How much is this going to cost? That’s one of the first questions business owners will ask when considering spending money on marketing, and rightfully so. With tight budgets and ever slower sales cycles, business owners need to be both concerned and somewhat conservative with their marketing spend. However, marketing cannot be considered an optional expense. It is as necessary as spending money on your store, your inventory or whatever licenses and permits you may need. But how much is enough?
I’m often surprised when I find that business owners do not even have a budget line item in their business plan for marketing. I’ve seen companies spend hundreds of thousands of dollars to open their business, buy equipment or inventory, hire employees…and yet have no clear idea or budget for letting the world know that they are open for business. Remember, just because you put up a website does not mean people will visit. And as always, hope is not a plan!
So are there any ballpark numbers we can use to estimate how much marketing is going to cost? Well, as with many business questions, the answer is often “It depends,” but happily, there are some good estimates you can use to work on your budget. Here are a few facts about marketing spend in 2014 – 2015:
- The majority of businesses in the U.S. spend more than 10% of their overall revenue on marketing
- As a percentage of overall budgets, B2C companies devote about 16.3% to marketing
- Digital marketing accounts for about 25% of the overall budget with 13% is spent on digital advertising and 12% on content marketing and website development
- 50% of companies plan to increase spend in 2015
- 63% of marketers consider digital advertising as a source of revenue and not just an expense
So to put that in perspective, if you are planning on creating a business with a $500,000 per year gross revenue, you should consider a yearly marketing budget in the range of $50,000. For the most part, you can think of that as an all-in budget which includes your ad buys, materials, online and offline content and perhaps even some outside marketing help.
Of course, these are very round numbers and can vary from about 3% on the very low end to as much as 30% on the high end. The most important thing to remember is that marketing, and hence the success of your business, does not happen by accident. It takes time, effort and money, but if you do nothing, all the money spent on your beautiful new store, or your inventory, or your equipment, may end up costing even more if you have to close your business because nobody knew it existed. Plan accordingly so you don’t ever let that happen!