Small business owners consider finding new customers to be their biggest challenge and consequently label deploying new marketing strategies to reach out to prospective customers as their primary focus to ensure business growth. Despite being most important for small business growth, marketing remains the most underinvested area among small business owners.
This was the finding of a new survey by Kabbage Inc., a global financial services, technology and data platform company which serves small businesses. In association with Bredin, a leading small business research firm, Kabbage surveyed 500 small business owners of almost every industry across the U.S. and at various stages of business.
Small Business Growth Statistics
The data from the survey reveals insights into the most significant aspects that helped the businesses reach profitability and grow.
The owners rank identifying new customers as their most pressing challenge, surpassing the concerns related to the likes of cash flow and competition. To overcome the challenge of acquiring new customers and to ensure business growth, small businesses regret failing to invest in marketing sooner.
Despite the urgency to adopt marketing strategies earlier on in the life of a business, the survey shows marketing is the smallest annual expenditure among small businesses, significantly outweighed by rent, payroll, the purchasing of equipment and investment in technology.
Marketing represented only 7% of all costs during the first year of business, the survey says. Between the first and fourth years, 13 percent of all business costs were spent on marketing, respondents of the survey said. Only 7% of business expenses were spent on marketing between years 5 and 7, and 5% of all business costs was devoted to marketing between years 10 and 19. After 20 years of doing business, the marketing spend represented 11% of business costs.
Respondents repeatedly said they wished they had invested at least two to five times more in dollars in marketing every year. For example, during the first year of business, respondents said they wished they had devoted at least 28 % of business costs on marketing instead of just 7%.
Kabbage’s survey reiterates the importance of the early stages of a business, with 84% of business owners saying they reached profitability within the first four years of starting their venture while 68% of the business owners said they acquired profitability during the first year of business.
Despite becoming profitable early on, the respondents admitted they needed access to significantly more working capital to support business growth.
Victoria Treyger, Chief Revenue Officer at Kabbage, said, “Even though most businesses reach profitability in their first four years, our research shows businesses still encounter unique opportunities or challenges that require extra capital, such as bridging cash-flow gaps, making strategic purchases, increasing marketing spend or opening new locations.”
Talking exclusively to Small Business Trends about the need for small businesses to sufficiently market their brand, particularly during the early stages of business, Treyger added:
“I encourage business owners to start building their marketing programs early with no too minimal budgets by focusing on PR, reviews, and social media. 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. Small businesses can also use Facebook as a customer-relationship management tool. 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. Once you have some budget, you can also start testing ads on Facebook and Instagram targeted to customers in your area.”
The Kabbage survey provides actionable advice for small business owners of any industry and at any stage of life that it’s never too early to establish marketing campaigns designed to reach out to and acquire new customers.
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This article, “Small Businesses Know Marketing is Important but Continue to Under Invest, Survey Says” was first published on Small Business Trends