Picking a flat rate is usually effective for companies looking at a one-time expense, such as specific public relations marketing or a trade show, and not a long range marketing plan.ĭefining a flat dollar amount may be challenging in the first year of a business, since there are no past records of sales and marketing expenditures. Particularly useful for small businesses, they can base marketing budgets on what they think the company can afford instead of the company's sales.

Many businesses simply set a flat dollar amount for their marketing budget. The marketing budget will never spin out of control and deplete sales revenue.

The main advantage to using a percentage of sales is that the marketing budget will increase, or decrease, with the sales revenue of the company. If a business is launching a new product or service, advertising and publicity needs are greater, so the percentage will increase. The average allocation usually ranges between 9-12% of the annual budget, while the smallest businesses may go as low as 2%. Although each business's marketing budget will differ, below are four common methods used to allocate funds:Īllocating a specified percentage of sales revenue is one of the most popular methods for developing a marketing budget. Keep in mind, it is usually easier to begin with a base amount for the entire marketing budget, and then divide it into subcategories. design and printing costs for all print materials, such as newsletters, brochures and press releases, direct mail costsĭetermine a dollar amount for each of the above categories.The overall marketing budget should include: Smaller business may just try to match the spending of their direct competitors. New companies may spend as much as 50% of sales for introductory marketing programs in the first year. Depending on the industry, marketing budgets can range from as low as 1% of sales to over 30%. Each amount varies based on the size of the business, its annual sales and how much the competition is advertising. How much should you spend? And where should you spend it?Ī marketing budget typically covers costs for advertising, promotion and public relations. While a marketing plan will give your business marketing goals, a marketing budget helps you figure out practical steps to achieve those goals. As today's savvy businesspeople know, to have a strong business people have to know who you are and what you offer.

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