How Much Should You Invest In Marketing?

It’s a simple question with a not-so-simple answer. Companies vary greatly in size, revenue, goals and priorities. And the marketing budget process has different challenges depending on how long you’ve been in business.

For established companies that have been actively marketing, forecasting based on past performance is a viable benchmark. However, that’s not an option for those just starting out. The accepted standards to maintain or fuel growth don’t apply when you’re just stepping into this world for the first time.

Calculate, Allocate And Grow

A good place to begin regardless of size and years in business, is with your gross revenue.

For the early-stage business (0-5 years), experts estimate at least 12 to 20% of your gross revenue should be allocated to marketing. While this may seem high to some, it reflects the uphill reality of gaining traction against established competitors. Of course, this should be adjusted based on your industry’s profit margins.

For a young company, a substantial investment in marketing can create brand visibility and build a strong base of new customers and leads. As a brand develops a track record and following, the marketing budget can be trimmed or adjusted to support a desired level of growth.

For established companies (5+ years), experts recommend that 6 to 12% of gross revenue be allocated to marketing. The lower percentages recognize that a sizable group of customers have come on board and displayed repeat-buying patterns. While these seasoned enterprises still need to market, they can afford to reallocate some resources to other business-critical areas.

An Investment In Success

When it comes to marketing your business by executing effective strategies that connect with your target audience, it takes money to make money. Companies that approach marketing as an investment instead of an expense can create value with every dollar spent.

Whatever your initial outlay, seeing a steady influx of leads and sales that help your business grow is the return that keeps on paying it forward.

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