Many new and small businesses struggle with figuring out what percentage of revenue they should be spending on marketing initiatives. However, most don’t see as a matter of % of revenue but as a matter of spending as little as possible. And that is the wrong mindset.

Growing a business is truly not a case of “if you build it, they will come” as in that classic movie Field of Dream. You need to plan your marketing properly and invest in it, either time or money, but definitively invest. Be very wary of any advisor telling you to save the money and do it the cheap and easy way, there is no such thing. Word of mouth is truly powerful, but, it doesn’t just happen by accident, it is something that is built and worked on. Are there people who accidentally succeed, yeah, for sure, but there is now way of reaching success if all you do is hope you will be so lucky. So, let’s get working here and discuss budget and marketing for people who really want to be successful instead of hoping for magic.

What is a typical marketing budget?

Well, the rule of thumb is that most businesses should invest between 5% and 8% of their revenue. As a percentage of profit, it should represent anything between 10% to 15%.

Another way to look at this is the average marketing budget as a percentage of revenue reported by Chief Marketing Officers (CMOs) of American companies. Depending on the industry, companies’ marketing budgets may be larger or smaller. Here is a list of marketing budget by industry as per the Wall Street Journal CMO survey:

  • Consumer packaged goods: 24%
  • Consumer services: 15%
  • Tech Software/Biotech: 15%
  • Communications/Media: 13%
  • Mining/Construction: 13%
  • Service Consulting: 12%
  • Education: 11%
  • Healthcare/Pharmaceuticals: 10%
  • Retail/Wholesale: 10%
  • Banking/Finance/Insurance: 8%
  • Transportation: 8%
  • Manufacturing: 8%
  • Energy: 4%

Digital marketing is a portion of that average marketing budget. The portion of digital marketing budget varies depending on strategy, but it can be as little as 3% and as high as 100% of a companies overall marketing budget. However, a good average is 30-50% of overall marketing budget dedicated to digital marketing. This would include investments in web design, SEO, digital advertising, email marketing, etc.

So, look at your marketing expenditures and make sure you are at least in the lowest range of marketing spend. Being too low means you are losing on business opportunities, your business is barely scratching the surface of your market and likely, you are suffering of low sales. If you want your business to grow, we always suggest a more aggressive marketing budget.