As a business owner, you know how paramount it is to have a successful marketing strategy. But with so many options out there today – from traditional print advertising and broadcast campaigns to digital channels like social media, search engine optimization, and more – it can feel overwhelming to figure out exactly where to invest your time and what to spend on marketing for the best return on investment.
To help clear up some of this confusion and make an intelligent decision when allocating resources for marketing your business, we’re breaking down the different factors that affect how much you should spend on marketing.
The U.S. Small Business Administration provides a benchmark of allocating 7-8% of gross revenue toward marketing efforts. However, this figure might vary—at around 4-5% for industries like construction and over 20% for consumer goods companies—depending on the sector’s inherent characteristics.
Finding the sweet spot amidst these rates is crucial to maximizing the potential of both traditional and digital marketing strategies.
Invest in your business by spending at least seven percent of the total revenue on marketing and advertising.
Because of little Brand awareness, we have found that New Companies should spend more, around twelve through twenty percent, on marketing. On the other hand, established Companies can devote less at approximately six to twelve percent to marketing.
How to Calculate what to spend on marketing, according to the U.S. Small Business Administration
Many businesses allocate a percentage of actual or projected gross revenues – usually between 2-3 percent for run-rate marketing and up to 3-5 percent for start-up marketing. But the allocation depends on several factors: the industry you’re in, the size of your business, and its growth stage. For example, during the early brand-building years, retail businesses spend much more than other businesses on marketing – up to 20 percent of sales.
Generally, 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.).
This percentage also assumes you have margins in the range of 10-12 percent (after you’ve covered your other expenses, including marketing).
If your margins are lower than this, you might consider eating more of the business costs by lowering your overall margins and allocating additional spending to marketing. It’s a tough call, but your marketing budget should never be based on what’s left over once all your other business expenses are covered.
HOW MUCH OF YOUR MARKETING BUDGET SHOULD YOU DEDICATE TO DIGITAL MARKETING?
You should invest at least half of your small business’s marketing budget in digital marketing. Traditional or older marketing methods like billboards are often overpriced, and hard to determine the “Return on Investment.”
These older methods are still effective. So wise business owners and marketing managers should look to cover the basics of traditional marketing. And then focus on search engine optimization (SEO), Pay Per Click (PPC), Website Design, and Social Media to garner attention in a world where people are looking at their smartphones ten times longer than they are on the road.
Content Summary
- Business owners should spend at least 7-8% of their gross revenue on marketing efforts.
- However, the percentage varies depending on the industry and company size.
- A minimum of half of the marketing budget should be dedicated to digital marketing tactics such as SEO, PPC, website design, and social media.
- Quick Web Designs is a full-service digital marketing company that provides expert services to increase online sales revenue, leads, and brand awareness.
Contact Quick Web Designs Today for Digital Marketing
“Are you looking for ways to market your business?” Our experienced and enthusiastic team has years of experience helping companies increase their online sales revenue and brand awareness.
For a free consultation and quote, contact our friendly sales team today.
