Marketing is an essential part of winning new customers. But deciding how much to spend – and on what strategies – can be challenging for many business owners.
A question that crops up frequently on the forums is how much you should spend on marketing. While most founders can see the benefits of marketing, determining a budget is often a daunting task.
Research by YouGov showed that marketing budgets typically account for 9.3% of overall company revenue in the UK. However, the figure can vary drastically between businesses.
In this guide, we look at how business owners can set a marketing budget and allocate funds effectively.
Marketing encompasses paid advertising, public relations, branding and creative, website design and SEO, social media, leaflets and flyers, as well as special offers and promotions. It might also include things like hiring new staff, taking on freelancers or paying for agencies.
Your budget should state how much you intend to invest in specific marketing activities. Whether you set a monthly, quarterly or yearly budget is up to you. What’s important is that you have a degree of flexibility and can change your plan as you learn what’s delivering the best returns on investment.
Goals might include:
Once you’ve decided on your goals, it’s equally important to determine how you’re going to measure the impact.
Whether it’s the volume of sales or value of sales, the number of people visiting your website or customers coming into your store – without some form of measurement it will be impossible to know how successful your marketing efforts have been.
For example, you might aim to generate a certain number of leads per month or to build your email subscriber list to a certain level.
Having two to five main goals is a healthy place to start.
The perceived wisdom is that marketing spend ranges from 2-20% of gross revenue, with most sources stating between 5-10%. However, rather focussing on the outlay, the most important thing to consider is the expected return on your marketing investment.
On the How to Calculate a Marketing Budget thread, UKBF member Trevor Andrews posted:
“Your spend on marketing depends on what you need. If you are launching a business it could be 10%, if you are a profitable business and just need to keep things going it could be 2%.”
Japancool advised that the important thing is to work out what return you expect from any marketing efforts before investing.
“If your marketing is 50% of your gross profit, but it increased your sales by 500%, then it would be worth it,” they posted.
Mark T Jones has a six-step plan for determining your marketing budget:
Taking things one step further, UkAppCoder shared a detailed formula based on product cost price that business owners can use.
If your business has a very limited marketing budget, or you’re looking to get a little extra mileage on your investment, check out our guide Seven ways to promote your small business for free.
Startup founders with no track record of marketing will have to experiment to begin with. To boost your chances, try speaking to other founders and posting on our Sales, Marketing & PR forum to see what strategies have worked well for others in a similar position.
Again, for new and established businesses alike, it’s essential to record and monitor the data from your marketing efforts: determining the return on investment from different marketing strategies is key to informing future efforts.
Here are some of the ways you could allocate your marketing budget:
To find out more, check out these UKBF guides on the power of social media:
With great email content and a decent number of subscribers, businesses can reap the benefits. Some studies suggest the ROI on email newsletters can be as high as 42:1 and it’s an effective way to increase customer retention.
Our guide Six simple techniques to quickly grow your email marketing list offers handy tips on how to utilise this strategy.
Learn how to build a better website for your business with our handy guide.
A question that crops up frequently on the forums is how much you should spend on marketing. While most founders can see the benefits of marketing, determining a budget is often a daunting task.
Research by YouGov showed that marketing budgets typically account for 9.3% of overall company revenue in the UK. However, the figure can vary drastically between businesses.
In this guide, we look at how business owners can set a marketing budget and allocate funds effectively.
What is a marketing budget?
A marketing budget is a plan that sets out the amount of money you intend to spend on marketing your business during a given period.Marketing encompasses paid advertising, public relations, branding and creative, website design and SEO, social media, leaflets and flyers, as well as special offers and promotions. It might also include things like hiring new staff, taking on freelancers or paying for agencies.
Your budget should state how much you intend to invest in specific marketing activities. Whether you set a monthly, quarterly or yearly budget is up to you. What’s important is that you have a degree of flexibility and can change your plan as you learn what’s delivering the best returns on investment.
