The Marketing Budget – Where To Start

As a new business, there is precious little historical information that can be used to guide the creation of a marketing budget. As a default, many companies will use industry standards as guides (very typically, the “average” will be somewhere between 2% and 5% of gross sales). Unfortunately, as with any industry standard, it does not represent the unique needs or strategies of any individual company. Relying on a “formula” to determine the marketing budget will rarely be the best approach, as every business has marketing needs and costs that vary widely from other companies. While there are no simple rules for determining what you should spend on marketing your business. Here are some guidelines for developing your annual marketing budget.

What Goes into Your Budget?

Before any budgets can be created, there has to be a marketing plan in place. Without an overarching goal and strategy, there is no sense in talking how much it will cost to achieve what has not been defined. The cost in time and energy to create the marketing plan will pay for itself if it focuses your efforts and ensures you spend only on the programs that benefit your business. Too many times small businesses work without a plan and needlessly spend money on “marketing” efforts that have absolutely no return on investment.

At minimum, you want to have a clear vision of what your marketing strategy is, and that in turn, helps to clarify the messages and positioning that will work for your business, and a set of marketing activities that will raise visibility and generate demand. If you choose to outsource the creation of the marketing plan to a company specializing in marketing plan creation, be sure to include the cost of their services in your marketing budget.


If you are a new business, you will likely need to spend some effort against the creation and development of brands. Developing your company brand image is more than just getting a logo to call your own, but quality work along those lines can certainly contribute or even be the centerpiece for your branding efforts. Your brand image needs to be aligned with your company’s brand identity so that everything you do projects the same message to your prospects, regardless of whether it is how you answer the phone, how you project yourself, or how your Web site and sales tools appear to your prospects. As the corporate and brand images will be key components of your marketing efforts, be sure you choose something that you can stand to look at and use for many years to come. This is not something that changes monthly or as often as the whim strikes.

Sales Tools

Another area of your marketing efforts that would need to be budgeted for include your sales tools. Examples of sales tools are your Web site, business cards, letterhead, brochures and other marketing collateral materials needed to fulfill the call to action of your marketing programs. To control your costs, you can create some of the components as you go (you don’t need to have every piece of marketing support ready on Day One), but it is advisable that you not cut corners on the design or quality of the tools. Cutting corners on sales tools creates an image of being small and unprofessional to your prospects.

Initially, start with business cards and a Web site. If you don’t use a lot of letterhead, you can create a Microsoft Word template that you can use for the occasional letter. You can print on your color printer using quality paper and the outcome will look just fine. For your business envelopes, it is more cost-effective to have them printed professionally.

Most businesses benefit from a highly professional, quality web site. Depending on your business, you can select a template based Web site or a custom designed Web site. The option you choose is based on what will appeal to your target audience. Be sure you understand the importance of your Web site to your business and the impact it can have on your revenue before you determine the budget. If your primary marketing effort for your business is Internet marketing, you really should consider putting a few more dollars into your Web site and have it developed professionally. You will also need to implement search engine optimization for your site so that the search engines can properly find you. When you get prices for Web sites from different sources, make sure you understand exactly what they are including in the price. You may think you are getting a $1000 site, but if the firm charges for additional pages over a set amount, extra for a contact form, requires you to use their hosting company, and charges more for search engine optimization, you can spend a lot more than you may have budgeted.

Marketing Programs

After deciding on corporate branding issues, determining the appropriate sales or marketing support tools, the next step is to isolate what programs you are going to execute. All promotional activities fall within the seven vertical categories:


Direct marketing

Internet marketing


Public Relations

Word Of Mouth

Strategic Partnerships

To identify what programs are the best for your business, you might want to begin by seeing what others (in your industry, as well as outside your industry) are doing and use that as a guide. Everything that others do may not be necessarily right for you, and part of why you put a marketing plan together is to differentiate yourself from others, but it is a good start to look at their activities for guidance on where you should invest your dollars.
In the excitement of putting marketing plans together though, don’t neglect the most effective activities that often don’t cost all that much (if anything at all); networking, Internet marketing and public relations. More costly programs that should be undertaken after thoroughly researching them include; direct marketing, advertising and events. Keep in mind that you don’t need to do all the activities at once. Plan them out over the year so you can budget for them and measure their effectiveness. If you have too many things going on at once, you won’t be able to keep track and measure. Understanding the return on investment on a marketing activity enables you to determine whether to keep them running or stop them and try something else.


Establishing a marketing budget helps you identify the money the business has earmarked for marketing activities over the year and to set a schedule for executing the plan. It also helps allow you to react opportunistically to changes in the marketplace as they arise if you know what is planned, why it was planned, and how it supports or conflicts with the new opportunity. It gives you the flexibility to move the investment from an activity that isn’t performing to another that may yield a better result. Managed properly, your marketing budget is the best investment you can make in your company. If you wisely invest your marketing dollars, you can keep your costs down and get a profitable return on your investment.