How Much Should You Invest in Your Marketing Budget?
In a nutshell - Avoid looking at marketing as a flat cost. While established small businesses usually spend 7% to 8% of gross revenue, a generic baseline won't fuel your unique objectives. Instead, businesses should treat marketing spend as an evolving investment aligned with specific growth goals.
One question we hear often from business owners is how do they determine the right marketing budget? Deciding on a figure can feel like guesswork. Spend too little, and your business misses opportunities to capture sales growth. Spend too much, and you risk burning through profits.
Here’s the general rule of thumb: Most established small businesses with sales under $5 million should plan to spend 7% to 8% of gross revenue on marketing.*
Pair this general rule of small business marketing spend with an assessment of your business objectives and outlook. Consider what stage your business is in right now, your profit targets, and what you need to spend to realistically achieve your growth goals.
Your Ideal Budget Depends on Three Major Triggers
1. What is Your Phase of Development?
Launch Phase - Startups need to build awareness fast. Plan to invest 12% to 20% of projected revenue to get off the ground.- Growth Phase - Scale up your budget if you want to capture a larger share of your target market.
- Maturity Phase - Established companies can consider dropping down to 5% to 8%, but don’t forget to keep an eye on your competitors!
2. What are Your Industry Norms?
- B2B Businesses - Business-to-business models usually need less consumer reach. They typically spend 2% to 5% in the maturity phase.
- B2C Brands - Consumer-facing brands compete heavily for attention. Expect to spend 5% to 10% or more even with an established name in the marketplace.
- High-Competition Fields - Retail, ecommerce, and even medical or legal practices in competitive markets often need 15% to 25% to stay ahead of other businesses.
3. What are Your Current Competitive Pressures?
- Market Shift - Increase your budget if an aggressive competitor moves into your local area or industry. The stronger your business’s presence with your audience, the more competitors will have to work harder–and spend more–to try and take customers from you.
- Market Leader - Hold a steady, efficient budget if you already dominate your industry or local niche.
The Bottom Line
If you catch yourself thinking about your marketing budget as a straight cost, reframe it as an investment tied to your business goals. As your business evolves, so should your marketing budget to ensure your investment matches your strategic plan.
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*Based on research published by Forrester.