How much is too much or too little to spend in marketing?
If you’re a small business owner or solo entrepreneur, this can often be a daunting question as you manage every dime that flows in and out of your company. As a rule of thumb, many marketing experts have said that 15% is an ideal percentage to devote to your marketing budget. The 15% is based on monthly revenue. For example, if your company is earning $100,000 annually, then about $15,000 should be devoted to marketing. This is especially the case with start-ups. But do small businesses actually live up to this amount. We were curious about it so we did a little bit of digging around and here’s what we came up with:
Marketing Budgets According to the 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 actually 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.”
Legal Zoom’s Viewpoint on Marketing Budgets….
” Depending on the industry, marketing budgets can range from as low as 1% of sales to over 30%. New companies may spend as much as 50% of sales for introductory marketing programs in the first year. Smaller business may just try to match the spending of their direct competitors.”
Here’s one we really like. Read the full article in Entrepreneur Magazine on how to calculate an ad budget.
And through our digging around, we also came up with this infographic that was created and based on a survey of small business owners in the U.S. So how much are these businesses really spending on marketing….$2,000 a year. That’s it! We look at that number and don’t think it’s good or bad, we think it depends on your industry and business model.
We’d love to know, where do you weigh in on this? Tell us your thoughts about what’s been the most effective thing you’ve done to optimize your marketing budget.