Determining a marketing budget is vital to allocating enough resources to help market your brand or company effectively. Since businesses rarely benefit from the concept of “build it and they will come,” then it’s essential to ensure your marketing budget aligns with your financial revenue goals.
Budget ranges will vary depending on the goals of the company, as some clients will budget more if they are launching a new product or service, while others will budget less if they are simply sustaining one.
Why is it important to have a marketing budget?
There are several reasons it’s vital to have a marketing budget:
- Every aspect of your business should be budgeted, so before you spend on marketing needs, prep a budget first.
- A marketing budget allows you to implement a strategy and ensure that plan is fully actionable.
- A marketing budget assures you stay on target for both estimated and actual marketing costs.
- A marketing budget lets you better allocate funds and refine spends to the appropriate areas (i.e., branding, digital, etc.).
How much should you budget for marketing?
We advise clients to allocate anywhere between 5% to 18% of their gross annual revenue towards marketing, depending on the business industry.
Based on recent research surveys, the benchmark data indicates that the median average for marketing expenses based on revenue is around 14%. This figure means that for every $100 you make in your business, you would spend $14 on marketing costs.
How do you calculate a marketing budget?
Your marketing budget should correspond with your company’s desire and ability to grow. It should also factor in any expected attrition in current customers and/or your company’s capability to maintain its existing trajectory.
You should also determine the benchmarks in your industry and adjust those with your aims for growth. You can then use those figures to further modify the budget each year based on the previous year budget’s ability to produce results.
If your previous marketing spend didn’t yield a significant return on investment (ROI), evaluate which marketing efforts produced successful results and adjust accordingly.
Tip: Try our marketing budget calculator to get an idea of how much your business should be investing towards marketing needs.