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How to set an effective annual marketing budget for your business

In the quest to build a solid, profitable and sustainable business, companies tend to fall into two camps: they skimp on the marketing budget or they throw a stack of money at marketing to the detriment of their core business offering.

So, what is an effective annual marketing budget for a business?

There’s no magic figure that guarantees marketing success, but three questions will tell you what the best budget is for your business.

What is your annual revenue?

Determining your marketing budget starts with projecting your earnings for the coming 12 months.

Meet with your finance manager and estimate the gross revenue of the business for the next year.

The figure will be based on what it has been in previous years, and potential variables.

For example, you might already have more work than last year booked in, which could increase your estimated earnings, or you may have lost a key contract, which could bring it down.

Estimating your revenue will allow you to see what amount you’ve got to work with, and what portion of that can be allocated to your marketing budget.

What stage is the business at?

How much money you spend on marketing will vary depending on whether you’re a start-up or an established business.

As a general rule of thumb, start-ups require more advertising and therefore a larger percentage of profits put towards a marketing budget.

There are several reasons for this.

A start-up’s brand won’t be as strong as a more established business so there needs to be more effort put into building brand recognition.

Older, better-known brands tend to have built greater trust and loyalty among consumers.

This is built over time, so up-and-coming brands need to even the playing field with a robust marketing plan.

How to set an effective annual marketing budget for your business

What percentage should you spend?

Once you’ve estimated the gross income of the business, you need to decide how much of that will be spent on marketing.

According to American digital strategist and author Ryan Flannagan, new companies should spend between 12 and 20 per cent of their gross revenue on marketing, while their more established counterparts should allocate between six and 12 per cent.

While that might seem like a pretty big chunk, it needs to be remembered that for start-ups, marketing should be a key focus of business activity and finance.

It doesn’t matter if you’ve got a fantastic product or service, if no one knows about it no one will buy it.

More established business that are looking to grow also need to increase their reach. And the only significant way to do that is through marketing.

Invest for the future

Think of it like this: the marketing budget isn’t so much an expense as an investment in future prosperity.

Once you’ve worked out the amount you should spend on marketing, it’s important that you make sure it gives you the biggest bang for your buck.

Whatever final marketing budget figure you arrive at, it’s essential that your marketing strategy be formulated by a team with the experience and knowledge to deliver maximum results.

As a marketing agency based in Melbourne, Assemblo offers businesses a range of digital marketing and traditional advertising options.

With a team of creative and technical experts, Assemblo can help you to determine a marketing budget to suit the level of your business and the activities required.

To find out how we can help your business grow, give us a call on (03) 9079 2555 or drop us a note via our contact form below.

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