime value calculation:

  1. What is the average sales value per annum of your existing customers?      ________
  2. What is the average profit contribution per customer? (#1 x GM%)                ________
  3. On average, how many years do you retain a customer for?                            ________
  4. What is the lifetime value of each new customer? (#2 x #3):                           ________
  5. What percentage of this lifetime value are you willing to invest?                    ________
  6. Acquisition budget per new customer (#4 x #5):                                               ________
  7. How many new customers are you budgeting to acquire?                               ________
  8. Campaign budget reality check (#6 x #7):                                                           ________

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Understanding your numbers

Whatever the shape of your customer journey, there are some clear stages that need to occur between awareness and purchase (see Figure 1 below).

It is important that you identify and track your numbers at each stage and periodically ask yourself:

  1. How many people do you need to talk to get someone to engage with you?
  2. How many touch points are required to convert this prospect into a customer?
  3. How much do you need to spend at each level to obtain 1 new customer?
  4. What can you do to improve your lead conversion ratios and reduce associated costs?

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Written by BizPay

BizPay is a seamless technology platform that solves cash flow challenges associated with paying business invoices. The company was founded to help businesses grow better by enabling them to use top suppliers and professional service providers. Frictionless, transparent and affordable, innovative payment products allow businesses: to split bills into 4 easy instalments and/or receive full invoice payment in 24 hours to grow their businesses without being constrained by cash flow.