Budgeting 101: How Much Should I Really Be Spending on My Marketing?


One of the most common topics we address with our clients is the question of how much they should be spending on their marketing. Every small business owner faces this question and has to figure out a marketing budget that is best for their unique business. However, there are some tried and true best practices for creating a marketing budget that can certainly help you make the most educated and effective decisions.

Knowing how much to spend on marketing at any given time will save you from haphazardly spending on a whim, or from wasting your money by not spending enough or in all the wrong ways.

Determine What Your Marketing Budget Should Be

There are all sorts of equations and budgeting best practices to assist you in finding the right budget for your business — and you’ll need to take many variables into account to make an educated decision. Here’s what we consider to be some of the top variables you should consider first:

  • Your industry: Your marketing budget could fluctuate heavily depending on the size, type, and amount of competition in your industry. Therefore, it’s key to do your research, but also not to compare yourself too much to your competitors. Just because they are doing something and seem to be successful, it doesn’t mean it’s working or that it would work for you.

  • Where you are compared to direct competitors: However, with the above being understood, competitive ad spend intelligence can help you answer important questions like: “What will my marketing budget need to be in order to grow my share of the market?”

  • The size of your business: Do you have more than one location? Do you need to promote in different markets? Are you looking to reach a variety of target audiences or is your general audience pretty niche?

  • The cost of a customer: For businesses that only need five clients a year to be successful, your marketing is going to look very different than a retail store where most customers spend $200 a year and they need 100+ customers a month.

  • The growth stage you’re in: New businesses often need to spend more to effectively launch, promote, and establish their position in the marketplace. Additionally, if you’re looking to grow (not just maintain) your business, spending the same on marketing won’t take you to the next level.

A Few Rules of Thumb When Determining Your Minimum Spend:

5-10% of your projected gross revenue is generally a good figure to consider for your marketing budget. According to a 2014 study by Gartner Research, companies spent an average of 10.2% of their total revenue on marketing.

Of course, if your competitors are more aggressive with their marketing dollars, you might want to consider spending the same or more so that you can compete. However, this isn’t always the case, and sometimes simply spending your marketing dollars wiser and more strategically can make a bigger impact.

However, keep in mind that you will need to either catch-up or pace your spend when competing with more established businesses who might have the luxury to spend at a higher level to keep their brand top-of-mind. Even if your product or service is worlds better, turning consumer behavior is arduous. People are creatures of habit and hard to win over; especially if they’ve been loyal to a certain brand for years.

Furthermore, remember one golden rule of budgeting 101—you need to be spending for the business you WANT to become, not the business you are now. If you’re a million dollar business looking to become a $3-5 million dollar business, continuing to spend the same on marketing won’t get you to that next level.

What Does Your Marketing Budget Account For?

Your marketing budget is much more than just placing ads. Money allotted to marketing should go toward many different aspects of your business including, but not limited to:

  • Brand Development: Things like designing logos, creating a style guide, and developing sales collateral.

  • Website: Finding a template that works for your brand, or working with a developer to design one from scratch, paying for the domain name, keeping the content fresh and newsworthy, optimizing your site for search engine optimization, and making sure it’s mobile-friendly.

  • Social Media: Creating and updating accounts across all social platforms including Facebook, Twitter, Instagram, LinkedIn, Pinterest, or wherever makes sense for your industry and your customers.

  • Promotional Materials: Developing, creating, and producing promotional materials such as business cards, t-shirts, hats, and pens for employees, prospects, and giveaways.

  • Media Buys: Purchasing radio, TV, print, online, and/or outdoor advertising campaigns in your market.

  • Advertising Creative: Consider working with an expert in that particular medium for professional looking/sounding/hearing ads, or ask your media partner if they can help.

  • Trade Shows: While you may need to give up some staff at the office for a few days, trade shows or conferences could get your brand out in the community. When done effectively, they are a great way to interact with potential partners and prospective customers and are a powerful way of recruiting strong leaders.

Some Things To Keep In Mind...

Your marketing budget is an investment in the future of your business.
It needs to be a figure you’re comfortable living without for the time being. Effective marketing requires you to deliver the right message to the right person at the right time in the right way. In other words, spend your budget wisely and it’ll come back to you tenfold.

It’s important to know when you’re spreading yourself too thin.
It’s better to save up for an effective, consistent marketing campaign than to try and spend very little and get no return. If you aren’t able to really dominate the medium you are using, and you are instead sprinkling your dollars in a variety of places without consistency, you will never reach your marketing goals. It’s much wiser to focus your budget in one or two places, and build your presence with that target audience. Once you’ve dominated there, you can then start expanding your reach.

Additionally, look at the entire year when you’re creating your budget. Thinking annually will keep your marketing efforts consistent throughout the year; you don’t want to get to Q4 and realize you’ve already blown through your budget for the year.

Think about the seasons, holidays, and special events that could be marketing opportunities or provide direction as to when to spend more or less in your industry.
For example, an accounting firm will need to plan for tax season just like a restaurant with a great outdoor patio should plan for a busy summer season. So, while you should market consistently, allow for additional spending when you need it in the budget.

The BEST campaigns are branding campaigns done annually, combined with action campaigns done seasonally… this is where the magic happens!

Make sure your goals are very clear to everyone including your media partner and creative directors.
Don’t tell them you’re just looking to “get the word out” if you’re really looking to drive sales for a specific product or event. When everyone is on the same page with what the end result should be, the creative and marketing plan will be more cohesive and, in turn, effective.

For example, if you told your media partner that you were looking to push a specific event your restaurant was throwing, they could put your ad in the events section of their website as opposed to the regularly scheduled restaurant section. Many people looking for event-specific content go straight to those sections and having your ad targeted to that spot increases the chances it’ll be seen by the right audience.

It All Starts with a Plan...

Defining the marketing needs of your company will help you to create a formal budget. Once you establish that figure (at the beginning of your fiscal year), you can make any annual changes to mirror the growth or decline of your company. Keep an eye on the effectiveness of every marketing effort to better determine if it has a place in your marketing plan next year. We won’t get into HOW you should spend your money, that’ll be for another article. But follow this to manage your marketing well, and you just might end up in the envied position of trying to figure out how to manage high revenues.


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