31 Jan What Is a “Decent” Marketing Budget?
One of the first questions I ask prospective clients is, “What is your budget?” Most people have no idea how much “marketing” costs, so they don’t know how to answer. (This also leads me to believe they don’t have a marketing budget. Newsflash: You need one.)
So let’s zoom out and look at the big picture.
What is a decent marketing budget?
The U.S. Small Business Administration has some great guidelines.
If your sales are less than $5 million per year and your net margin is between 10-12 percent, you should spend 7-8 percent of gross revenue on marketing.
Let’s say sales in 2019 are projected to be $2.5 million and your net margin will fall in that 10-12 percent range. Seven percent of $2.5 million is $175,000 for the year. Break it down by month, and you are looking at a marketing spend of $14,583 per month.
New companies and small businesses
This is where things get a little fuzzy, because it depends on who you ask. Recommendations for new companies and small businesses (less than $1 million in annual revenue) range from 2-3 percent of revenue all the way up to 20 percent for those in a competitive industry.
I worked with a management and operations consultant a few years ago, and she suggested a marketing budget between 10-15% of revenue. If you look at the above numbers, this falls right in the middle.
How to make the most of your marketing budget
If your annual marketing budget is $35,000, that means your monthly spend is $2,916. I’m going to round that down to $2,900 for simplicity’s sake.
Spend the first month on a marketing strategy so you know what kind of marketing activities will deliver the best ROI.
You can do a nice combination of blogging, email marketing and social media marketing and advertising for $2,900:
- Two blog posts per month ($600)
- One email newsletter per month ($300)
- Social media marketing (post and channel management) on two channels ($1,500)
- Social ads as needed (up to $500 in ad creation and spend)
That not too shabby, is it? If you land one new client per month with an average life value of $15,000, your monthly ROI is 417%.
I know I’m making up numbers here. I simply want to illustrate why it’s important to think all the way through to your ROI. Once you know it, spending money on marketing is much less painful – and it may even be fun.
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