How To Determine Your Marketing Budget

It’s One Thing To Have A Marketing Budget

It’s Another Thing To Know How To Spend It Wisely

Happy 2016, friend! 

I have a question for you. Do you have a marketing budget defined for your business? 

If you answered "No", it's OK. You are not alone. If you have answered "yes", do you feel you are planning on investing enough to get the job done?

I was recently visiting with a prospect and the question about marketing budgets came up. I figured he’s probably not the only one who’s curious, so why not address the question here?

In this post, we are going to discuss how to calculate your marketing budget based on your percentage of projected gross sales/revenue, as it is the most commonly used. 

Before we begin let me state that the obvious answer to how to determine your marketing budget is… “it depends”. It depends on many factors such as:

• your industry
• how many years you have been in business
• your competition
• your growth strategy, just to name a few

In this article on the SBA.gov website from 2013, they give a decent breakdown of how much money you should allocate toward marketing.

Based on the information they provided, they recommended between 2-5% of projected gross sales. But depending on the size of your business, your industry, and your growth stage you may want to plan on more. For example, a retail business in the early years may need to allocate up to 20% of gross projected sales while getting started.

They also suggested the following:

“As a general rule, small businesses with revenues less than $5 million should allocate 7-8 percent of their revenues to marketing. This budget should be split between:

• 1) brand development costs (which includes all the channels you use to promote your brand such as your website, blogs, sales collateral, etc.), and

• 2) the costs of promoting your business (campaigns, advertising, events, etc.).”

So, based on these assumptions from the SBA, let’s break this down a little more, shall we?

How does look in terms of dollars invested in marketing? Here are a few examples.

Now the questions are::

• How does one determine how to spend the money wisely?
• How much should be earmarked for your online marketing budget vs traditional marketing efforts? 

The answers to these questions are simple, it depends on a lot of factors, many we have already discussed above. But you have to look at where you are currently, where you want to be, and in what period of time.

You will need to spend this budget on things like:

• Trade shows
• Marketing Staff
• Travel
• Website
• Content, blogging, video, etc
• Marketing technologies and analytics
• Social media
• CRM
• Paid advertising (PPC, paid social, etc)
• and much more

Depending on your situation, you should plan a minimum of 25-50% of your budget to go toward your digital marketing efforts, and in some cases even more. The best part about digital and inbound marketing, when done properly, is that you can be dang near 100% accountable for your growth, and measure your success. 

At the end of the day, the ideas here are an approximation, and can and will change depending on your business and the markets you serve. 

Until next time,

Doc