How Much Should I Spend On Marketing?

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If you are running a business of any size, it is likely that you have pondered the same question numerous times: “How much should a company spend on marketing?”. The reality is that there is not always a straightforward answer. If you have already searched for one online, then you will have been hit with millions of responses.

There may be obvious differences between a small business marketing budget, and that of a bigger company in terms of actual spend. However, when you look at what percent of revenue should be spent on marketing, should there be any vast differences?

Marketing is a tricky area. You already know the basics such as having a blog, but so many businesses lack a marketing plan. This plan is something that should be flexible and adaptable, much like a business plan is. By having a plan in place, you can start to look at your small business advertising budget and ensure that you are allocating sufficient funds.

By reading on, you’re going to find all that you need to know about how much a company should spend on marketing. By the end of this article, you’ll be well placed to develop your marketing plan, allocate a budget, and push forward.

What Do We Mean By A Marketing Budget?

Before we jump in and start looking at how much a company should spend on marketing, it is worth taking a step back, and starting with the basics. In simple terms, your marketing budget is the money that you have allocated to use for marketing activities. With your business, you may choose to set an anal budget, or you could work on a monthly, or quarterly, basis.

For your marketing budget to work, and before you can really address the issue of how much should a business spend on marketing, you need a marketing plan. This plan will contain your marketing goals and then you can work out the spend required to achieve each one. Not sure what a plan should look like? Take a look here.

As we have already touched on, when looking at your small business marketing budget, your plan needs to be flexible. If you review performance and something isn’t working, then change it. There is little use in wasting your budget on marketing activities that just aren’t working. Tweak and reassess whenever you need to.

What Is The Average Spend On Marketing?

The average spend on marketing varies depending on the industry, company size, and marketing objectives. However, in general, businesses allocate a significant portion of their budget to marketing activities. According to industry reports, companies typically spend around 6% to 14% of their total revenue on marketing efforts. This expenditure encompasses a wide range of activities such as advertising, public relations, digital marketing, social media campaigns, and market research. Larger corporations with established brands may allocate a higher percentage of their revenue to marketing, while smaller businesses or startups may dedicate a smaller percentage. Additionally, the advent of digital marketing has led to an increase in online advertising and promotion, resulting in a shift in marketing budgets towards digital channels. Ultimately, the average spend on marketing reflects the importance businesses place on promoting their products or services and reaching their target audience effectively.

Why Should I Be Spending On Small Business Advertising?

Let’s be honest, running a business isn’t easy. You may be successful, and you may be doing what you love, but there is certainly nothing easy about it. One of the biggest challenges faced by small businesses is cash flow, along with the fact that it always seems that there is something that needs to be paid for. When you start looking at how much should a company spend on marketing, it is understandable to be asking why you should be spending at all.

The truth is that effective marketing strategies are the lifeblood of your business. Assuming that you are using your budget correctly, and that you have goals to aim for, your marketing spend should be bringing you a significant return on investment (ROI). This is why a marketing plan is just as important as your business plan. Get it right, and you’ll be wanting to allocate as much as possible to your small business marketing budget.

How Do You Calculate How Much To Spend On Marketing?

Determining how much to spend on marketing involves setting clear goals, analyzing revenue and business stage, researching industry benchmarks, identifying the marketing mix, considering customer acquisition costs, evaluating the competitive landscape, assessing ROI and performance tracking, and finally allocating the budget based on these factors. While there is no universal formula, businesses should align their marketing budget with their objectives and available resources, regularly review and adjust based on performance, and stay mindful of industry standards and competition.

What Percent Of Revenue Should Be Spent On Marketing?

When considering how much should a company spend on marketing, for many, the answer comes down to looking at percentages. Should a small business marketing budget be smaller than a big business in terms of percentages, or should they be around the same?

There are advocates of spending 5% of your company revenue on marketing. You will find that there is plenty of advice that suggests that this is the general rule of thumb. The important point here is to focus on the world ‘general’. Whereas there are plenty of businesses that stick to the 5% rule, you will find just as many spending 20%.

With that in mind, what percent of revenue should actually be spent on marketing? The answer, unfortunately, is that it depends. There is no one size fits all, and the percentage of revenue that you allocate to marketing will depend upon factors such as:

The sector that you operate in
The goals that your business is aiming for
How long your company has been established
The amount of funding you have access to

While not providing a direct answer to the size of a small business advertising budget, and the percent of revenue to use, hopefully, this section will have reiterated the importance of research and having a plan.

How Much Should I Spend On Marketing When Starting A Business?

When starting a business, determining how much to spend on marketing requires careful consideration. While there is no fixed percentage or specific amount that applies universally, it is generally advisable for startups to allocate a significant portion of their budget to marketing efforts. This initial investment is crucial for building brand awareness, acquiring customers, and establishing a market presence. A common guideline suggests allocating around 10% to 20% of your projected revenue towards marketing in the early stages. However, the actual amount should be determined based on factors such as industry norms, target audience, competitive landscape, and available resources. It’s important to strike a balance between investing enough to promote your business effectively while remaining mindful of your overall financial sustainability and the need to allocate resources for other crucial aspects of your startup. Regularly assessing the performance and ROI of your marketing initiatives will help you optimize your budget allocation over time.

How Much Profit Should Be Invested In Marketing?

