How Much Money Should Small Businesses Spend on Marketing?

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August 1st

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Do you have a marketing budget set aside to promote your small business each year? Marketing experts typically recommend that you reserve as much as 10% of your small business’ gross sales for marketing. That includes advertising, promotions, direct mail, giveaways like magnets and such, promotional signage, and so on. The question is whether or not 10% is realistic for your small business or not.

There are several factors to consider when determining your annual marketing budget:

First, the amount of money you spend on marketing should be directly related to the growth stage of your business. Is your business still in its infancy, or is your business mature and well-known? The stage of your business certainly impacts how much money you need to spend to promote it. What industry does your business operate in? Different industries require varying marketing investments to remain competitive. On that note, what are your competitors doing? It’s important to maintain a level playing field at the very least.

Second, you need to plan what new products, services or enhancements you’ll introduce to your small business in the upcoming year. Naturally, if you’re launching a new product, you’ll need to invest enough in the marketing of that product to raise awareness and recognition of it.

Third, you need to determine what business goals you have set. If you want to grow your business by a certain amount within the next year, you need to invest enough money in promotional efforts to help you get there.

Bottom-line, you should invest 5%-10% of your gross sales into your marketing budget. Make a plan before the new year starts and stick to it. Set aside a bit of your budget for opportunities that might arise throughout the year. Most importantly, use your marketing budget. It might sound like a great idea to hold onto that money if your business is doing well, but to grow, you need to reinvest in marketing your business.

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