Owners are feeling more optimistic about the economy. Sixty eight percent of small businesses plan on increasing their marketing budget in 2013 (according to a recent study by Aweber), and almost all (97%) plan on at least maintaining their current level of marketing spend.
But that begs the question: What is a smart marketing budget? How much is too much, where you are throwing away resources? How much is too little, where your revenue will remain flat — or worse yet, eaten away by competition?
For this article I was hoping to come up with a neat chart with small business marketing benchmarks by industry. Unfortunately those figures do not seem readily (or publicly) available. But I have seen several polls by different companies that all point to the same general “rules of thumb” for marketing budgets. These levels of dedicated time and money are typical of businesses that are growing and want to keep growing:
- Dedicate about 10% of revenue to marketing and sales. Many companies (according to a recent survey by the CMO Council) spend quite a bit less than this figure with 16% of companies spending between 5-6% of revenue on marketing, with 23% spending over 6%. But marketers of new products often invest 20% of projected revenues for launch. So, in general for a relatively new and growing business budget, allocate about ten percent of revenue to marketing, with half of that amount spent on labor – either your internal staff or external marketing firms.
- Dedicate 20% of your time to sales and marketing. Every successful owner I know is spending at least two hours per day or a day a week on marketing and sales. Included in this time are cultivating relationships via social media and networking, bringing on distributors and salespeople, and managing marketing campaigns.
- Expect $10 in additional revenue for every dollar spent. Marketing and sales programs are an investment in your business. As such you should expect a significant return for your time and effort. (I will write more about specific metrics by marketing tactic later this month.)
How do you derive your marketing budget number? Share in the Comments section below.