Set clear marketing goals
Before crunching the numbers, it’s important to consider exactly what you want to achieve with your marketing efforts. This will help you to determine how much you are prepared to spend to reach certain goals and what marketing strategy would be most appropriate.Goals might include:
- Increasing online sales
- Raising brand awareness
- Getting people to sign up for something, like a subscription or catalogue
- Collecting personal details, like email addresses
- Generating enquiries or leads
- Encouraging visitors to your physical premises
Once you’ve decided on your goals, it’s equally important to determine how you’re going to measure the impact.
Whether it’s the volume of sales or value of sales, the number of people visiting your website or customers coming into your store – without some form of measurement it will be impossible to know how successful your marketing efforts have been.
For example, you might aim to generate a certain number of leads per month or to build your email subscriber list to a certain level.
Having two to five main goals is a healthy place to start.
How much should my business spend on marketing?
There is no correct amount to set for a marketing budget. It depends on your goals, your industry, how established your business is and how much money you have available.The perceived wisdom is that marketing spend ranges from 2-20% of gross revenue, with most sources stating between 5-10%. However, rather focussing on the outlay, the most important thing to consider is the expected return on your marketing investment.
On the How to Calculate a Marketing Budget thread, UKBF member Trevor Andrews posted:
“Your spend on marketing depends on what you need. If you are launching a business it could be 10%, if you are a profitable business and just need to keep things going it could be 2%.”
Japancool advised that the important thing is to work out what return you expect from any marketing efforts before investing.
“If your marketing is 50% of your gross profit, but it increased your sales by 500%, then it would be worth it,” they posted.
Mark T Jones has a six-step plan for determining your marketing budget:
- Get hold of a simple marketing budget template.
- Fill in the numbers you are reasonably sure of.
- Estimate the numbers you are unsure of to the best of your ability.
- Go back and challenge the numbers you have put in boxes, including the ones you are sure of.
- Once you have a clear insight into your costs and returns you can juggle your budgets and returns.
- Repeat constantly.
Taking things one step further, UkAppCoder shared a detailed formula based on product cost price that business owners can use.
If your business has a very limited marketing budget, or you’re looking to get a little extra mileage on your investment, check out our guide Seven ways to promote your small business for free.
How to allocate your marketing budget
Once you have decided on the amount you are prepared to spend on marketing, the next step is figuring out how to allocate it. For established businesses, this will be a case of looking back at previous marketing campaigns and seeing what worked and what didn’t.Startup founders with no track record of marketing will have to experiment to begin with. To boost your chances, try speaking to other founders and posting on our Sales, Marketing & PR forum to see what strategies have worked well for others in a similar position.
Again, for new and established businesses alike, it’s essential to record and monitor the data from your marketing efforts: determining the return on investment from different marketing strategies is key to informing future efforts.
Here are some of the ways you could allocate your marketing budget:
Social media
Social media should be a key part of marketing efforts for any business. Booting posts or running adverts on platforms like Instagram, Facebook, TikTok, LinkedIn, Twitter and YouTube can help your business to connect with customers.To find out more, check out these UKBF guides on the power of social media:
Email marketing
Email marketing remains a highly effective tool. It allows you to nurture potential customers and generate significant engagement levels.With great email content and a decent number of subscribers, businesses can reap the benefits. Some studies suggest the ROI on email newsletters can be as high as 42:1 and it’s an effective way to increase customer retention.
Our guide Six simple techniques to quickly grow your email marketing list offers handy tips on how to utilise this strategy.
Pay Per Click (PPC)
PPC is an online advertising model in which a business pays a search engine or another website every time somebody clicks on their advert. One of the most effective forms of PPC advertising is Google Ads. Find out more in our guide on how to get started on Google Ads.Website redesign
Investing in your company website can be an excellent way to spend some of your marketing budget. Not only can it help your business to look more professional, it can increase the conversion rate, increasing the impact of your marketing effortsLearn how to build a better website for your business with our handy guide.
