So, you’ve done all the hard work to develop a solid marketing plan that you believe will achieve your
business goals for the coming year, only to find yourself struggling to determine how much money you
should allocate toward supporting the plan. While you certainly don’t want to spend more than is
required, at the same time, spending too little risks not achieving your important goals.
Determining a marketing budget can be stressful and requires careful planning and consideration.
Adding to the stress is the fact that, more and more, digital marketing has become a pay-to-play
landscape where the more you spend, the more likely you are to achieve the results you need.
So, why is a marketing budget important? Well, a marketing budget allows your business to allocate the appropriate level of funding to ensure that your marketing plan is efficiently and effectively supported. A marketing budget is essential for effective planning, resource allocation, and performance evaluation. It guides businesses in making informed decisions, controlling costs, and achieving marketing objectives while maximizing return on investment.
While there is no hard and fast rule for how much a business should allocate to marketing, most
businesses rely on a percentage of gross revenue as a guide. Another way to think about your
marketing budget is to frame it in relation to the revenue growth you’re aiming to achieve with your
marketing efforts.
That said, marketing budgets can vary widely when it comes to the actual percentage, especially
considering that there are many other factors that will have a bearing on your budget including the type of industry, size of business, B2B or B2C, stage of growth, etc.
Speaking of stage of growth, while a good place to start is the Small Business Association’s
recommendation that 7-10 percent of gross revenues should be allocated to marketing, businesses that are just starting out and are focused largely on building brand awareness might spend up to 20 percent on marketing – a much higher percentage than established companies.
Founder and CEO of Elevate My Brand, Laurel Mintz, recommends that start-ups set their initial budget
at 12-20 percent of gross or projected revenue. Whereas, Kayla Carmicheal of HubSpot states that the
average marketing budget for a start-up should be 11.2 percent of overall revenue in order to build
brand awareness and attract new customers – two critically important goals for new business ventures.
As we’ve mentioned, allocating your marketing budget requires careful planning and consideration. But by setting clear goals, analyzing past performance, investing in a solid foundation, and monitoring
results, you can optimize your marketing budget for optimal results. Keep in mind that marketing is an
ongoing process, so be prepared to continuously evaluate and adjust your strategies to stay ahead in
today’s dynamic business landscape.
Finally, keep in mind that while you might have the greatest product or service in the world, if no one
knows about it, it just doesn’t matter. Peter Drucker, regarded as the inventor of modern business
management, once said, “Because its purpose is to create a customer, the business enterprise has two
– and only two – basic functions: marketing and innovation.
The purpose of marketing is to reach your target audience and communicate the benefits of your
product or service so you can successfully acquire, keep, and grow a customer base. And that takes a
carefully considered budget. If you need help determining an appropriate budget allocation for your
business or non-profit, Haven can help.
