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Three Rules of Thumb for Setting Up Your Small Business Marketing Budget
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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:

  1. 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.
  2. 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.
  3. 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.

Jeanne RossommePresident, RoadMap Marketing
Jeanne uses her 20 years of marketing know-how to help small business owners reach their goals. Before becoming an entrepreneur, she held a variety of marketing positions with DuPont and General Electric. Jeanne regularly hosts online webinars and workshops in both English and Spanish.
www.roadmapmarketing.com | @roadmapmarketin | More from Jeanne

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Discussion (11) Comment


  1. TimVisitor

    Great article! What a great breakdown of the best way to manage your marketing, time and budget!

  2. Great advice and I think the most important overall message is to think about it and put some structure in place. Being clear about your target market, what you want to achieve and the channels will ensure that your budget is appropriately deployed.


    • Jeanne RossommeAuthor

      Thanks Rosemary. I agree! Any targets (even rough ones as I suggest above) help set real goals.

  3. Spending 10% for your marketing budget does seem like quite a bit too much for most small businesses. For small businesses I think a smart way to build a budget is to first focus on the actual marketing plan, then associate costs with the strategies and tactics you plan to accomplish your goals. I always build a budget from the bottom up – what I NEED to spend to reach goals, then cut back in areas (if necessary) to meet how much I CAN spend.

    In many cases you can tap into small business marketing tools that help you accomplish marketing goals at a very low-cost.


    • Jeanne RossommeAuthor

      Great points Diane. The reality is that most of us SMB owners spend what we can but the bottom up planning you suggest really makes sure you are spending on the most important things first.


  4. Martin LeytonVisitor

    I run a tradesmen blog and have been a tradesmen for many years and know that fellow traders no longer just look at a basic marketing as before and realise that how you adverise and where can make a big difference


  5. Jeanne RossommeAuthor

    Honestly Stuart when I was searching for real benchmarks, they were all over the map. Net is clearly important as some businesses such as grocery stores have profit margins of only 1-2%. New product launches can often budget 20% or more in the first year to build awareness. If you have an established business 10% of net is a place to start. Hope this helps –Jeanne


  6. PhilVisitor

    We are a well established company at 27 years in business with annual sales of $2.5million. 10% budgeted for marketing in our case would be $250,000 with 5% internal & 5% external. That means we would budget $125,000 per year or $10,416 per month for external marketing expenses. Then we should expect a $10 for $1 return or $1,250,000 in additional sales for one year. Not impossible I guess but lets just call it wholly unrealisiic.


    • Jeanne RossommeAuthor

      Thanks Phil. I now realize I was unclear in terms of the ROI number. Typically that is a 1 in 10 return for the expense on a campaign. So if you spend $5000 on a direct mail campaign you should get $50,000 in additional revenue. The $10,000 per month above would include expense for sales people or leads.

      Thanks for clearing things up with real numbers! –Jeanne


  7. StuartVisitor

    Hi Jeanne,
    For point one would you see the 10% revenue spend as 10% Gross sales or a net figure?


    • Jeanne RossommeAuthor

      Honestly Stuart when I was searching for real benchmarks, they were all over the map. Net is clearly important as some businesses such as grocery stores have profit margins of only 1-2%. New product launches can often budget 20% or more in the first year to build awareness. If you have an established business 10% of net is a place to start. Hope this helps –Jeanne

 

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