How To Calculate Your Marketing Budget for 2020
One of the most frequently asked questions we receive as an advertising agency is, “how much should I spend on marketing?” There is no simple answer or formula to calculate exactly how much a business should spend on marketing, the truth is, the answer to that question is always complicated and varies for each business. Every business is unique and should consider the many different factors that are important in their business model and how those fit with an advertising budget.
The easiest way for small businesses to calculate a marketing budget is make it a consistent percentage of gross revenue. Here is a table guide based on SBA business averages.
|Percent of Gross Revenue||SBA Average Guide|
|4%||Medium / Low|
|10%||Medium / High|
|14%||Growth / Aggressive|
|16%+||Startup / Aggressive|
We strongly believe marketing and sales are the life blood of business and every company should be conducting some form of advertising. Well established, large, B2B businesses with strong traditional sales channels might choose to create a marketing budget on the low side at 2% – 4% of revenue. On the other hand newer, B2C businesses and startups should consider more aggressive marketing budgets to build customers and loyalty. This would be on the high end at 14% – 16% of projected revenue.
Marketing Calculator Breakdown
Industry – Each industry has different advertising needs and allocations. This field is not calculated as a part of the advertising budget recommendation, but should be considered when choosing a marketing budget percentage.
Yearly Gross Revenue – This is simply your business gross revenue for the year. Marketing budgets are calculated easiest by taking a percentage of your yearly gross revenue.
Marketing Budget – This field correlates with the chart above, typical marketing budgets can range from 0% to 20%+ The average small business marketing budgets lay somewhere in the middle at 6%-8% of gross revenue.
Digital vs. Traditional Allocation – Many small business allocate marketing budgets to both traditional channels as well as digital channels.
Overall Marketing Budget Recommendation – This is the overall monthly marketing budget recommendation based on your yearly revenue and marketing budget strategy.
Digital Advertising Recommendation – This is the monthly budget recommended for digital advertising which includes, Google Ads, Bing Ads, re-targeting, display advertising, social media advertising (Facebook, Instagram, LinkedIn), video marketing and all other forms of pay-per-click or pay-per-impression-style digital advertising.
SEO Recommendation – This is the monthly budget recommendation for search engine optimization (SEO). Organic traffic driven by good search engine optimization is one of the largest drivers of leads and revenue to many business websites. Unlike most forms of advertising, SEO is sticky. SEO has the longest timeline for success, but remains one of the most powerful ways to get traffic, leads, and sales.
Branding / Social Media Marketing Recommendation – Branding & social media marketing for many businesses isn’t usually a direct channel for traffic leads and sales, but rather an important support channel in the customer journey that helps grow the brand, awareness and loyalty.
Traditional Marketing Recommendation – This is the monthly budget recommended for traditional advertising which includes, TV, radio, magazine, billboards, flyers, guerrilla tactics and all other forms of traditional advertising.