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Local Spark Blog
05Aug 2016



How Much Should My Marketing Budget Be?

Online Marketing by Matt Smith

Marketing is an extremely important element of running a successful business. Without marketing, a company goes unnoticed and is rendered entirely unable of staying afloat in the competitive free market world. A large dilemma which many business owners face is the question of how much money they should actually spend on marketing. If you allocate too much of your income toward your marketing budget, you won’t have enough money left over to spend on other vital business expenses. However, if you do not allocate enough of your income to marketing, you will not be able to grow or even maintain your business and will almost certainly end up losing a significant amount of profits and customers. Determining how much your marketing budget should be depends on a wide variety of factors. If you’re looking for a magic number, the answer is between ten to thirty percent of your income, and here’s why:


You might have heard before that the general recommendation for creating a marketing budget is to dedicate approximately five percent of your company’s income to that budget. However, this strategy is designed specifically to help companies maintain their current position in the market. It is just enough money for a business to scrape by and maintain the customers and consumer attention they have already gained. There is no room for growth or increased success in this scenario. If you are starting with a smaller business and are hoping to grow it into something larger and more significant in the business world, it is vital to spend more money than the generally recommended five percent on marketing costs.


Before you agree to spend between five and thirty percent of your business’s hard-earned money on marketing, it’s understandable that you would want to know what that marketing investment can do for your and your company. The simple answer is: it can do a lot. Spending an increased amount of your income on marketing creates an exponential return for you and your company. If you maintain your marketing budget at that higher percentage, you will continue to acquire more growth and increased profits for your company.


If you’re looking for a case-in-point scenario, here’s a good one: A-1 American Services is a successful plumbing company in Hampton Roads. They spend approximately twenty-five percent of their annual income on marketing expenses. This percentage is considered to be five times higher than the general five-percent recommendation for established companies. However, A-1 American Services is increasingly successful; they currently bring in an income of approximately four million dollars per year. This multi-million-dollar income is undoubtedly due largely in part to their extensive marketing budget.


You might be convinced now that spending five to thirty percent of your income on marketing expenses isn’t such a crazy idea after all. However, five to thirty percent is a fairly wide range. What percent within that range is best for ensuring growth and success for your own business? The answer to that question depends entirely on the unique business that you own. All businesses are a little different and have slightly different marketing needs. The primary things you should consider before deciding upon an exact marketing budget are the level of competition of your business and how many new products or services you are offering. If your business is in an especially competitive industry, such as supplying consumer products, you should ramp up your marketing budget to twenty-five percent of your income. Furthermore, if you offer new products or services, you should spend twenty percent of the revenue you earn from each one on marketing for that product or service.


Determining how much your marketing budget should be depends on a wide variety of factors and achieving the perfect balance between costs and returns can be extremely difficult. The bottom line is, however, that if you have big dreams for your company and hope that it will grow and gain increased success and profits above its current level, you have to be willing to spend money on marketing. Allocating a five percent marketing budget every year without ever giving it a second thought is not a smart way to do business and will result in you missing out on growth and profit opportunities. Keep your marketing budget at ten percent or higher and monitor it closely and frequently in order to make any necessary adjustments that might arise in the future.