Determining the exact amount of profit that should be invested in marketing is subjective and depends on various factors. The decision should be based on your business goals, growth stage, industry, and marketing strategy. As a general guideline, it is recommended to allocate a percentage of your profits to marketing activities. Many businesses allocate anywhere from 5% to 15% of their profits towards marketing efforts. However, it’s important to consider the specific needs and circumstances of your business. If you are in a growth phase or aiming to penetrate new markets, you may choose to allocate a higher percentage of profits to marketing to support those objectives. On the other hand, if your business is mature and focusing on maintaining market share, a lower percentage might be appropriate. Regularly assessing the effectiveness of your marketing campaigns and adjusting your budget allocation accordingly will help ensure that you are investing an appropriate amount for optimal returns.

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What Should My Small Business Advertising Budget Be?

While looking at what percent of revenue should be spent on marketing doesn’t come back with any concrete answers, there is another search that is useful. One study into how much a small business marketing budget should be came back with these results:

Less than £1,000 per year was spent by 38% of small businesses
A spend between £1,000 and £5,000 was also made by 38%
Only 5% reported spending between £5,000 and £10,000
14% of small businesses exceeded £10,000 with their marketing spend

While these figures may give some insight, the important thing to note here is that these businesses came from a variety of sectors. This highlights again that there is no such thing as a one size fits all approach to the question “How much should a business spend on marketing?”.

How Can I Be Sure I’m Getting Value For Money?

When it comes to your small business advertising budget, you need to be sure that every penny is working hard and generating the results that you need. The way to do this is just the same as in any other area of your business: you need a way of evaluating performance. Now, there may well be a variety of complex equations and calculations that you could use, but we’re just going to keep it simple.

To establish if your marketing plan is effective, and if it is offering value for money, all you need to look at is if you are getting more business. Has your revenue increased? Is the increase in revenue covering your marketing costs? After the costs are covered, are you still on the up? If you can answer yes to all three questions then your small business advertising budget is performing successfully and giving you an ROI. Of course, there are differing levels of success though.

Where Should I Be Spending My Small Business Marketing Budget?

If you are clearer on how much should a business spend on marketing, then you have won half of the battle. The next part is looking at that budget and being clear on where it is going to be spent. This is where your marketing plan is useful. Some of where your spend will go will be dependent upon your industry as this will dictate where your potential customers are and how you can target them.

As we have said, you may have very clear goals, but you may need to adapt your marketing plan as time goes on. As you see what’s bringing you the most success, it makes sense to allocate more of your small business advertising budget to those areas.

Let’s explore some of the options that are available to you:

Email Marketing

There is nothing new about email marketing. It has stood the test of time for one simple reason – it works. When you learn how to use email marketing effectively, you will soon realise that you need to be allocating part of your small business marketing budget here. Yes, there are plenty of new strategies that are well worth exploring, but email still has its place.

The reason that it works is simple. You are reaching out directly to those who are interested in your product or service. It has often been said that there is money in a list, and that is still true today. The bigger your email list the more successful your marketing will be.

Social Media Marketing

If you are looking for a great ROI from your small business advertising budget, then social media is well worth exploring. It is worth taking a look at the demographics of each platform and deciding where your presence should be. Maybe it is Facebook that will work best for you. For others, it could be Instagram or even TikTok. Regardless, once you have decided on your platform(s) make sure you take the time to understand them.

The reality is that social media marketing can be relatively simple. It is something that, as a business, you could probably handle yourself. The downside is that it is extremely time-consuming. You may decide to use some of your small business marketing budget to pay for a company to handle this for you.

Content Marketing

When you consider how much should a company spend on marketing, there is no getting any from the fact that content marketing deserves to be included. By creating content you stand to benefit by increasing your rankings in the search engines and also by showing yourself to be an expert in your field. Creating content can bring huge returns for any business.

Again, this is something that a be time-consuming. As well as the time it takes, there is a great deal of skill required to create the perfect headline and to craft the best copy. For this reason, many businesses choose to outsource their content creation so that they can focus on the areas where they bring the most value. Remember, while content includes blog posts, there are also other areas to consider such as infographics, images, and videos. Different types of content will perform better than others depending upon the message you are trying to get across and where you are publishing it.

Search Engine Optimisation (SEO)

This is an area that can cause masses of confusion, but the truth is that SEO is one marketing activity that you need to embrace: it simply can not be ignored. If you take the time to master the basics of SEO, you can soon start to see benefits as your site, and your content becomes more visible. However, it is likely that you will want to allocate part of your small business marketing budget to having this managed on your behalf.

SEO is not a part-time job. It requires constant learning and tweaking to realise the full benefits. There are times when Google updates its algorithm and suddenly there is a whole lot more learning to be done. A professional company can monitor this for you and bring you the best results.

Pay Per Click (PPC)

It is always worth exploring PPC and including this in your small business advertising budget. This is a great way of targeting potential customers and driving them to your site. The cost of PPC will depend upon your sector and how competitive your search terms are.

It can be easy to lose money on PPC. If your campaigns are not optimised you could find yourself getting plenty of clicks but little return. There are some professional companies that can handle your PPC campaigns on your behalf. To see if this is worth your marketing spend, you would have to examine the potential ROI and then review the performance on an ongoing basis.

Final Thoughts

When it comes to considering the question “How much should a company spend on marketing?”, there is no clear cut answer. Much depends on the sector that you operate in as this will have a bearing on the marketing methods that will work best for you.

When it comes to content marketing, at Content Conga, we have vast experience in creating quality copy for an array of different industries. Why not go ahead and give us a try by letting us produce the perfect content for your business?