Start by researching your industry. In the simplest terms, your marketing budget should be a percentage of your revenue. A common rule of thumb is that B2B companies should spend between 2 and 5% of their revenue on marketing. In the case of B2C companies, the proportion is usually higher, between 5 and 10%.
You should invest 2-5% of your sales revenue in marketing. Compared to those findings and the findings of many similar studies, 5% doesn't seem like a very big figure. In fact, it seems quite reasonable. However, we must clarify that our 5% rule applies to most years, not to everyone, and covers most marketing, but not everything.
The years that require more expenses will come when you need to invest in the foundation of all your daily marketing activities. You'll probably have to exceed your 5% marketing budget to update your website once every three to five years. Therefore, basic marketing costs are usually not included in your 5%. Without a solid marketing base, your daily marketing activities will range from “ineffective” to a waste of money. Again, let's use websites as an example. We talk to a lot of catering companies and entrepreneurs that have websites that generate less than 5,000 visitors a month, a perfectly respectable amount of traffic for many small businesses.
However, consider if one of these websites was underperforming and only converted 1 in 10,000 visitors into customers (the conversion rate). With 5000 visitors per month (a very high figure for many catering companies), a conversion rate of 1 in 10,000 would translate into only one new online customer every two months. Now let's consider an updated website with an optimized conversion rate: a website that converts 1 in 500 visitors into a customer. That means spending 95% less to acquire each new customer.
It's not always that simple, but we've simplified this example to demonstrate why it's almost always beneficial to exceed 5% of the marketing budget for infrastructure investments. If you're marketing with a fairly static annual budget, you consider marketing as an expense. Good marketers know that this is an investment. The first step toward allocating the marketing budget is to determine the marketing objectives for the year. We recommend at least three objectives S, M, A, R and T.
with predefined success measures linked to each of them. Do you have the basis for achieving your goals? With the objectives in place and the measures of success in place, it's time to allocate your marketing budget. Remember that both are necessary to boost your growth (without traffic, even the best website in the world is worth very little). With established objectives and a solid marketing base (including a marketing strategy), you'll be ready to select marketing activities. How much do you spend on marketing? To see our carefully selected list of the best catering content for each month.
There's a general rule in the marketing world that you should try to spend between 2 and 5% of your sales revenue on marketing. This 5% rule is based on years of previous marketing experience and feedback from successful companies. Although at first glance this 5% rule doesn't seem very generous, if you break it down it's quite reasonable. This is because it should apply most years, but not every year.
Approximately 5% of your sales revenue should cover most of your regular and ongoing marketing activities. While there's no one-size-fits-all answer to all of this, you can simply use the 5% rule, as mentioned above, as a general approach to meeting your marketing needs from the start, especially if you're starting from scratch, and then go a little deeper to plan your budget as you go. The general rule is to invest 5% of your company's revenue in marketing. However, this varies significantly by sector and depending on the marketing strategy established by the company. Some companies spend more than 20% of their revenue on marketing if they try to enter their market quickly. Usually around 5% of sales turnover, but up to 20% or more of revenue for ambitious startups that focus on high growth and rapid market entry.
Choosing a flat rate is often effective for companies looking for a one-time expense, such as specific public relations marketing or a trade show, and not a long-term marketing plan. Especially useful for small businesses, as they can base marketing budgets on what they think the company can afford, rather than on the company's sales. Every year, in the survey of marketing managers, top marketers are asked how their marketing expenses are expected to change in the coming year. While the B2C product sector devotes an average of 15.1% of revenues to marketing budgets, the B2B product sector reports a much lower 7.8% of revenues dedicated to marketing expenses.
Often considered to be the most effective budgeting method, this method uses the objectives of the marketing plan to determine the marketing budget. Establish a detailed marketing budget before the start of each fiscal year and annually make any changes that go hand in hand with the company's growth or decline. New companies can allocate up to 50% of sales to introductory marketing programs during the first year. Partnering with marketing agencies also gives you access to a team of specialists who can help you achieve your goals faster and won't waste your marketing budget. Marketing technologies and automation are proving effective in combining the most effective marketing tactics (email marketing, organic search, social media marketing, and content marketing) to achieve better results.
Identify your most profitable marketing channels, and then devote more of your marketing budget to the channels that best meet your needs. That's why David Hoos, director of B2B performance marketing at The Outloud Group, says you should spend time understanding your customer journey before spending a penny of your budget on marketing. Now that you know the typical percentage of a marketing budget by percentage and revenue, the next step is to learn how to manage your marketing budget. Many first-time business owners contact other people working in the field to learn about their sales and marketing projections and, from there, calculate marketing costs.
One of the difficulties in offering a general budget recommendation is that not all companies are consistent with what they include in their marketing budget. You can hire an internal marketing team within your company and the current costs would be salaries; or you can hire an external marketing company to provide this service as your marketing partner.
