How to Determine Your Marketing Budget in 2023: Guidelines for Small Businesses

As a small business owner, you know that marketing is critical to growing and sustaining your business. It’s how you get your name out there, attract new customers, and build brand recognition. But with limited resources and a laundry list of expenses, it can be challenging to determine how much of your revenue should be allocated to marketing.

The best way for a small business to determine the ideal marketing budget is to consider various factors, such as their business goals, industry, growth stage, and market conditions.

Small businesses can create marketing budgets that align with their specific needs and objectives by considering these factors. One of the most popular schools of thought is to use this general guideline, allocating a percentage of total revenue towards marketing, to help determine an appropriate budget. Finally, small businesses can maximize the effectiveness of their marketing budget by targeting specific audiences, using data analytics to inform marketing decisions, focusing on high-ROI tactics, and measuring and adjusting their efforts regularly.

What Is The Best Percentage?

A company’s marketing budget can range from 5-25 percent of its revenue or revenue targets. This depends on the company’s size and stage of growth. It also depends on the impact of marketing on sales within their industry. The company’s growth stage is the most important factor when determining the size of your marketing budget. Companies that want to maintain market positions should budget between 2-10%. Companies with high growth targets (fast-growth stages) should budget between 15-30% of their projected revenue.

• The amount of revenue businesses allocate to marketing has grown over the past 12 years, with the average at 8.7% of overall company revenue in 2022 (source: CMO Survey)
• Marketing will comprise roughly 13.6% of a company’s total budget in 2023 (source: Hubspot)
• If you want rapid growth, then you may need to push that number higher, possibly to 20% or more (source: Forbes)

The Importance of Allocating a Marketing Budget

Allocating a marketing budget is crucial for small businesses. It allows you to reach potential customers, generate leads, and build brand awareness. Without a marketing spend, your business risks being overlooked in a crowded market, missing out on valuable opportunities, and stagnating.

Correctly determining your marketing investment can also help you measure your marketing effort’s return on investment (ROI). By tracking and analyzing the performance of your marketing campaigns, you can identify what’s working and what’s not and adjust your strategy accordingly. This ensures you’re using your marketing resources effectively and getting the most out of your investment.

On the other hand, not allocating a marketing budget can lead to missed opportunities and stagnant growth. Your business may struggle to gain visibility and attract new customers, hindering your ability to expand and succeed. Without correctly calculating your marketing cost, you risk falling behind your competitors and missing valuable leads and sales.

In short, allocating a marketing budget is essential for small businesses that want to grow and succeed. It allows you to reach potential customers, generate leads, and build brand awareness while measuring your efforts’ ROI.

Factors to Consider When Determining a Marketing Budget

While setting a budget for your marketing campaign is crucial, the amount of revenue that should be spent on marketing can vary greatly depending on various factors. When determining how much to allocate toward marketing, small businesses should consider the following factors:

• Business Goals: What are your business goals, and how does marketing support them? If you want to expand into new markets or launch a new product, you may need to spend more on marketing to reach your target audience. On the other hand, if you’re focused on maintaining your current customer base, you may be able to get by with smaller marketing investments.
• Industry: Different industries have different marketing needs and challenges. For example, businesses in highly competitive industries may need to spend more on marketing to stand out from the crowd, while businesses in niche markets may need to focus on more targeted marketing strategies.
• Growth Stage: Are you a new business just starting out, or an established business looking to grow? New businesses may need to spend more on marketing to build brand awareness and attract new customers. In contrast, established companies may be able to get by with a smaller marketing budget.
• Market Conditions: The current market conditions can also affect your marketing budget. If the market is highly competitive or there are significant changes in consumer behavior, you may need to adjust your marketing strategy and spend more on marketing to stay competitive.

Considering these factors, you can determine an appropriate marketing budget that aligns with your business goals and needs. The next section will discuss general guidelines for how much revenue should be spent on marketing.

Guidelines for Allocating a Marketing Budget

While there is no one-size-fits-all answer to how much revenue a small business should spend on marketing, there are some general guidelines to consider. The Small Business Administration recommends that companies with revenue under $5 million should allocate 7-8% of their income towards marketing, while companies with revenue over $5 million can allocate 5% or less.

Other sources suggest allocating between 5-12% of total revenue towards marketing, depending on factors such as industry and growth stage. For example, a study by Gartner found that high-growth companies (those with 20% or more annual growth) spent an average of 12% of their revenue on marketing.

It’s important to note that these are just general guidelines, and the appropriate marketing spend for your business may vary based on your specific circumstances. For example, if you’re in a highly competitive industry, you may need to spend more on marketing to stay competitive. Alternatively, if you have a unique product or service, you may be able to get by with a lower marketing budget.

Ultimately, finding the right balance between your marketing spend and overall business goals is the key. It’s a good idea to track your marketing efforts’ effectiveness regularly and adjust your budget as needed to ensure you’re getting the best return on investment.

In the next section, we’ll discuss strategies for maximizing the effectiveness of your marketing budget, so you can get the most out of your investment.

Strategies for Maximizing the Effectiveness of a Marketing Budget

Allocating a marketing budget is one thing, but getting the most out of your investment is another. To maximize the effectiveness of your marketing budget, consider the following strategies:

• Target Specific Audiences: Rather than trying to reach everyone, focus on specific audiences most likely to be interested in your products or services. This allows you to tailor your marketing messages and use your resources more effectively.
• Use Data to Inform Marketing Decisions: Use data analytics tools to track the performance of your marketing campaigns and adjust your strategy accordingly. This can help you identify what’s working and what’s not, so you can optimize your efforts and maximize your investment.
• Focus on High-ROI Tactics: Not all marketing tactics are created equal. Focus on tactics proven to deliver a high return on investment, such as content marketing, search engine optimization, and email marketing.
• Measure and Adjust: Regularly measure the effectiveness of your marketing efforts and adjust your strategy as needed. This ensures you’re using your resources effectively and getting the most out of your investment.

By following these strategies, you can maximize the effectiveness of your marketing budget and get the most out of your investment.

Conclusion

Allocating a marketing budget is crucial for small businesses that want to grow and succeed. You can determine an appropriate marketing spend that aligns with your needs by considering your business goals, industry, growth stage, and market conditions. General guidelines suggest allocating 5-12% of total revenue towards marketing, depending on various factors.

To get the most out of your marketing budget, target specific audiences, use data to inform marketing decisions, focus on high-ROI tactics, and measure and adjust your efforts regularly. By doing so, you can maximize the effectiveness of your marketing budget and achieve your business goals.

Ready to optimize your marketing budget and achieve your business goals? Contact us today to learn how we can help you target specific audiences, use data analytics, and focus on high-ROI tactics to get the most out of your marketing budget. Don’t miss out on valuable growth opportunities – let us help you succeed!

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About The Author

Phil Tucker

Digital Marketing Expert

Phil Tucker is a digital marketing expert specializing in Search Engine Optimization and Website Design. He founded Be Famous Media in 2012, a digital marketing agency located in Lynchburg VA, that helps businesses across the United States increase their online visibility and attract more customers. Phil has over 20 years of experience in digital marketing and has worked with clients in various industries, from healthcare to manufacturing. He is passionate about helping businesses achieve their goals through effective digital marketing strategies. Check out his articles on his blog MrPhilTucker.com for insights and tips on improving your online presence.