Introduction

What’s a Realistic Marketing Budget?

What is a realistic marketing budget?

What’s a Realistic Marketing Budget?

What is a realistic marketing budget?

You’re curious about how much you should spend on marketing – and I applaud you asking that question. Because what I see most from business owners and marketing executives is that assumption: “I want to spend $X on marketing because that’s what I’ve been spending.”

Maybe you’re not be happy with the results you’ve been getting because, after all, if you’re pleased with your marketing you probably assume you’re spending enough; “if it ain’t broke, don’t fix it.”

Since you’ve gotten this far, I ask that you come further with me as I answer this question.

What I typically see is business owners or senior leaders who think that marketing shouldn’t cost much because (1) they already have a website and (2) anyone can post on social media, or shoot a video on their phone. I’ve heard this idea about marketing spend since the internet began.

But it doesn’t work this way, and I’ve listed why below. I’ve written before about how to best allocate a marketing budget and I’m now sharing what a realistic marketing budget should be, depending on your type of business.

First, let’s dispel the idea that “anyone can do marketing who has a phone.” Have you tried this yourself? Or hired someone to do this? Maybe you have a niece or nephew who’s great with social media apps – s/he is on all the time – so you’ve tried having them help out?

How did that work out? I suspect not very well. And one definition for insanity is doing the same thing over and over again, expecting different results.

Here are the reasons why you should resist the temptation to do this and why it won’t work:

  1. Asking someone who is young and inexperienced in your business to do your marketing is like asking someone who has built a treehouse to build your home.

You wouldn’t do this, would you? But asking a younger person, who happens to be fluent with social media apps, to then take this on for your business makes sense? No, it doesn’t – because they aren’t strategic and they have no experience with bigger projects – especially an important one for you.

Teenagers and college students (or recent graduates) typically have no idea how to be on social media and be effective for anyone else, other than themselves. They know how their peers think and react, but they have no idea about how your customers or clients think, or how to best market your business.

In this case, free (or fairly cheap) is actually costing you money, because you’re not going to get any return on your investment. You’re pretty much throwing away that money. But that’s ok, right? Because it’s not much to begin with. That’s why you tried it.

2) Your marketing shouldn’t be tied to past history – but rather your revenues.

If you have a number in your head that you want to pay for marketing, where did it come from? Did someone else tell you that number? Or is it just a number that makes you comfortable, that you feel you can afford? Is it based on the size of your company? Or how fast you want to grow?

These are the questions to start asking when creating a reasonable marketing budget, not trying to think of ways to get it for free, or at as low a cost as possible.

Here’s an article with some good data about the range of marketing budgets that exist. One guide to use is the Small Business Administration (SBA) recommendation of 7 – 8% of gross revenues on marketing, if your business is under $5 million in revenues. Larger companies often spend much more, depending on if they market to consumers (B2B) or other businesses (B2B).

Start-ups may spend as little as 2% of revenues on marketing, and well-established brands might spend as much as 20%. A lot depends on:

  • the competitiveness of your market (the more competitive, the higher the spend)
  • the number of years you’ve been in business (how well the brand is established locally, regionally, or nationally)
  • how fast you want to grow

 

3) Marketing is an investment – and not investing in your business means no growth.

Most importantly, marketing should be seen as an investment in your business. Every dollar spent should return much more in sales. So the question you ask becomes: “how much should I spend in marketing to meet my expectations to grow $XX in revenues?”

If you have market competitors, marketing is a way of ensuring you keep (or grow) your market share. If your competitors are outspending you, you may find that they get the new business instead of you and your market share decreases.

Instead of thinking about marketing as a discretionary spend, it’s important to realize that marketing is the fuel for your engine (your organization) to grow. Without any fuel, the organization goes nowhere and might even do worse, over time.

If you’re not sure what to spend on your marketing, or you’re unhappy with the results you’ve had so far with your marketing spend, let’s talk.

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