Understanding how much your business should allocate for its marketing budget is crucial to success. Often, marketing budgets are seen as an expense by small businesses and replaced with more pressing concerns. But, marketing plans can also be forgotten by big businesses that have achieved a certain level of success.
There are many factors for every individual company to consider. Here are some general guidelines to think about when outlining your marketing budget, and a little more on why a marketing budget is so important.
Determining a Marketing Budget
When figuring out how much your business should spend on marketing, consider these two main questions:
- What is the current size and scope of your business?
- What is the overall goal you want to achieve?
These two questions are closely tied. If you have a new and growing business, you obviously have different needs than a company celebrating 50 years in business. If your goals are to rebrand your business, your goals are different than a company that wants to focus on solid lead generation.
Your objective has a direct impact on your timeline. For example, branding is the type of objective that sees a Return on Investment (ROI) over a longer period of time compared to other marketing efforts.
Of course, an integral factor in determining the right marketing budget is the size of your business. Most experts recommend spending 5 to 7% of your annual revenue on marketing to maintain your current level of awareness and visibility in your market.
If your focus is to grow and gain market share, that number increases to 10 to 12% annually. These numbers are scalable. For example, if your business is looking to grow and generates $100,000 in revenue per year, aim to spend as much as $12,000 of that revenue on marketing. If your company needs to maintain top-of-mind awareness and nets $25,000,000 annually, it’s realistic to spend $1.25 to $1.5 million to maintain your market share and influence.
Why Do I Need A Budget?
The answer to that is simple: your business needs a budget to grow. The idea of budgeting is rooted in the saying: “If it can’t be measured, it can’t be managed.” Throwing money at your marketing without measuring results or following a plan could be a major liability for your company. A business should always have a clear vision of its tactics and objectives.
Attaching an amount to your budget doesn’t mean much unless you have a marketing plan with achievable, realistic, time-based goals. In fact, having a budget with goals is one of the main qualifying items we use here at Innovations.
Are you struggling with what to do next? We’re here to help you and your business move forward. Take the first step and request a consultation with us. A simple, 30-minute conversation has never been so important for your business.