Setting a Marketing Budget

category ➞ Marketing

Photo: "GUM (Main Universal Store) in Moscow" by A. Savin

"Hundreds of marketing articles could describe the small details of this big Moscow shopping center, but it all started with a proper marketing budget."

Having a marketing budget is just as important as knowing what activities to fund. When building a marketing program, start by doing one or two marketing activities really well then build that into a comprehensive program over time.

This will ensure activities with your brand name attached reflect positively on your organization. Every action you take sends a signal of quality to your target audience. It is far better to create one extraordinary piece of content than ten mediocre ones that could damage your credibility.

As for the actual dollar amount, this is what the U.S. Small Business Administration recommends you spend:

As a general rule, [organizations] with revenues less than $5 million should allocate 7-8% of their revenues to marketing.

U.S. Small Business Administration » "How to Set a Marketing Budget that Fits your Business Goals and Provides a High Return on Investment" (June 2012)

This means if your organization falls within that range you want to be spending up to $400,000 annually on your marketing budget.

If your organization generates more than $5 million in annual revenue, I have seen other experts recommend a decrease in that percentage. For example, an organization earning more than $300 million in annual revenue may want to budget 4% of revenue toward marketing. This approximates to $12+ million annually.

It is worth noting that each industry has its own standards. Some will budget more, and some will budget less. Red Bull likely spends between 30% and 40% of revenue on their marketing programs. The values presented here are used to give you an idea where to start.

With a budget firmly in hand you gain a much better sense which marketing activities fit your business.