It is also based on how much you want to grow, and how fast.
Both SCORE and USSBA define the variable for a proper marketing budget to be between2% and 10% of sales, noting that for B2C, retail and pharmaceuticals can exceed 20%during peak brand-building years.
Most companies underspend on their budgets, thinking that not to spend is to save.This, quite simply, isn t true. You ve heard it before, and it bears repeating youhave to spend money to make money. The trick is to spend your money wisely on atailored marketing plan aimed at fulfilling your company s goals. Keep in mind thatyour marketing efforts are directly correlated with your revenue, so now is not thetime to be penny foolish.
Budget-Setting Guidelines
There are two main things to consider when setting a marketing budget:
The brand development or refinement of the brand and channels used to promote thebrand. These include logos, Web sites, blogs, email campaigns, sales presentations,brochures, ads, etc. The ongoing expense of promoting and advertising your brand to your customer base.
For most small to medium-sized businesses, the percentage of revenue dedicated to amarketing budget is determined by industry and size. Below is a chart showing whatwe have put together based on several creditable sources.
Revenue Marketing BudgetUnder $5 million 7 8%$5 10 million 6 7%$10 50 million 5 6%$50 100 million 4 5%Over $100 million 2 3%
Here s an important consideration:
Every industry is different, so companies that sell to specific government branchesor one that has an ultra-specialized niche may be able to deduct 1 2% from the abovefigures. If your company is B2B or B2C, you may need to raise your budget by 1 3% tosee solid results. Retail and pharmaceuticals lead the spending, with many of thesecompanies spending more than 20% of net sales. Overall average is reported as 6%.
Many other circumstances will merit an increase or reduction in your marketingbudget as a percentage of revenue. Feel free to contact us to discuss this, or visit
http://www.sba.gov/smal lbusinessplanner/index.html.
During an initial branding build or a re-branding phase, you should have a higherbudget, which can be reduced in the future. This will allow you to contract for allthe media you need to make an impactfull brand impression.
Last year, ImageWorks clients spent on average spent between $50,000 and $120,000building or rebuilding their brand language. The broad range reflects businesssize and industry.
Can I still grow my company with baby steps ?
Sure. We call this organic growth, and it is how nearly every business starts off.Remember washing cars or mowing lawns for a few bucks? Next thing you know, yourneighbor wants it done. That neighbor refers you to another neighbor, and so on.Many businesses grow their clientele on word of mouth alone, and are verysuccessful.
But they usually hit a brick wall. That s where building a solid branding campaignhelps. To rely on partial branding or organic growth alone, you risk losing revenuefrom business you did not get because X% never discovered you or did not have theirinterest piqued when they interacted with your brand. Nor can you account for lostrevenue from those who perceived your current brand negatively and left your sitewithout you ever knowing it. This is why it is so important to build the brandcorrectly. Why risk millions to save thousands?
Why do so many small and medium-sized businesses fail?
One reason is that companies do not allocate enough money for marketing. Successfuland highly profitable small and medium businesses (SMBs) know how to allocateadequate funding to marketing each year. SMBs realize that marketing, if doneproperly, brings back solid returns and vice versa whereas not allocating enough inyour budget for marketing could spell disaster. Think of marketing this way: It is afundamental ingredient for profitability and growth.
For more marketing information, please contact sales@imageworksstudio.com.
M ichael Delpierre and Scott C. Margenau, the key principals at ImageWorks Studio, aleading marketing and branding agency, contributed to this article. They specializein branding and marketing strategies, persuasive content and optimization, andrevenue-generating programs for their clients. To learn more about ImageWorks Studioand what it can do for you, visit http://www.brandsthatsell.com/ .
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