Whether you're just starting a business, or you're ready to get serious about driving sales through marketing, the first question you will likely have is, "how much should I spend on sales and marketing?" Well let's find out.

What's in a Budget?

When budgeting your expenses, make sure you monitor all overhead costs, not just employee costs. To calculate a true budget you need to include fees for outsourced work like web development, digital services, subscriptions, and company marketing. Budgeting helps prioritize the key necessities your business needs to function at its best, while removing amenities that may not be providing the expected efficiency.

How Much Should I Spend on Marketing?

Your marketing budget will encompass all costs for marketing, public relations, advertising, promotions, including digital marketing, SEO, social media, google ads, and more.

As a general rule of thumb, the United States Small Business Administration recommends small businesses that make less than $5 million in revenue should allocate seven to eight percent of their revenues to marketing. But, a recent survey of 168 Chief Marketing Officers revealed that marketing budgets can account for as high as 40% of a business's budget.  

It is recommended that young companies spend around 20-25% of their revenue on marketing costs, and more established companies should aim for the 10-15% range.

How Much Should I Spend on Sales?

As the founder of a business, your main job is to sell. Though your small business will have constant demands that eat up your time and money, you must find time and devote resources to ensure your sales team is properly supported to deliver maximum impact to company growth. When budgeting for the sales department, expenses include: salaries, bonuses, administrative costs, and overhead. While the costs vary for every unique business, statistics show that high-growth technology businesses spend 25 to 45 percent of their revenue on sales. 

Below are some tips to help you find how much you should spend on sales and marketing to be successful:

  • Set a Dollar Amount: New businesses that don't yet have a percentage of revenue to budget against can determine a specific dollar amount for their marketing and sales budget. To do so, calculate how much you can afford to spend, then prioritize which marketing strategies are best for your company's needs and goals. Lastly, allocate a specific dollar amount that is feasible within your current sales projections for the next year . If you only have limited funds available, you might want to fully fund the higher priority categories first and partially fund the others until you begin making revenue.

  • Allocate a Percentage: Other companies may prefer allocating a percentage of revenue rather than a dollar amount. This helps ensure your budget is balanced and that you earn a profit by optimizing towards an ROI. 

  • Fund Marketing Objectives: List some of the goals you hope your marketing campaign will achieve along with an estimate of each goal's cost. Next, fund them based on their priority.

Figuring out how much you should spend on marketing and sales can seem overwhelming, but it’s imperative for the growth and longevity of your business. Try and above tips and let us know what works for you and your customers. Good luck!

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Tags: Blog, Marketing