How to calculate your marketing budget [Infographic]

When we meet with potential clients, we always have to ask the dreaded question, “What’s your marketing budget?”

Typically, we get a blank stare and a shrug… and that’s okay! Unless you’re a marketing expert, most people don’t think about the amount of money invested in a regular marketing campaign.

A good marketing agency won’t try to sell you what you can’t afford, but try to find what’s best for your situation. All businesses are different and have individual needs, but we’ve found an easy way to get your business on the right track when planning your marketing budget. This article includes a template and process for allocating your marketing budget regardless of your business size and revenue.

Now is the time to pull out that calculator and figure out your true marketing budget.

Income calculation

One of the first steps in determining your marketing budget is to establish your total revenue.

Talk to your CFO, finance department or accountant and figure out your gross income or estimated income.

Gross revenue – Income received before any deductions or allowances, such as for rent, cost of goods sold, taxes, etc.

Estimated turnover – Amount of projected profits for a given accounting period. This calculation can be important for a number of financial activities, including estimating taxes owed, budgeting, and issuing statements to shareholders and interested members of the public (sagegeek).

For our marketing budget example, we’ll say that our company’s gross revenue for this accounting period is $100,000.

size of the company

Are you a new growing business or an older, established one? Typically, new businesses are really the ones that need to push their marketing. They are trying to establish their brand and gain loyal customers.

Established companies, while they should always be marketing, don’t have to push as hard; customers know their name and will buy without even thinking about it (think Kleenex).

For our example, let’s say our company is a fast-growing start-up, has been around for about 2 years, and has 13 employees.

Marketing Budget Allocation

Marketing budgets for new businesses

For these new businesses, at least 12% to 20% of your gross revenue should be allocated to marketing. Sounds like a lot, doesn’t it? Especially for a small business!

Well, think of it this way: you have this amazing new product or service – a major shift in your industry. But no one is buying. Why? Well, probably because they have no idea it’s a real thing yet.

Word of mouth doesn’t do much, and new businesses need to take their business to the next level. Marketing should be a major focus of these young companies; it not only brings in new customers and leads, but establishes your brand in the industry. Once your brand is established, you can certainly discuss reducing your marketing budget.

If you are a startup, also see:

Marketing budgets for established businesses

For established businesses, at least 6-12% of your gross revenue should be allocated to marketing. But why so little compared to these small companies? As mentioned earlier, established brands don’t need to be so heavily marketed. They have their loyal customers who really aren’t going anywhere. Although they still need to market, they certainly don’t need to allocate as many resources as a small business.

For our example, our small business with a turnover of $100,000 decided to allocate 15% of their gross income to marketing. By taking our revenue (100,000) and multiplying it by our marketing percentage (0.15), we arrived at a marketing budget of $15,000 for our accounting period.

You see, math can sometimes be easy.

While there’s no magic number for every business when it comes to setting a marketing budget, these percentages are a great starting point for your brand to get started with their marketing strategies.

Check out the full infographic below.

About the Author

Ryan Flannagan is the CEO and Founder of Nuanced Media. Ryan is passionate about thought leadership, sharing experiences and collaborating in the digital space. He uses his in-depth market analysis skills and understanding of complex technologies to provide optimal service. He is well known in the community for his strong involvement, his candor and his leadership, as well as his commitment to contributing generously to the in-kind services of non-profit organizations.