By Kat Cancio | December 29, 2014

Determining the right marketing budget is cumbersome for any business. Startup companies and small businesses especially, must maintain a healthy balance of revenue to costs while still investing resources to market and grow. The big question for any small business is then: how much budget should be set aside for marketing?

The U.S. Small Business Administration recommends, “As a general rule, small businesses with revenues less than $5 million should allocate 7-8 percent of their revenues to marketing.” This percentage is based on companies that have margins in the 10-12 percent range (after expenses).

Of course, there are many other factors to consider when determining a budget such as the type of industry, size of business, growth stage, etc. For example, businesses that are just getting their feet off the ground and are focused on brand building might spend up to 20 percent of sales on marketing, a much higher percentage than established companies might use.

Regardless of how much budget is set aside for marketing, all businesses can benefit from a system of checkpoints to make sure marketing budgets are being used to their fullest potential. Here are a few ways to curb wasted marketing spend:

  • Track return on investment (ROI). Measure your spending and the current effectiveness of all your activities. Tools such as Google Analytics and call tracking can help, but even simple spreadsheets or pen & paper are better than nothing. If one quarter was more profitable than another, investigate why. Simply put, basic tracking empowers you to do more of what works and less of what doesn’t.
  • Revisit your plans. Recognize that the original marketing plan you created is flexible and can be adjusted as necessary. Remind yourself of your goals and evaluate your performance throughout the year. There is no guarantee that your original plan will be successful, but as long as you know whether your spending is actually achieving your marketing goals and you are willing to make the appropriate changes, you are on the right track.

Additional resource on marketing and budget management:

How to Give Your Business an Extreme Marketing Makeover (Book)