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How Much of Your Business’s Annual Spending Should Be on Marketing?

How Much of Your Business’s Annual Spending Should Be on Marketing?

Saturday 3rd April, 2021

Determining the apt marketing budget is often arduous for any enterprise — especially start-ups and small companies. This is because they must maintain a healthy balance between the revenue generated and the cost spent on marketing and growth annually. However, the big question most businesses ask is: how many resources should be set aside for marketing?

Generally, marketing budgets are directly correlated to business growth and depend on business size, growth stage, and industry type. Besides, how you choose to market your brand gives more insights into the future of your enterprise. Because of this, getting the correct answer of how much you need to spend on marketing becomes an open topic.

Yet, you still need to invest in effective marketing strategies to create and maintain your brand’s relevance, reputation, demand, and competition. Here are a few ideas to help you determine how to budget your annual marketing tactics.

THE 5% RULE

The marketing budget means the total cost of marketing, public relations, advertising, and promotions to boost your business growth. It includes promoting your business through different platforms such as social media, sponsorships, Google Ads, and more. As to ease the pressure of your marketing budget, adopting The 5% Rule comes in handy. That is, spending between 2-5% of your annual sale revenue on marketing.

According to the US Small Business Administration, spending 7 to 8 percent of your total gross income on marketing and advertising\ in ideal. Primarily, this rule is designed for businesses that generate annual revenue of less than R50 million. As a small company or start-up, spending between 2-5% of your total yearly earnings allows you to cover most of your marketing needs.

The 5% rule is ideal for most business owners because it enables companies to remain productive and regain a more significant market share. However, the figure may vary between companies more so those in highly competitive industries. For instance, pharmaceutical companies can spend up to 50% of their annual revenue to facilitate new products’ marketing.

INVEST IN YOUR BUSINESS FOUNDATION

Start-ups and small businesses can find the 5% rule ideal for their marketing budgets. But as your business continues to grow, you’ll require more spending on your marketing strategies. That is, your marketing budget will include more marketing foundations such as promoting your brand, website design and development, and new marketing stratagems.

Having a solid marketing foundation on a daily basis helps you develop practical and creative marketing policies essential for your business growth. Nonetheless, it would help if you consider expected returns vs marketing investments. Most companies wonder how much a specific marketing investment will garner at the end of the year.

Like how much to spend on your marketing, there is no precise answer on your marketing investment returns. Some marketing techniques may take a while to manifest and generate returns. For example, marketing strategies designed for branding may take longer to see results. When coming up with your annual marketing budget, always ensure you can measure success metrics that align with your business model.

HOW TO SPEND YOUR MARKETING BUDGET EFFECTIVELY

Businesses marketing on static annual budgets tend to view markets as expenses. But most established companies understand the value of working with good marketers. Whether you are using the 5% rule or spending 10-50 percent of your gross revenue on marketing, it is imperative to curb wasted marketing spend. Here are some ways to spend your marketing budget effectively;

BOTTOM LINE

How much you can spend on your annual business marketing has no precise answer. The best way to spend wisely on your marketing is through learning more about your business and industry in general. But with the 5% rule for start-ups and small companies and between 7-50 percent for established companies, you can get more insights into your annual business’s marketing spending.

At Betterbanc, we ensure SA businesses get the necessary capital required to help them grow and expand. Our goal is to make sure you’re always ahead of your competitors with adequate funding to propel your business. For more information about marketing budgets, contact us to learn more today!

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