How Much Should You Budget For Marketing?
How Much Should You Budget for Marketing?
While it varies from industry to industry, there are a few guidelines
When budgeting, most business owners know how much to budget for things like IT, telephones and internet, rent and employee salaries. But many overlook probably one of their most important efforts: Marketing.
Some businesses say they don’t need to do marketing, or they don’t include it initially in their budget. That’s a lot like spending money to put on a party, and then not sending out invitations for people to show up.
In The Practice of Management, author Peter Drucker says that a business, any business has “only two basic functions: marketing and innovation. Marketing and innovation product results; all the rest are costs.”
There are a lot of functions that marketing does, like branding, customer research, social media, SEO/SEM, customer experience and journeys and digital advertising, just to name a few.
How much to budget
So how much should you dedicate to marketing? That’s a simple and hard question to answer, as no two companies, even in the same industry, are the same. But if you don’t want to read any further and want a quick answer, you should budget 5% of your gross revenues on marketing.
If you want a better answer, read a little further, there are some good guidelines to follow.
For example, the US Small Business Administration says that you should budget between 7% and 8% of your gross revenues for marketing if you are doing less than $5 million in sales a year. If you are doing more than that, you should budget 10% or more.
It can also depend on if you are an established company, or the new kid on the block. If you are new, it’s recommended that you budget 12% to 20% of your gross revenue on marketing (you need to establish yourself and gain brand recognition away from established companies). If you are an established one, you should budget between 6% and 12%.
Here is a table that breaks it out plain and simple. So if your gross revenues are $5 million a year, and you want to spend 9% on marketing, then you would need to budget $450,000.
| Gross Revenue | 5% | 7% | 9% | 11% | 15% |
| $500,000 | $25,000 | $35,000 | $45,000 | $55,000 | $75,000 |
| $1,000,000 | $50,000 | $70,000 | $90,000 | $110,000 | $150,000 |
| $1,500,000 | $75,000 | $105,000 | $135,000 | $165,000 | $225,000 |
| $2,000,000 | $100,000 | $140,000 | $180,000 | $220,000 | $300,000 |
| $5,000,000 | $250,000 | $350,000 | $450,000 | $550,000 | $750,000 |
| $7,500,000 | $375,000 | $525,000 | $675,000 | $825,000 | $1,125,000 |
| $10,000,000 | $500,000 | $700,000 | $900,000 | $1,100,000 | $1,500,000 |
| $15,000,000 | $750,000 | $1,050,000 | $1,350,000 | $1,650,000 | $2,250,000 |
| $20,000,000 | $1,000,000 | $1,400,000 | $1,800,000 | $2,200,000 | $3,000,000 |
| $50,000,000 | $2,500,000 | $3,500,000 | $4,500,000 | $5,500,000 | $7,500,000 |
What it included in your marketing budget? Everything from employee salaries, outside marketing help, advertising, your website, printing, giveaways, trade shows, just to name a few.