Percent of Revenue Allocated to Marketing
As a business owner, you have a vast amount of responsibilities. One of those responsibilities is determining how much you should be spending on marketing. While there’s no set amount you absolutely have to spend, most successful businesses are spending a certain percentage of their revenue on marketing and advertising. Ideally, your business will fall within the normal parameters for comparable organizations.
The Case for Percentage-Based Spending
While there are some businesses that base their marketing budget on their overall budget or on their relevant ROI, some suggest percentage-based spending makes the most sense in the long term. Aiming to spend a percentage of your revenue, rather than relying on a fixed budget allowance, enables you to grow your marketing as your business grows and capture more market share.
If your marketing strategies are effective, you’re likely to bring in more revenue. Allocating a percentage of that constantly increasing revenue helps reduce the risk of overspending and helps prime your organization for continued growth by allowing you to increase and expand your marketing efforts over time.
This method also works for new businesses. If you’re just getting started, you can simply estimate your expected revenue, based on statistics within your industry, and then allocate a suitable percentage of your estimate. The key, for both new and seasoned businesses alike, is to determine what percentage to allocate, which is why considering current averages is important.
A New Drive for Marketing
In order to fully understand what modern businesses are spending on marketing, one must first understand the trends of recent years. Many businesses have realized the vast importance of marketing and have gradually started to allocate more funds toward it. Right now, the “average” business is spending about 9.5% to 12% of its revenue on marketing-related costs, with some businesses spending as much as 13% or more. While the exact percentage does vary across industries, aiming for at least an average percentage is a smart move, especially considering that pre-pandemic marketing budgets were generally higher.
The Importance of Business Size and Stage
Paying attention to industry standards is important, but the most vital step in determining your exact marketing expenditure is considering your business’ current size and stage, as well as your goals for the future.
Businesses that are comfortable with their current market positions can expect to invest up to about 10% of their revenue on marketing to maintain their status, not accounting for potential changes in industry trends. On the other hand, businesses that want to see a growth of 50% or more are wisely investing anywhere from 15 to 30% of their revenue or projected revenue on marketing.
While it may be tempting to take a more conservative approach to spending, this can often backfire. In the Great Monetary Crisis of 2008, businesses that continued to invest in their future growth, in spite of the recession, typically saw above-market total shareholder returns for the next decade. In short, as this example demonstrates, investing in your future, even in uncertain times, often pays off in big ways. Also, the most successful businesses know that staying stagnant is never the best option. Instead, it’s always better to stay one step ahead and to work toward continual improvement.
The Need for Versatile Marketing Solutions
In addition to ensuring you are allocating the right percent of revenue to marketing, it’s also important to invest in the right type of marketing. Top-earning businesses generally engage in multiple forms of digital marketing, including social media advertising, paid search campaigns, and general search engine optimization. At C0MPLÉX1, we understand the importance of a multifaceted approach. We also understand that the more varied the marketing a business engages in, the better the results are likely to be, particularly if each strategy is designed to reinforce and strengthen the others. For this reason, we offer a host of marketing services beyond and in addition to generalized SEO, including pay-per-click advertising, social media management, and web design and development.
Contact Us Today
At C0MPLÉX1, we believe in empowering professionals to make their own decisions. However, we also believe in making informed choices and taking a future-forward approach. While you’re always in control of how much you spend, remember that your choice can affect your business for years to come. If you’d like to learn more about percentage-based spending, our services, or how we can help your business allocate capital wisely and reach new heights, we’re happy to assist you. Contact us today to get started.