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Posted by Divij Khithani on August 25, 2016

How much should a business spend on marketing?

Key decision makers of small, medium, and large businesses are often challenged with the task of budgeting for the upcoming fiscal year. Part of this process involves allocating a certain dollar amount towards the company’s marketing budget. Unfortunately, there is no objective way to accurately calculate a marketing plan’s prospective return on investment, and thus, this makes it extremely difficult to decide how much to allocate towards marketing.

Deciding on an adequate marketing budget is a key decision that revolves around a variety of factors, including the industry you compete in, the amount of time that the business has operated for, the size of the business, and the business' yearly revenue. Really, the amount you spend on marketing is a combination of how much revenue your business generates every year, in addition to how much you aim to grow in the next fiscal year. It is typically said that a business will spend anywhere from 1 to 10 percent of gross revenue on marketing, although a variety of factors may push the business to spend more than 10 percent. For example, some B2B companies spend under 1 percent of their gross revenue on marketing, as their products already hold a significant presence in the marketplace. On the flip side, new products sold by B2C’s are sometimes allocated 50 percent or more towards their marketing in order to establish the product among consumers.

Unfortunately, firms that generate less than seven figures in annual revenue struggle to compete against firms that do generate seven figures or more. This is because a marketing budget allocation of 1 to 10 percent has much more buying power for a seven figure firm rather than a six figure firm (or less). We recommend that firms generating less than seven figures per year dedicate more than 10 percent of revenue towards marketing, depending on your business needs and goals. This way, your allocation is much higher and you can afford to compete with larger businesses who have higher budgets. Typically it is recommended that businesses looking to grow dedicate more, and businesses that are looking to maintain their place in the market can hover at the same allocation as the previous year.

Effectively creating a budget is a task in of itself, but executing the budget in the most cost-efficient way possible is the real difficulty that most businesses face. As a business owner or key decision maker, a daunting reality of project management is that things do not go according to plan, and projects often exceed budgets. Let BTI take you through the process. Our team of dedicated project managers, strategists, developers, and designers will help you reach your business’s branding and marketing goals, no matter the budget. The BTI team takes pride in its tried and tested approach to effective marketing and maximizing ROI. For small businesses that need full, integrated marketing solutions, BTI has launched our newest business, “Web Toaster”, to provide digital marketing for small businesses with small business budgets.

Get in touch with the BTI or Web Toaster team today, and take your business to the next level.