How 2021 Will Change Marketing Forever? In this podcast, we’re interviewing Clarence Fisher at Tulsa Internet Marketing. Covering what you’ll need to know going into 2021 so you make smart marketing choices.
How Much Should You Spend on Marketing in 2020?
On average, marketing budgets make up around 10-14% of total company budgets.
Of course, this varies by industry and how long the company has been in business.
Small businesses generally allocate closer to 7-12% of their total revenue to marketing.
In this case total revenue refers to all the money generated through sales before expenses are taken out.
So, how much should you be spending on your marketing budget in 2020?
Here’s some stats:
- The US Small Business Administrations suggests 7-8% of your gross revenue should go toward your marketing budget.
- While the digital marketing budget averaged 42% of the overall marketing budget in 2019, that’s expected to jump to 45% in 2020.
- Taking the lead in the digital marketing category is video marketing. Video marketing will double what it was from 2016 to 2021.
- The use of social media ads will get 25% of the digital marketing budget in 2020.
This is great information for you to use as a starting point. But what should your company specifically budget? And once you set that budget, how should you, specifically, spend it?
Need help figuring out what your marketing budget should be and how you should spend those marketing dollars? We’ve got the answers for you in this blog.
Grab a piece of paper, a pen, and a calculator (or your nearest computer and jump into Excel) and let’s get planning!!!
In this blog we’ll cover:
- How to calculate your marketing budget
- How the average company allocates online and offline marketing efforts
- Some kick-butt strategies to make the most of your marketing budget
- Free marketing budget template
How to Calculate Your Marketing Budget
Here’s a quick guide to help you figure out what’s right for your business.
Step 1: Calculate your company revenue
Gross Revenue – Revenue received before any deductions or allowances, as for rent, cost of goods sold, taxes, etc.
Estimated Revenue – Amount of earnings projected for a given time period.
If there’s a big difference: go with the smaller number.
Write this number down! You may need to ask your accountant or sales team for help to figure out this number.
Step 2: Assess company size.
Determine if you are a new company (0-5 years old) or an established company (5+ years old).
Step 3: Determine ideal marketing budget range
New companies (0 – 5 years old): New companies should allocate 12-20% of gross revue to marketing. This is more than what established companies should assign.
Why? Well, you’re the new kids on the block, and you need to make a name for yourself and your products/services. Marketing should be a key focus with companies that are just starting out.
Established companies (5+ years old): Older, more established companies should allocate between 6-12%.
Let’s go through 2 examples:
Example 1: Company A has been in business for ten years, and over the past two years their average gross revenue has been $1,000,000 per quarter (or $4,000,000 per year). This means Company A’s ideal marketing budget should be around $60,000 – $120,000 per quarter (or $240,000 – $480,000 per year).
Example 2: Company B is just getting started. The just opened their doors last week and have projected that they’ll make $25,000 per quarter (or $100,000 this first year). This means Company B’s ideal marketing budget should be around $3,000 – $5,000 per quarter (or $12,000 – $20,000 per year).
Now you’ve got an idea of how much money you should be spending on marketing, let’s move on to how to spend those dollars.
How should you allocate your marketing funds?
The landscape for marketing is more complex than ever.
How should you allocate marketing budget across channels online and offline?
And, how should you spread out those funds across each of the various channels?
A smart way to figure out where to use your marketing budget- review what worked for you last year. How’d you get the sales/leads? Look at the customers who closed in 2019 and make a list of the top 10 marketing strategies that closed them.
What clients do you currently have and how did they come to find you? Once you fine-tune this list, you’ll know what works best for you and where your marketing efforts should go.