How to Determine Your Marketing Budget in 3 Steps

Growing your business, gaining more clients, more leads, or sales doesn’t happen as organically as most people think. Sooner or later you’re going to have to put yourself out there. That’s all marketing really is – letting people know that you exist and communicating your value to them.

It might be a simple concept, but getting people’s attention and actually convincing them of your value is easier said than done, especially in today’s content-saturated world. Marketing a business takes time and effort, and you might end up needing more help than you originally thought. 

In order to market effectively, you first have to figure out how much you’re willing to spend and what your marketing budget is. That budget will dictate what strategies are available to you and how you can go about marketing your business.

So how do you calculate your total advertising and marketing budget? Here are our 3 steps you can follow to figure it out based on your business’s revenue.

1. Determine Your Revenue Target

You start by setting your revenue target. Ask yourself how much money you want to make, how much you want in sales, or what your overall goal is.

Of course, everyone wants to make more money. I talk to business owners all the time who say they want to grow. But when I ask them about their revenue target this year or last year, they usually don’t have an answer – they just want to make more.

Businessman target for success holding dart on blackboard

Not setting a target is why so many businesses aren’t making more money. If you don’t have a set goal you can work towards, you can’t strategize properly. You won’t know if what you’re doing is working or if you need a new approach. So set a total revenue target. For this example, we’re going to use $100,000/month in sales.

2. Allocate a Percentage of Your Revenue Goal

The second step is figuring out a percentage that makes sense for you and that works for you to hit your revenue target. The percentage that works well for the companies and the clients that we work with is between 10-20% of total gross revenue. We suggest that they allocate this towards marketing and advertising.

So if your business makes $100,000/month in revenue, you would take $10,000 to $20,000 a month for marketing spend. We’re going to say $10,000 for simplicity’s sake. However, we don’t suggest just throwing that money at whatever marketing tactic you like best. You need to divide it up to make sure you’re getting a return on your marketing investment.

Here’s what we recommend.

a) Spend half on experienced marketers.

You need someone who understands marketing, who has run proven marketing campaigns and can walk you through them. Whether that’s somebody in your office who acts as your marketing director or an agency partner like us, you need people.

Top view of phones and files and coffee mugs

When it comes to the intricacies of marketing, it’s worth it to pay the fee and bypass your learning curve. Instead of you trying to go and run your own advertising campaigns and do your own social media, learning as you go, find people who can help you. Hire a team to help you hit those targets.

You can allocate about half of your budget to your marketing team or person – $5000/month in our example.

b) Spend half on paid ads.

After paying for your team, you’re left with half (or $5000/month) for paid ads. That is, anything that you have to pay in order to get people’s attention. We usually run with Google or Facebook.

So, now you’re spending $5000/month on advertising, and $5000/month on team. Note that this breakdown will likely change based on your individual business. Maybe you find an agency that just runs paid ads and you pay them $2000/month. You then have $8000 to put towards paid ads.

Google analytics chart on laptop screen

Or maybe you want to take a different approach and focus on social media, videos, content – more organic and creative marketing. In this case, it will be much more time intensive and require paying writers, videographers, and content creators to produce content for you. You’ll spend more on people and less on paid ads if you go this route.

3. Determine the Marketing Strategies That Work Best for Your Business

Now that you have your numbers figured out, you can start looking into what marketing activities make sense for your business and your goals.

Just make sure that whatever you’re doing is, in fact, strategic. One of the biggest mistakes that business owners make when they’re trying to kick off marketing campaigns is not allocating the right amount for their marketing budget. Some just look at their bank account and decide they can do $100 or $500 this month, and that’s their marketing budget.

That’s not a good way to grow your business. Make sure you’re strategic, that you’re planning for the future so you can maximize every dollar of your marketing budget.

In Conclusion…

Planning a marketing budget shouldn’t be the last item on your to do list for the month. If you’re not marketing, sooner or later your business won’t be growing. And if you’re not being strategic about your marketing spend, you’re probably not marketing how you should be.

Follow these three steps and soon you’ll be on your way to gaining more clients, more leads, and more sales. And if you want a robust team that can handle all of this for you – zero time wasted on learning curve – be sure to shoot us a message.