Marketing Costs for a Retail Start-Up

Business team working together on marketing a start-up business.
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When you are starting a new business there are many demands on your time and budget. One of your primary concerns could be budgeting for the online marketing of the start-up. You need to put your start-up funding where it will give you the biggest bang for the buck, reach your target clientele, be effective in driving sales, and help grow the business.

Start With a Business Plan

To begin with, you will need a well thought out business plan. Evaluating startup costs can be difficult for new retailers. There can be a lot of stress and tension when creating the plan. The financial demands of a growing business are immense. You need licenses and permits, legal and accounting advice, perhaps a storefront and warehousing space, office staff and supplies, website and marketing, and the list goes on and on.

Many of the figures listed for start-up costs on your business plan are estimates. And you can never be too conservative. The Small Business Association offers a free calculator to help estimate these expenses before you launch your company. You will need an estimate of your cost and how long it will take before you turn a profit—the breakeven analysis—as you approach lenders and investors to raise funds.

Estimate How Much You Need to Sell

Next, you'll need to project a little. To estimate marketing expenses, start with how much you'll need your store to generate in retail sales. Don't consider how much you want to sell. Instead, focus on what you have to sell to stay in business by paying your overhead costs.

In the first year of many retail stores, the owner will publish two numbers for the sales staff each day. The first figure is the "cash flow" number, and the second figure is the sales goal. Every sales member should understand that if the store does not at least hit the cash flow number, the store could not pay its bills—including employee salaries.

This technique helps to rally the troops, but it also gave them a sense of trust and ownership in the store's outcome. They knew jobs were secure if they hit the cash flow number, but they also knew their ability to keep that job was related to hitting the sales goal.

 Each retailer's marketing strategy will greatly depend on which market segments they have chosen, including target market, location, media strategy, and other factors. These will all help determine your marketing costs.

Budget Your Marketing Costs

As part of your pre-launch investigations, you completed market research and competitive analysis for your business. You identified your customers and know there is a need for your product or service. You understand how much you need to generate on a regular basis to keep your business afloat. Now, you can turn to advertise and marketing your services to reach your sales goals.

Once you've figured out your sales figures, you can apply a percentage of that amount for marketing and advertising. Early on this marketing percentage will need to constantly monitored and adjusted. As your business grows and adjusts to its place in the market you will measure the productivity and results of your efforts.

The range for marketing is typically based on your retail segment—basically, what you're selling. For some retailers, it requires a very modest marketing budget. For others, it takes much more for people to notice you.

Generally speaking, a successful retail store will spend between 3% and 5% of sales on marketing. Spend more, and you'll be "dependent" on advertising. That means customers will only respond when they see an ad. Spend less, and your traffic will suffer because you may not be present enough. There should be a happy medium.

Let's say your business needs to generate $100,000 each month in sales to make a profit. If you choose to apply 3% of your monthly sales to marketing, then you have $3,000 for marketing. As you build your marketing strategy, you'll learn where to spend that money for the highest coverage.

Spread the Marketing Love

Don't put all of your startup marketing dollars in one place. Too many retail startups make the mistake of putting all of their money into newspaper or on a billboard. When you first open, you don't know what medium a customer will respond to best. You have to test and explore and try different venues and mediums to see what is the best ROI (return on investment) for your store. 

Also, consider there are less expensive ways to market your store than advertising. Cross promotions with other retailers or businesses and events in the store all drive traffic but cost much less than a newspaper ad. You should also think outside the box. There is no harm in being creative.

Social Media

One of your first duties, and one of the best ways to get yourself noticed, is by designing a webpage and going through social media. Create a page for your business on sites like LinkedIn, Alignable, Facebook, Instagram, Pinterest, and Twitter. Promoting your business like this can come at no cost unless you count the time invested in creating and maintaining a profile.

Some of these online media giants will be better suited for one type of business over the other. LinkedIn and Alignable give a professional appearance to your company. Facebook, Pinterest, Twitter, and Instagram offer powerful platforms to keep your name and your product or service in front of your target audience.

Sites like Facebook also have services you can pay to help promote your business. For example, you can pay to schedule a post about your official launch, so it reaches your audience at just the right time. You can also pay to have posts promoted on related pages and sites, or have them promoted on general newsfeeds and timelines. Twitter also offers the same service—giving you the option to promote your tweets so a wide range of people can see your post and, therefore, your business.

Professional services are readily available, especially to small businesses and start-ups. These companies will handle and monitor your social media presence and/or other marketing tools. Be sure to research these to see if they're a good fit for you.

Once you get enough traffic from your marketing strategies, you may begin to see a nice boost to your sales and, effectively, your bottom line.