Creating a Marketing Budget - 6 Essentials for Success

Published on
October 16, 2018

Running a business takes more than just a great idea or even an understanding of how a business operates. It takes a marketing budget. You need to be able to market your business effectively - and you need to be able to do so at the right price.

Marketing theory is pretty simple. You just need to get your products, brand or message in front of people who would be willing to buy what you are selling. The difficult part is when you realize that you don't have a mountain of money to spend on your marketing efforts or countless hours of free time to devote to more cost-effective marketing methods.

In this article, we are going to explain how you create a realistic marketing budget for your small to medium sized business (SMB).

Organize your Financials

organize financials for your marketing budgetThere are several rules of thumb for setting a marketing budget. In either case, you will need to have accurate financial records so you will know exactly how much room you have in your budget to pay for marketing services. Spend time reviewing historical data as well as the accuracy of cash flow forecasts to determine what this number is.

The numbers change a little depending on whether you have been in business for a while or if you are a new company. Your goals for your SMB also play into where your marketing budget should be. These simple estimates are usually tied to your sales revenue or operating budget.

Creating a Marketing Budget

In general, new companies will need to spend somewhere between 12 and 20 percent of their gross revenue on marketing efforts. However, if your business is less than a year old, you'll need to increase those numbers to about 25%.

For businesses that have been in business at least five years – the ideal marketing budget tends to be around 6 to 12 percent of revenue because the business is (hopefully) already established and can rely on word of mouth marketing to drive sales. However, if you are in a highly competitive industry, look to maintain at least a 15% marketing spend of your gross annual revenue to keep sales steady.

Company Goals

While money is important, what is more important is to consider your overall marketing goals. Yes, you probably want to increase sales, but by how much? Do you want to increase engagement via your social media channels? Do you need to create or revamp your brand identity or sales collateral? Maybe you need an updated website that will allow you to sell products online? Consider what the annual goals of the business are at the same time you are finalizing your marketing budget. And be specific!! Ideally, your goals and your budget will align to ensure marketing success.

Time Counts Too

In addition to money, you should also budget out the amount of time you have available to spend on your marketing efforts. If you or someone at your company does not have the time to dedicate to marketing, consider enlisting the help of a marketing/PR firm or consultant to help. When you get into certain types of marketing, like social media, the actual cost outlays are minimal, but it takes time to write posts, create images, monitor comments and respond to messages.

How to Spend Your Marketing Budget

Marketing budget for your business goalsOnce you've determined how much of your budget should be spent on marketing, you'll need to look at how to spend that money. There are certain standards you can use. For instance, most small businesses spend roughly half of their marketing budgets on digital marketing like email marketing and social media, but you might find that something different works better for your business. Work to create a strategic marketing plan so that you can be smart and realistic with your marketing dollars.

The important part is to connect your marketing decisions to specific goals - and if you don't have any marketing goals set, start there. For instance, if you are opening a small retail store, which is more important to you: foot traffic or online sales? Are you trying to get people to buy online or shop in-person? Did you want people to subscribe to your email list or follow your social media? The answers to these questions matter because the methods you use to produce each result are very different.

Check the Metrics

While rules of thumb and marketing goals are great places to start when you create a marketing budget, the next step is just as significant. You need to monitor your marketing metrics to see what works and what doesn't work for your company. The easiest way to do this is to look at the marketing ROI for your efforts.

ROI stands for "return on investment" and it refers to the value you receive for the money you spend. In the case of marketing, it usually refers to the amount of sales you generate from specific marketing efforts but you could also measure the increase in email subscribers, Facebook followers, or number of people who visit your store. By paying attention to which marketing efforts give you the best ROI, you can make better decisions about where to spend your marketing budget and where to save.


Whether you’ve been in business for five years or 100, knowing where to put your marketing dollars for true success can be difficult. The decisions you make during your annual strategic planning process are going to determine your success. Spend time determining how much you can afford to spend on marketing and what your goals are as a company. Then, make sure to monitor the ROI of your efforts, Over time, you will be able to tweak your marketing so that it can be as effective (and valuable) as possible.

Do you need help planning your marketing budget?

Still not sure how where you should be spending your marketing dollars? Fear not! We’re here to help. Email us at or call 480-305-2017 for a complimentary consultation. We’re happy to help.

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