Business Tips Digital Marketing October 5, 2020

How Much You Should *Actually* Spend on Your Marketing Budget

Writen by Eden Ads

comments 0

[vc_row type=”grid”][vc_column][vc_column_text]

Spicy Nugget: Rightsizing Your Marketing Budget

“If you treated your marketing spend with the same importance as your electric bill—those funds in the hands of competent marketers would guarantee your business growth, just as certain as your lights would stay on.”

-Adam A. Sene, CEO

digital marketing budgetSo how much should you should be spending on your marketing?

The long and short answer is: Whatever you can.

The long answer requires a bit more thought, so read on if you’re ready to get formulaic and do some inspection into the technical nature of your business goals and marketing priorities.

Covering a Few Basics of Digital Marketing

By marketing we mean bringing your products or services to market. Back in the day, that would have meant literally bringing them to the marketplace, but these days things work a bit differently. Modern marketing refers to the ways we may our products known and available to potential buyers. There are thousands of ways to market, and as our world continues to evolve—so will the field of marketing.

By digital marketing we mean doing all that stuff above, just exclusively using computer technology, on the internet or wherever electronic media can be viewed—i.e. Facebook Ads, Google Ads, social media marketing, email marketing, etc.

By ad spend we mean how much money you spend on advertising. In our case, we are referring to online advertising via platforms like Google and Facebook. (That’s what we do!)

Recommended Marketing Budgets Based on Trends

Advertising online is one of the fastest and most effective ways to give your business a boost in terms of traffic, viewership, brand interest and online presence. In your tool bag of magic marketing tricks, advertising is a must.

Though there isn’t an exact number as to what your marketing budget should be, it is helpful to know what the ranges are in order to get started and hone it in from there.

The US Small Business Association (SBA) reports that businesses across America spend anywhere from 1% to 12% on marketing. With such wide variety, how do we even know where to start?

According to, the average American small business invests about 1% of their annual revenue back into marketing. (For example, if you made $500,000 per year, that would equal $5,000 towards marketing.)

SmallBizTrends also acknowledges that small businesses in retail (like jewelers and furniture stores) tend to invest a bit more, putting upwards of 4% of their annual revenue towards marketing.

Web Strategies, Inc. reports that marketing dollars have been steadily on the rise for the last several years, but again seem to stay within the range of 1-10% of annual revenue.

Further, companies whose services were business to business (B2B) spent less on marketing than those who were business-to-consumer (B2C). Even still, within the category of B2C persistent variety can be found. Physical product businesses spend an average reported 9.6% of annual revenue on marketing, whereas service-based companies spend closer to 12%.

So what’s the takeaway?

“In general, B2C companies need to budget more for marketing than B2B companies”, says Rieva Lesonsky, entrepreneurial author and guest writer for the SBA official blog.

You’ll also need to budget more for marketing when your business is just starting out, because you’re still trying to build awareness of your brand and attract customers. Once your business is established, you can reduce your marketing budget because you will have a steady customer base”, adds Lesonsky. “However, that doesn’t mean you can stop marketing—you’ll still need to invest in attracting new customers and retaining existing ones.”

Because marketing spend varies as widely as it does, the SBA also recommends contacting your industry trade association or reading industry trend publications to see if they offer any benchmarks for setting a budget in your field.

How Much Should I Spend on Ads?

Advertising campaigns take time to optimize. In fact, you might consider the first 30 days strictly a testing ground. Although leads will begin to flow, the ad platform is just beginning its process of gathering data with which to optimize targeting. After month one some traction is visible, but this process continues for up to 90 days.

For brand new businesses who haven’t yet sold a single product from their spiffy (or not so spiffy) websites, we offer an advertising starter package. This allows traffic to flow through your brand so the wheels start turning, at a decreased rate. Where we see things really turn the corner is after about 90 days, at which we graduate our new clients to the Full Service plan.

The following are some approximate ad spend range recommendations that may work for you. (Please chat with us for a personalized recommendation for you!)

Brand New Businesses

Budget: $500 per month in ad spend for the first 60-90 days casting a strategically wide net, then optimize and increase spending.

Small to Medium Businesses

Budget: At least $1000-$3000 per month in ad spend.

Larger Businesses

Budget: Anywhere from $3000 to $10,000+ per month in ad spend.

Mega Corporations

Budget: Usually no less than $20,000 per month in ad spend.

How To Tell if Your Existing Marketing dollars are profitable

Cost per lead x typical conversion rate = X

If you have no money to budget for marketing, start with what you can. After 30 days, examine your cost per lead and the rate at which they’re converting to leads/sales. Your marketing spend shouldn’t exceed X.

If your conversion rate is skyrocketing because your sales team is amazing, consider upping that spend. If your cost per lead is tanking the equation, that’s when it’s time to look at troubleshooting steps like lead optimization, improved targeting, etc. There are countless ways an ads team can (and should!) optimize a campaign on a daily and weekly basis.

If you’re doing no marketing at all but have a pretty good conversion rate on the leads/sales you are getting organically, remember that your conversion rate will likely decrease as the number of leads that you come into contact with increases.

If you are currently exercising a specific marketing budget but are wondering if it’s too much or too little, try that formula out and see where you stand in relation to X. (Again, your marketing money shouldn’t usually exceed X. If it does, it’s time to troubleshoot.)

Small Business Marketing, Simplified

If you’re not growing, you’re shrinking. There’s a reason that 90% of start-ups fail, and we would argue it’s largely because all too often not enough money is invested into the correct marketing strategy.

Treat marketing spend as a necessary investment. Skip the water cooler in the break room and opt for a tightly targeted audience of potential customers in your area whose interests align with the goods and services you offer. It has to be done.

As a business owner, you’ll have to spend money to make money. The above gives you the reins and hopefully a little peace of mind that you’re not just burning cash.

Give it a whirl! If you have questions or want a pro’s help, you can always put the pen and calculator away, eliminate the urge for day drinking and give Eden Ads a call instead.[/vc_column_text][/vc_column][/vc_row]

Right Menu Icon