One of the most common questions that we hear from clients and potential clients ranging from small businesses to 3 Billion dollar enterprises is “How Big Should My Marketing Budget Be?” It takes money to do great marketing and each year budgets need to be defined, so how much is enough?
Q. How much of a budget is reasonable?
A. How much money do you want to make? (Don’t say lots)
There are two ways to arrive at a marketing budget:
The first is simple and quick, but not very accurate. The other is much more exact, but takes a bit more work to figure out. Let’s examine them:
Back Of Napkin Approach
On average companies spend on between 3% and 7% of revenues on marketing. Smaller firms have lower revenue, so they invest a higher percentage of their total revenue in marketing. So a $10,000,000 firm could expect to have a marketing budget of around $700,000. But a billion dollar firm would expect a marketing budget of around $30,000,000. This approach gives you a rough guesstimate of what the budget should be. This approach may work if you are the owner of a small business and want to get a rough idea of how to allocate funds, but most CMO’s won’t want to walk into an annual budget meeting with the board with this sort of data to back up their funding request.
This is what I call a “How many leads do you to meet your revenue projections” approach. “Click here to download a Marketing Budget Calculator that will help you to allocate a budget. Using this method, you answer a series of questions including:
Download the spreadsheet and complete with your answers. The marketing budget will be calculated for you. Using this calculated approach your business will be able to accurately project the amount of money to spend on marketing to meet your revenue projections.
Let us know if you have any questions on how best to distribute your marketing dollars.