What’s Your Budget? Here’s the Scoop!

One of the most cringeworthy questions asked of business leaders is, “What’s your marketing budget?” It can cause a stuttered response, because to many, marketing is a mystery. Throttling your marketing budget up and down can be confusing and frustrating.

Having a sustainable marketing plan may be complicated, but make no mistake about it, how much you spend on marketing directly impacts business growth.
Consider these statistics:

• Companies that grew 1-15% year over year spent an average of 16.5% of their revenue on marketing
• Companies that grew 16-30% year over year spent an average of 22% of their revenue on marketing
• Companies that grew 31-100+% year over year spent an average of 50.2% of their revenue on marketing

Knowing where your business is positioned in its life cycle can help determine what percentage of revenue to spend on marketing. While there is no one-size-fits-all answer, budgeting generally falls into three main categories.

Startup Business or New Product/Service Launch First-year businesses need more marketing capital to get off the ground. Although cash flow is tight, marketing really is a foundational investment, as customers need to know you exist, how to find you, and most importantly, why they should choose you.

Start-up marketing budgets range between 25 and 35% of the overall budget. Thirty-five percent may seem high, but if the industry competition is high, it may take that much of an investment to make an impact.

An Established and Growing Business In order to stay in the public eye, the recommended budget for an established business ranges between 12 and 18% for marketing.
At this stage how to spend is just as important as how much is spent. With a consistent budget you can afford to make adjustments if your business is not getting the results it needs.
In a highly competitive market? Setting the budget closer to 18 percent will help achieve the business’ desired goals.

Flat or Declining Business Marketing budgets are always one of the first things a business cuts during a downturn. While this may seem logical, shrinking the marketing budget also shrinks your visibility with consumers and prospects. Once customers start looking and spending elsewhere, they may never come back.

If revenues are flat (or falling) boosting marketing efforts can help.

The rule of thumb for a business facing stagnation or decline is to increase the current marketing budget by 3-10% for six months.

Paired with an effective strategy and execution, numbers should start pointing upwards. If results are sustained, consider lowering that percentage. Continued marketing will help keep your business competitive.

If you do not see results in that six-month period and your business is still struggling, consider adjusting your marketing efforts higher again.

With the right market analysis and planning, the outcomes become more consistent and sustainable.

Need help making these decisions? Contact First Impressions Marketing today to get reliable information on establishing a sustainable marketing plan.