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How Much Should Your Business Spend on Marketing Each Year?
Posted by Martin William on June 12, 2019 in Marketing Strategy

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How much do you spend on marketing each year?

The amount you invest in marketing your products or services can have a direct impact on your bottom line. Invest too little and you’ll be unable to leverage a return on your investment. Invest too much and you won’t be able to recoup your losses. Your goal is to safely grow your business.

While marketing is an important part of every small and large business, whether mature or startup, the amount you spend shouldn’t be set in stone.

While the biggest of global brands can spend a massive sum on their marketing campaigns; your environment, competition and goals mean that figure isn’t appropriate for you.

So, exactly how much is the right sum to spend on marketing? If you want to know how much your business should spend on marketing each year, here’s what you need to know.


How much money should my business spend on marketing?

Different sources have different opinions on this matter.

Some global brands are known to spend as much as 40% of their annual gross revenue on marketing. But does this mean you should do the same?

Not quite.

The US Small Business Administration has a different opinion which underpins the figures quoted by most marketers. They recommend spending around 7 to 8 per cent of gross revenue on marketing if your profit margin is in the range of 10 to 12 per cent.

That said, there are also a few variables to consider.

Firstly, determine how much you can afford to spend on marketing. You don’t want to spend too much on marketing and be left without a little to no profit margin. It has been suggested that a new company should spend 12 to 20 per cent of gross revenue on marketing while an established company should devote 6 to 12 per cent.

What’s the takeaway here? Newly established companies will have to spend more to create a gap in the market to exploit. Once you are established you can scale back your marketing spend.


What Should Your Marketing Objectives Be?

Just because your competition is spending more than you on marketing doesn’t mean they will get more profit.

Your return on investment depends on the strength of your marketing campaigns. An effective marketing campaign may return three times more ROI compared to your competitor’s spend.

For effective and powerful marketing, you must first build a strong foundation. It’s easy for an established business to invest using their current revenue, though this could be a problem for startups.

The rise of small business lenders has made it easier than ever for startups to secure the funds they need to invest in marketing from the start. According to corporate financiers Maxiron Capital, “innovative corporate financing provides flexible repayment options and rates in a way that traditional lenders don’t. This creates opportunities for businesses in 2019 to access the marketing capital they need and scale up as a result.”

Your business marketing foundation should include three things.

  1. Marketing Strategy
  2. Brand Development
  3. Website Management

Here’s what makes each one of them important.

1. Marketing Strategy

If your marketing strategy isn’t an effective one, then it’s just a waste of money. In many cases this requires the services of an expert marketer who knows what they’re doing. You should also keep track of all strategies and their return to ensure the optimal ROI.

2. Brand Development

You should do your best to develop a brand that encompasses your business. Brands are trusted names and your customer will always prefer a brand over an unknown name. Your company will reach a new level of development with each step when it’s become a brand.

3. Website Management

Digital marketing is effective and targeted form of marketing that can deliver exceptional ROI. You must have a functional and robust website for effective digital marketing. This helps you reach and connect to your target market and basically focuses on bringing traffic to your website. Remember, a visitor on your website is like a potential customer in your office.

This is reinforced by Sydney cleaners Walkers Floor Care who say that “We didn’t appreciate the value of a professional website until we made the change from our older design. Potential clients judge your site and if there are typos, design flaws, or poor user experience you risk missing out on customers for your business.”


How Do I Split a Marketing Budget?

Unfortunately, there isn’t one single formula to split a marketing budget that would work for all businesses.
Instead, there are a number of things you have to consider.

Here are three of the most important things to consider when dividing your marketing budget.

One – Which platforms for marketing will you use?

There are a many ways and platforms able to implement marketing. To identify how much you should invest in marketing, you’ll need to conduct research and understand where you can find most of your target audience. Your marketing options may include:

  • Email Marketing
  • Search and Social Ads
  • Influencer Marketing
  • SEO and SEM
  • Content Marketing

Two – What is your expected Cost and ROI?

You have to determine what your precise budget is and how much you can afford. Make sure your expectations are consistent with your ability to grow. Your marketing expenses may include:

  • A professional marketing agency
  • Designers
  • Writers
  • Software
  • Failed Attempts

Three – What has worked for you in the past?

Perhaps the most valuable indicator of what will work, and is therefore worthy of further investment, is to see what’s already working.

Look at your current marketing campaigns if you are currently using any forms of digital marketing. Marketing is a process that involves constant learning and adapting. So learning from your current and previous efforts will increase your chances of success in the future.

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  • Twitter
  • linkedin
  • Youtube
  • Google Plus
  • Pinterest
  • Instagram
  • Google Partner
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About Cameron Francis

Cameron Francis is the co-founder of The eTraffic Group which started as a 2 man start-up from his lounge room, to a 50 person+, multi million dollar company.

For over 10 years Cameron has been providing growth hacking and digital marketing strategies for small businesses, start ups & entrepreneurs. He helps companies like Retreat Caravans, Melbourne Real Estate, and Roth Newton grow their revenue.

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