How much should your small business budget on marketing?

Updated: Dec 15, 2020

budget on marketing for small businesses
How much should you spend on marketing?

So, you started a business lately. Or maybe you’re having a small business that you’re trying to get off the ground and running.

At the beginning of your business, you may get some words around through your connection and word-of-mouth to win clients. And that may keep your business running for a couple of months. But you don’t want to build a business without expanding it, do you? When that time comes, free marketing isn’t going to do the job for you as effectively as before.

At this point, a CEO may know what kind of advertising their business need to invest in, depending on their target customers’ interests and habits. However, most of the young entrepreneurs’ question is how much should they spend on marketing – or even if their investment in marketing is worth it. Are they spending too much or too little? Will their marketing efforts improve their profit? Are they spending that budget on the right thing?

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Now, as a business owner, you have to understand: no one intuitively knows how much to spend on marketing their business. Everything is trial and error to them. If everything is not so sure to anyone, why business owners still invest in it? Because they know that marketing is crucial to their profitability and growth, be it a small or big company. Yet, according to the U.S. Small Business Administration, small businesses especially don’t spend enough for a strong marketing strategy.

Marketing does matter. But where should small businesses or start-ups start? Let’s take a look at a list of industries and how much marketing takes up in their business budget.

Before diving into the sea of marketing and set up a plan for your business, you should consider how much are you willing to spend on marketing. Lucky you, many businesses across industries before you have been through a similar crisis. Take their experience as your starting point and adjust from then.

According to a study, here’s some of the top industries’ budget on marketing.

Consider these things before building your marketing budget

One size does not fit all, and also these statistics on marketing. Sure, looking at it may make you feel reassured because it’s real number took out from a real study. However, you should only look at it as a benchmark for your marketing budget. Building your business budget on marketing requires a hard look at your business goals and finances. At the end of the day, money spending on your business marketing depends on your industry, stage of business, and profit margins.

Consider these things first before launching your money into marketing

A new business’ marketing budget is often disproportionate to revenue

The marketing budget is often based on a percentage of your gross revenue, either how big or small your business is. But here’s the thing: as a young company, where do you have that “gross revenue”, or money – yet? And even for marketing? That means a startup business may need to spend a disproportionate percentage on marketing compared to its sales when first getting off the ground.

Consider this part as an investment into your business: if you do it right, what you get out of it is going to worth so much more.

In the early stages of a new business, calculate a budget based on sales projections

To calculate your marketing budget, look at your sales percentage for your first year in business, including predicting your annual revenue, an analysis of the source of revenue for your business, and calculating the overhead it takes to produce what you’re selling. A reliable and in-depth accounting system can help tell you everything you need to know.

When in doubt, follow the SBS system

According to the U.S Small Business Administration, a small business should spend 7 to 8 percent of their gross revenue for marketing and advertising if they’re doing less than $5 million a year in sales. Once you grasp the gist of it and know where you want to go and what you want to work with, you can start thinking of the right marketing plan that fits your budget.

Henry Ford said: “A man who stops advertising to save money is like a man who stops a clock to save time.” Of course, as an entrepreneur with little money and a business that hasn’t generated any profit yet, considering your budget to invest in marketing is still recommended, especially in digital marketing. With digital marketing, you can start your marketing plan right away, effectively, and affordably.

If you are not confident in your marketing skills and abilities, we can help. Our marketing experts can boost your small business. Contact us for a free quote!

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