What Percentage of Revenue Should You Spend on Marketing

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Every business wants to make the most of their marketing and sales budget. Getting your product or service in front of consumers is just half the battle; you also have to make sure the impact you’re having is giving you a return on your investment. Your business has individual sales and advertising needs that will vary by industry, but these general guidelines can help you build a strong marketing budget that works for you.

Determining your marketing costs

The SBA recommends spending 7 to 8 percent of your gross revenue on advertising. Other experts insist that 20 to 25 percent is best. The first step to determining how big your marketing budget should be is to calculate your marketing to sales ratio. To do this, divide your total marketing costs by sales revenue. Marketing costs include advertising, marketing materials, social media, branding, website, and public relations, plus things like promotions, events, Google Services, and sponsorships.

Allocating your marketing budget

How can you make the most of your marketing budget? Properly allocating your advertising spend is an important first step. You may choose to allocate a dollar amount or a percentage for each category. It’s estimated that the average company will spend half of its marketing budget on online advertising in 2021, with search engine marketing taking the majority of online marketing spend. 


Ultimately, the nature of your business and the competition in the marketplace should drive your marketing plan. It’s also important to consider the buying funnel, and how it impacts your target customers.

Getting results from your marketing strategy

Once you have implemented your marketing strategy, you should begin to calculate your Return on Investment (ROI). ROI is the approximate measure of the profitability of an investment. There are many ways to calculate marketing ROI. The simplest formula is to divide your net return on investment (for example, gross profits from a particular campaign) and divide it by how much you spent on the campaign. Multiply this number by 100 to get an ROI percentage. 

Tracking ROI over time will help you find your most profitable marketing strategies, as well as reveal which campaigns aren’t as effective.

Taking marketing cues from your competitors

It’s always helpful to watch your competitors when building your marketing strategy. Don’t be afraid to compare your marketing plan against those businesses with a strong history who are similar in size and industry to yours. Though creating an advertising plan always comes with risk, taking calculated risks and understanding how those investments are paying off is the best way to make the most of your marketing budget.

Fore more insights and to get a custom approach on improving your marketing campaigns, contact Journicity today for a free consultation.

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