There’s no magic percentage that tells you exactly what your business should spend on marketing. A useful marketing budget starts with what you’re trying to achieve and works backwards from there.

“How much should we spend on marketing?” is one of those questions that sounds as though it should have a simple answer.

Search online and you’ll find plenty of suggested percentages of revenue. They can provide a useful reference point, but they don’t tell the whole story.

Two businesses with the same turnover can have completely different marketing needs.

One might have an established brand, a strong website, an engaged database and a steady stream of referrals. Another might be entering a new market, launching a service or trying to generate significant growth.

Giving both businesses the same marketing budget percentage simply because their revenue is similar doesn’t make much sense.

So rather than starting with a number, I prefer to start somewhere else.

Start with what the business needs to achieve

Before deciding how much to spend on marketing, get clear on what marketing actually needs to do for the business.

Are you trying to:

• generate more enquiries?

• enter a new market?

• launch a new product or service?

• attract a different type of customer?

• improve retention or generate more work from existing clients?

• strengthen your brand?

• support an ambitious growth target?

Maintaining an established position in the market generally requires a different level of investment from actively trying to grow.

Your marketing budget should reflect that.

So, what percentage of revenue should go to marketing?

Marketing spend is often discussed as a percentage of business revenue.

Benchmarks can be useful when sense-checking a budget, but I wouldn't use a percentage as the strategy itself.

The right figure can vary considerably depending on your industry, margins, business model, growth stage, competition and objectives.

A newer business trying to establish itself may need to invest more heavily for a period. An established professional services firm with strong referrals might spend proportionately less but invest strategically in its brand, website, content and client communications.

The more useful question isn't simply:

“What percentage should we spend?”

It's:

“What are we trying to achieve, and what investment will realistically be required to achieve it?”

That changes the conversation from an arbitrary cost to a commercial decision.

Look at your foundations before increasing the budget

More marketing spend won't necessarily solve a marketing problem.

If you're generating traffic but your website doesn't convert it into enquiries, spending more to drive additional traffic may simply send more people into the same problem.

Likewise, if your positioning is unclear, your messaging is inconsistent or potential customers can't quickly understand why they should choose you, increasing your promotional budget isn't necessarily the first thing I'd recommend.

Before investing more, look at the foundations:

Is your positioning clear?
Can someone quickly understand what you do, who you help and why your business is different?

Is your website doing its job?
Does it communicate your value clearly and make the next step obvious?

Are you making use of the audience you already have?
Existing customers, past clients, email databases and referral relationships are often underused.

Do you have a plan?
Or is the budget being divided between disconnected activities because they're the things you've always done?

Sometimes the best use of additional marketing budget isn't buying more reach. It's improving what happens when people find you.

Think beyond advertising

One of the biggest mistakes when setting a marketing budget is assuming that marketing spend means advertising spend.

Paid media can absolutely have a role, but your overall marketing budget may also need to cover:

• marketing strategy and planning

• brand strategy and positioning

• website development and optimisation

• photography and creative assets

• content development

• email marketing

• campaigns

• customer communications

• events and partnerships

• marketing technology and platforms

• ongoing marketing support

• measurement and reporting

The right mix depends on the business.

A company with a strong brand and website might reasonably put more of its budget into campaigns, content and ongoing marketing support to keep activity moving consistently.

A business with weak foundations may get a better return from fixing those first.

Don't overlook the customers you already have

When businesses want to grow, the instinct is often to put most of the marketing budget towards finding new customers.

But growth doesn't always have to start with a new audience.

Ask:

How well are you communicating with existing customers?

Do they know about the full range of services you offer?

When did past clients last hear from you?

Are you actively generating referrals?

Do you have hundreds, or even thousands, of contacts sitting in a database you rarely use?

Depending on the business, improving customer communications, cross-selling, referrals or email marketing may represent a significant opportunity without requiring a huge increase in spend.

Separate the budget into priorities

Instead of starting with a long list of marketing activities, I recommend grouping your investment around a few priorities.

For example:

Foundations
Strategy, positioning, brand, website and core messaging.

Always-on marketing
Content, email, social media, customer communications and ongoing optimisation.

Growth activity
Campaigns, paid promotion, launches, partnerships and new-market activity.

Measurement
Analytics, reporting and understanding what's actually contributing to results.

Your mix won't necessarily be evenly distributed across all four.

If you've just rebuilt your website and refreshed your positioning, more of next year's budget might go towards campaigns and growth.

If your foundations haven't been reviewed for five years, the opposite may be true.

Your marketing budget should change as the business changes

A marketing budget doesn't need to be fixed forever.

If your business is entering a growth phase, launching something new or targeting a new market, you may deliberately increase investment for a period.

If you've just completed a major website or brand project, the following year may look different.

And if something isn't working, continuing to fund it because “it's in the marketing budget” isn't a particularly good reason to keep doing it.

Review both the amount you're spending and where it's going.

A better way to set your marketing budget

If you're planning your marketing budget for the year ahead, I'd work through these questions:

1. What does the business need to achieve?
Start with commercial objectives rather than marketing activities.

2. What role does marketing need to play?
Do you need more awareness, enquiries, repeat business, retention or something else?

3. What's already working?
Protect the channels and activity that are genuinely contributing.

4. Where are the gaps?
Your website, brand, database, content or customer journey may need investment before you add more activity.

5. What can you realistically execute well?
A smaller number of properly funded priorities will usually be more useful than spreading the budget thinly across everything.

6. How will you know whether it's working?
Decide what you'll measure before you spend.

There isn't one right marketing budget

The goal isn't to find the percentage that every other business is supposedly spending.

It's to make deliberate decisions about where marketing can create the most value for your business.

For some businesses, that will mean increasing their marketing investment.

For others, the bigger opportunity will be using the budget they already have more effectively.

And often, the most valuable first step isn't deciding how much to spend.

It's deciding what actually matters.

Not sure where your marketing budget should go?

The Branch Co. helps businesses develop clear marketing strategies, prioritise where to invest and turn those priorities into focused marketing activity.

→ Explore Marketing Strategy
→ View the free Marketing Plan Template