Setting a marketing and advertising budget is a challenge for many small business owners because there are so many different approaches and questions. 

Percentage spends vary widely based on a number of factors such as industry, market conditions, gross revenue, and competition.  However, the US Small Business Administration recommends small businesses allocate 7 to 8 percent of their gross revenue towards marketing and advertising – if the business is doing less than $5 million per year in sales AND your net profit after all expenses is in the 10 to 12 percent range.

So, let’s breakdown what some of these numbers actually look like.

Annual Revenue Annual Low-End Marketing Budget Annual High-End Marketing Budget Ballpark Monthly Marketing Budget
$100,000 $7,000 $8,000 $600/mo
$250,000 $17,500 $20,000 $1,500/mo
$500,000 $35,000 $40,000 $3,000/mo
$1,000,000 $70,000 $80,000 $6,000/mo
$3,000,000 $210,000 $240,000 $18,000/mo
$5,000,000 $350,000 $400,000 $32,000/mo


Spending Variables

Obviously, there’s always going to be a limit to what you can spend in marketing, regardless of what your competitors are doing.  Goals and affordability should guide your spending, and as you continue to grow your business, it’s important to set budgets for marketing. 

Starting a new business or introducing a new product or service can cost more to take to market than your regular, on-going marketing.  Alternatively, there may be seasons of business development you want to slow down or speed up your marketing efforts based on other factors such as staffing or manufacturing limitations.

Another general rule of thumb is the higher your margins, the higher you can afford your marketing budget to be.


Remember The Purpose of Marketing

Bottom line: successful marketing drives increased revenue.  It’s imperative to see those recommended numbers as an investment that, when executed properly, will grow your business, rather than a line item expense.

This is why it’s so important to constantly review the success of your marketing based on measurable metrics.  If something isn’t working, change it.


Give It Time

Many times business owners don’t see the effectiveness of marketing until they stop spending on marketing and wonder why after a few months their business has stopped growing. This is why tracking and metrics are important – things like visits, clicks, likes and followers, etc.  While it may not seem to have an instant increase in revenue, these are indicators as to whether or not your campaigns are working.

Marketing is not a faucet in your house, it is more like the garden in your backyard. It can take months to see results, but when you do your business will grow.  However, you can’t stop caring about a garden because you planted seeds 3 months ago and don’t see the results you want today.

At Raine Digital, we operate as your out-of-house extension to your business.  We get to know the ins and outs of your business to develop and execute a unique marketing strategy that evolves as your business and its target market evolves.  If you’re interested in learning more about how we can help your business grow, reach out to us! We’d love to chat with you about how we can help you succeed.