A business can’t survive without marketing, but knowing how much to spend can make all the difference. Many business owners ask how much they should be spending on marketing each year. There are rules of thumb, but also different factors that each company will need to consider. How mature is your market? Are you a new or established business? How fast do you need to grow?
The general rule of thumb for companies is to benchmark their marketing spending based on their revenue. Each percentage varies by company size and industry. Last year on average, companies spent 10.4% of their annual revenue on marketing activities, but the range of spending is wide. 30% of companies spend between 3-5%, while 45% are spending between 6-10%. If you are launching a new product, or are expecting to launch into a new market or territory, many companies choose to spend approximately 20% of revenue.
To follow the general rule of thumb, most companies should look to spend around 5% of their total revenue on marketing just to maintain their current position. Those looking to grow or gain greater market share should consider budgeting higher, somewhere around 10%.
If you are still unsure of what to do, we offer you an easy way to calculate your company’s marketing budget:
Total Revenue x 5% = Marketing budget to maintain current position and visibility.
Total Revenue x 10% = Marketing budget to grow, launch a new product, or gain greater market share.