How Much Should You Really Invest in Marketing?

Without marketing, there’s no growth. It’s the only fail-safe process to build lasting customer loyalty through a variety of strategies. But you already knew that.

Yet, something’s still incognito in the minds of small to medium-sized business owners: how much of your budget should go to marketing to drive effective results?

Sadly, the answer isn’t as straightforward as it could be. It depends on the type of business, size of business, as well as business goals.

The good news is, we can give you some proven strategies to help you make that happen.

The Answer to “How Much Should I Spend on Marketing?” and Other Questions You’ve Been Asking For Way Too Long

Some business owners prefer to budget their spend based on a percentage of their total revenue, while others base themselves on the goal they’re after. Keep in mind that there’s no specific template for this – the following data is meant to help you come up with a percentage that works for you.

About the renowned “5% rule” (meaning businesses should spend 5% of their revenue on marketing, on average), it doesn’t work well for small businesses and startups. We’ll take a look at why in a minute.

Here’s an example:

Joe owns a business, and he wants to grow his revenue by $100,000. How much should he invest in marketing to make that happen?

First, we need to consider Joe’s business size. If it’s already an established company, he could rely on 6-12% of gross revenue, according to the average spend. However, if his business is small and seeking growth, he should consider spending a little bit more. That would be 12-20% of revenue.

Yep, sounds like too much for a sprouting business, indeed. But investing heavily in the beginning will help a new business or startup establish a solid brand identity, which is key to brand longevity. Plus, these companies don’t spend this specific amount of money because someone told them to–they do it because they see a profitable return on investment (ROI) from it.

For reference, Joe could also study the average percentage his type of business generally invests. Here:

Next, he would need to decide what percentage should go to different channels depending on his marketing goals.

These channels include:

• Web design
• Social media management
• Search Engine Optimization (SEO)
• Branding
• Content creation
• Public relations
• Twitter and Facebook ads

For this step to be successful, he would need to prioritize his marketing projects. But he has no idea how to do it, which begs the question:

How to Prioritize Your Marketing Budget in 2021?

If you’d like to prioritize your marketing budget (but like Joe up there, don’t know how to do it) and be 100 percent sure every dollar is well-spent, here’s some expert recommendation.

1. Your Website

It pays to have a well-designed and user-friendly website with a low bounce rate. If your website design and content aren’t entertaining enough, you won’t be able to convince visitors to subscribe to your mailing list, download your ebook, or buy your product.

2. Google

Whether you’re paying to earn organic traffic through SEO best practices or paid traffic through PPC, the end goal is the same: earning top positions in search engines like Google. That’s where all of the eyeballs will find you, quickly.

3. Facebook and Instagram

Strategic social media content and ads are ideal to transform strangers into prospects by educating them about your brand. However, only professional-looking content cuts through the clutter and draws attention.

How to Calculate My ROI?

It’s simple.

First, take your marketing spend. Let’s say it’s X.

Now, take your usual revenue for every new business you get, and let’s say it’s Y.

If your margin is Z, how much new business (and eventually, money) would you have to earn, so your profits are equal to your costs?

Remember that your ROI should be higher than the investment. Calculate how much you should invest in order to 2x, 5x, or 10x your investment, depending on your business goals.

If you find it easier, here’s a simple ROI calculation formula:

Key Takeaways

Your marketing will only be successful if, for every dollar you spend, you get multiple dollars back.

Is there a guarantee that you’ll get a high ROI from your marketing efforts? No. But again, if you don’t take the risk, your chances of succeeding in marketing this year are even lower.

Or you can always contact an expert to do the job!