How much should your small business spend on marketing?

We can’t tell you how much of a facepalm it is to hear small businesses say they don’t budget for sales and marketing. 

“Oh, most of our sales come from word-of-mouth marketing.” 

“Word-of-mouth is enough.” 

“We’d rather invest our funds towards product development.” 

Gah!

From one small business to another, you have to allocate spending for marketing. We’ve already addressed the why, and now we’re taking it further to talk about the how. And yes, we’re talking numbers. 

How much should your small business spend on marketing? 

The U.S. Small Business Administration recommends that your small business allocate between 7-8 percent of your gross revenue (under $5 million) toward marketing. The administration based this percentage on companies with 10-12 percent margins. 

Okay, but what’s the average marketing spend?

Most small businesses spend around just 1 percent of their gross revenue on marketing—under the recommended spending. 

Average spending also depends on your industry. B2B companies typically spend 2-5 percent of their revenue while B2C is higher at 5-10 percent. This percentage is because B2C companies spend more money on marketing channels to touch more customer segments. We recommend doing more research on what is standard in your industry and with your competitors. 

While there is no magic number for your marketing spend, be sure to review the following when adjusting how much you’re spending:

• Your long-term goals
• How well your business is performing
• Your industry
• The popularity of your services/products
• The availability of your services/products
• Your previous year’s expenses

How to spend your budget?

There are countless strategies and marketing tools you can invest in to grow your business. 

Before you throw money at the first advertising campaign you think of, research what channels best suit your small business and optimize your channels or pages. An easy (and free!) place to start is by setting up a Google My Business page with updated information, a LinkedIn page and a Facebook page—all of which have no cost to create. 

As you plan your marketing budget, first invest in your software and analytic tools. This will be where you create your campaigns and content, as well as manage the performance of your processes. Popular software tools we’re fans of are Canva, Adobe, Monday.com and Ahrefs, but you’re free to explore other options.

Once you have your tools, calculate how much you can afford to spend on ads, SEO ads, sponsored content or partnerships, social media promotions and other paid opportunities. 

Next, budget how much of your budget will go into content creation. This can be anything from purchasing stock images or working with a photographer, writing your own blog articles or hiring a copywriter and creating videos on your own or with a professional. 

Your marketing goals and your budget should align. What you are trying to achieve determines how much money you should be spending and where it should be going. 

Rooted Web offers a wide range of marketing services at your disposal. If you’re having trouble determining your budget and your resources, don’t be afraid to start a conversation with us. We’re ready to help you.