How to Determine Your Marketing Budget

When you are working with a marketing team and getting your digital strategy ready to go, it's essential to have some type of marketing budget. Whether it's for how many people you have working on your team, how many tools and tech your team is able to invest in to utilize, or the budget your team is able to put behind ads and other campaigns, your marketing team needs some funding.

But how much money should your company set aside for marketing?

This is where you really need to know your marketing measurements and marketing ROI, so that you know what you're bringing in due to your efforts, and can comfortably set a budget based on that. That's your magic number, the sweet spot that will help you to continue bringing money into the company.

Creating a budget.

Let's walk you through how to determine your marketing budget, so you'll be able to find your own magic marketing number.

1. What does your company bring in each year?

The first thing your marketing team needs to know is how much revenue the company generates each year. Every company's revenue has to go to different areas (salaries, HR/culture, product creation, etc.) before it can even go to marketing to bring the company more business.

However, marketing should certainly receive a good percentage of what is coming back into the company. This is how your company is able to grow, reach a higher audience year after year, and increase revenue and, in turn, profit.

Business man using a calculator.

2. What percentage of revenue is your company comfortable spending on marketing?

"None of it" isn't an option here. Sure, all companies would love to be able to pocket as much profit as possible, but if you have your heart set on growing that business, the marketing team needs a good portion of the revenue to make that happen. Ad campaigns, marketing assets, and data tools are not free, and while you certainly don't need to spend close to a majority of revenue on marketing, you need something.

It's recommended for smaller, younger businesses to use a larger percentage of revenue for marketing than bigger, older businesses while they're still trying to grow and establish their presence in the industry. Marketing budget recommendations can even vary based on the type of business, i.e., B2B or B2C.

Smaller businesses should dedicate around 12-20% of their revenue towards marketing, while established companies should put 6-12% towards their marketing budget. On the other spectrum, B2B companies should utilize a marketing budget of 6-7%, while B2C should stay around 9-12%.

Once you've gotten your company's revenue numbers, it's all about calculating the correct percentage. It's important to keep an eye on your data and your marketing ROI. If past strategies haven't generated a high ROI, it's not worth it to dedicate a large marketing budget until you've figured out what works. This is why data-driven marketing is so incredibly successful and important.

Understanding your marketing measurements and marketing ROI helps you to put your budget to good use, and ensure you're getting the most out of it. Be sure to use this formula to determine your company's marketing budget, while also ensuring it makes sense for your company to utilize it in full.

Contact us for a Free Demo of the data management software that will help turn your company's data-driven marketing around.

marketing measures

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