- Feb 14, 2022
- By Cam Sivesind
But what defines the “S” in SMBs, and how CAN they embrace analytics to improve marketing performance?
One of our 4 trends we forecast for performance marketing for 2022 is the need for small businesses to embrace analytics to improve marketing performance and profitability. So it makes sense to take a deeper dive into defining the “small” in SMBs – Small-to-Midsize Businesses.
Marketing analytics, such as multi-touch attribution (MTA) and customer journey analytics (CJA), and the data collected from those tools is not exclusive to large brands with huge marketing teams and millions to spend on marketing campaigns. A small enterprise has as much, if not more, to gain from insights gathered from analytics data to determine its marketing effectiveness. How are dollars out bringing dollars in? It’s vital to know this.
Breaking Down SMBs
The exact definition of a small business depends on the industry, “but a small business is one that has fewer than 1,500 employees and a maximum of $38.5 million (revised to $41.5 million for 2021) in average annual receipts, according to the U.S. SBA (Small Business Administration).”
Small businesses are vital to America: “With 28 million small businesses making up 99.7% of all U.S. firms, small business is big for the United States’ economy.” Companies that make between $50 million and $1 billion are considered mid-sized. That’s quite a jump from the “small” category but consider mid-market and large enterprises earn multi-billions annually. Apple recently became the first $2 trillion (yep, that’s with a “t”) publicly traded U.S. company.
What Does a Typical Small Business Spend on Marketing?
What are these various size businesses spending on marketing? It’s hard to find these numbers, but a lot of experts have recommendations. The SBA recommends spending 7-8% of gross revenue on marketing and advertising if a business is doing less than $5 million a year in sales and its net profit margin – after all expenses – is in the 10-12% range.
LegalZoom says, “Depending on the industry, marketing budgets can range from as low as 1% of sales to over 30%. New companies may spend as much as 50% of sales for introductory marketing programs in the first year. Smaller business may just try to match the spending of their direct competitors.”
Take a hotel chain for instance. A franchise operator at a smaller property might have five office people on staff, and only one or two of them focus on spending a modest marketing budget of $20,000.
A 2019 article had this to share: “More than one-third of small businesses (37%) spend less than $10,000 on advertising each year. A smaller percentage of small businesses (20%) spend between $10,001 to $50,000 on advertising. Just 7% spend more than $1 million annually on advertising. This advertising spend is small compared to some of America’s largest companies, such as Disney, AT&T, and Procter & Gamble, which annually spend more than $2 billion on advertising.”
Small Businesses Drive America
Here are 73 stats about small businesses, but we pulled out a few of our favorites:
- As of 2021, there were 32.5 million SMBs in the U.S (99.9% of all businesses). Updated June 9, 2022.
- Out of the 31.7 million small businesses, 3.7 million are microbusinesses with one to nine employees.
- The number of small businesses in the U.S. has doubled since 1982.
- 91% of the time, consumers will choose small businesses when convenient, and 74% look for ways to support small businesses even if it’s not convenient.
- The average cost of starting a retail business is $32,000. However, store owners have reported starting with only $5,000.
- 84% of small enterprises are using at least one digital platform to share their products.
- Close to 85% of small enterprises have already invested in SaaS options in 2021.
- Online and digital channels will continue to grow. No-touch payments, including contactless cards and mobile payments, increased among small businesses in 2020.
- 73% of small businesses invest in social media marketing.
Here are some more great small business stats from LawnStarter.
Small Businesses Face Tough Sledding
The entrepreneurial spirit is most alive and well at small businesses, where often the founder is the sole employee for up to a year or more, and working nights and weekends are just a fact of life.
This article lays out 10 of the biggest obstacles facing small business owners, starting with “the majority of small businesses survive their first year, but not their fifth.” Throw in the effects of COVID-19, family members not wanting to take over a business, cash flow issues, and more, it’s easy to see why the struggle is real.
But with a little elbow grease and some time spent on marketing strategy and analytics, small businesses can thrive. There are oodles of success stories, and all of these business owners have great tips to share, like this from a gardener and arborist: “At the end of the day, if you are looking for a challenge that will never be fully complete or finished, then self-employment might be what you’re looking for. You need to believe in growth and overcoming challenges every day.”
Putting some money toward marketing is wise. Getting started – and then measuring the success of those efforts with analytics – is important. Here’s a nice list of marketing tips for small business and startup owners. These aren’t for everybody, but a mix of two to a half dozen of these likely apply to any entrepreneur.
Tools and ideas are available, many of them free, to help SMBs market. Take advantage of them. And some low-cost investments (money or time) could pay big dividends, like guerilla marketing, writing a regular blog or posting videos to help customers, joining a local chamber or association, and more.
We have soft spot for SMBs, as they were some of our first customers to take a chance on us and our products, and we plan to get back to and grow those roots in 2022.