Percentage That Should Be Allocated for a Marketing Budget

There is always the question about how much to spend for marketing in a business. While the payoff for strong marketing is great, there’s always a risk involved. Bad decisions on how much money to spend on marketing have sunk many businesses in the past. Either they spend too much from which they cannot recover or they spend too little and have to close their doors because of lack of business.

When deciding on a marketing budget for your business, there are many different variables involved, including the stage of business you are in, the size of your company, and the industry you are involved with. All of these factors should be carefully considered as you plan a marketing budget.

Calculating Percentages

To keep marketing budgets running smoothly, many businesses allocate a percentage of actual or projected gross revenues to the budget on a regular basis. This percentage typically falls between 2 and 3 percent for run-rate marketing and up to 3 to 5 percent for start up marketing.

Many experts advise that small businesses with revenue of less than $5 million should allocate 7 to 8 percent of their revenue to a marketing budget. This budget is typically split into brand development costs and promotion costs. Brand development includes all promotion of your brand, such as websites, blogs, sales collateral and printed material. Promoting your business includes campaigns, advertising and events.

In some cases, new businesses that are hoping to establish a very strong brand will spend much more than this. They may spend up to 20 percent of their revenue on marketing and brand awareness.

Consider Your Competition

Watching for hints and trends already established by your competition can make a difference in knowing how much to spend on marketing. First, consider the level of competition you are actually facing. If you are playing in a field of business with low competition, you are able to drastically reduce your marketing budget projection. Of course, you will need to spend more if you are facing fierce competition.

You can also get an idea of how much you will need for marketing by watching the marketing trends of your competitors. Some will even share this information with you. Watch for established companies within your same geographic area that look to have the same estimated revenue as you. You may be able to glean some information from their annual reports as well.

Spend Wisely

As with any business decision, be sure that you are careful with how you spend your marketing budget. Look for good deals and wait for promotions. When it comes to marketing material, make sure you use a trusted company like Printing Solutions who can help keep marketing costs low and manageable.

Related: How to Make My Business Stand Out with Marketing Material 

Do you have specific questions on how to effectively spend your marketing budget? Call us at 480-596-6300.