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The question of how large an organisation’s marketing budget should be is often shrouded in mystery and controversy. If you search for an answer online you’ll find answers ranging from as low as 5% of your total revenue to set figures in the hundreds of thousands of dollars.

In reality, the size of your ideal marketing budget will depend on a number of different factors including the size of your business, your goals and objectives and how much time you are willing to invest in doing things yourself.

The more time and marketing expertise you have on your hands the more you will be able to do for yourself but you will still need to get some expert advice if you’re going to get good results.

If you’re struggling to come up with a dollar amount for your marketing, here are a few questions you can ask yourself:

What are my business goals for this year?

How many more sales do I want to make?

How many leads will I need to get in order to achieve these sales?

Once you have the answers to these questions you’ll have more of an idea what you need to spend to make the revenue you envisage for your business.

Marketing costs can be split into different categories. If you are launching a new business or rebranding, there will be a cost associated with logo design, website design and other marketing collateral. If you’re happy with what you already have, you can focus on maintenance and ongoing campaigns instead.

When determining an exact figure, it will be largely dictated by what you can afford as a business. Some businesses choose to set a marketing budget based on a percentage of their annual turnover (for example, you’ll often hear 5-10% bandied about) but this can be misleading as it doesn’t really take into account your specific objectives.

5-10% is a conservative figure, especially for smaller businesses that need to compete with bigger more established brands. As an example, Microsoft spends 18% of their total revenue on marketing and Twitter spends 44%. While most SMEs are probably not undertaking marketing on such a grand scale, it’s worth thinking about where you need to put your money if you’re going to really grow your business.

How much are your competitors spending?

Your competitors’ marketing budgets are going to impact how much you spend. If your competitors are putting vast resources into their marketing, you’re going to struggle to keep up if you’re only spending $5000 a year.

The average marketing spend varies widely across different industries, according to Woocom. This is supported by research done by Vital Design comparing the marketing spend across publicly traded companies in different industries (in the US). I’ve summarised some of their findings below:

SaaS: Some of the largest SaaS companies in the world spent far above the generally accepted 10% figure on their marketing. For example, in 2014, Salesforce invested 53% of their revenue into sales and marketing (and grew by 33%), while email marketing company Constant Contact spent around 38% of their revenue on marketing in the same year.

Tech: Established tech companies like Apple and Microsoft dominate the industry, which means they don’t need to invest the same large amounts as other companies into brand differentiation and start up costs. In 2014, Microsoft spent 18% of their revenue on marketing while Apple spent a relatively low 7%. Google’s budget was 12% of their annual revenue.

 

Manufacturing: The average percentage of gross revenue spent on manufacturing marketing seems to be around 20%, which again is higher than the generally nominated 10%.

Education: The education sector spends a surprising amount on recruiting and marketing to students, even in the public sector. Anything between around 11% for a public university to 20% for a private one.

It’s clear that for businesses that are serious about success and growth, investing 10% of your overall revenue into marketing is probably not going to be enough. This doesn’t mean you need to make like Twitter and opt for 44%, but it does mean being realistic about what you want to achieve, and how much you are prepared to spend to make this happen.