How to Calculate Your Annual Marketing Budget?

You may calculate how much money you should spend on your marketing efforts by asking yourself, “How long is a strand of string?” It can be challenging to randomly select a number and find it accurate.

However, in general, many successful businesses employ a few techniques to determine the budget for their marketing.

There are several important things to consider when setting your marketing budget. Everything related to branding, website design, communications, and sales is included in marketing. It is a sizable heading, and each part must be closely examined to make sure your complete marketing system is operating at peak efficiency.

Let’s examine a few strategies for choosing a manageable budget that suits your demands.

  1. Percentage of Revenue:

Although economists disagree on the exact number, most small businesses devote between 7 to 12 percent of their overall income to marketing.

The fact that the budget is flexible is one of the key benefits of this percentage strategy. It will increase as your firm grows, enhancing your marketing presence. Additionally, it prevents excessive expenditure, keeps an eye on lavish initiatives, and guarantees your long-term profitability.

The U.S. Small Business Association advises, however, that if your margins are at or above 10 to 12 percent, you should only use a portion of your sales for marketing (net income, or the amount left over after expenses, is referred to as margin).

A 7 to 12 percent marketing expenditure would not be efficient if your company is just breaking even or, worse, still losing money. Of course, any such estimate involves a trade-off. Growth requires marketing, and sometimes it makes sense to reduce already slim profit margins to boost overall sales.

In general, this approach is accurate for companies that have been in business for some time, and most companies are recommended to use this model.

  1. Return on Investment

ROI, often known as return on investment, is a calculation used to assess the success of a business strategy. In this context, it refers to how well your marketing efforts have performed. Understanding how your efforts affect your entire budget is another benefit of calculating ROI.

You need a specific method to identify what worked and what did not as you implement marketing strategies. ROI gives you the information you need by comparing a plan or campaign’s returns to its costs in a percentage form. In this way, you’ll be able to spend your money on marketing more wisely in the future.

Let’s see how a jeans seller could estimate the return on investment from a PPC marketing campaign on Google:

  • The PPC advertising campaign is $100.
  • During the campaign’s duration, the vendor’s sales increase by $200.
  • She thus realized a 100% return on her investment.

However, marketing is rarely that simple. It can be difficult to measure the great benefits of many promotional activities, but they frequently result in sales that may last for a long time. Fortunately, substantial advancements in marketing attribution have made it possible for retailers to determine the ROI from specific channels and campaigns with greater accuracy. Businesses might adjust their estimates of ROI to determine which activities are truly resulting in conversions.

  1. Fixed Budgeting

Using fixed budgets is an alternative since a new company may need to be more diligent with its finances. In your first year, you might just need to settle on a budget number and stick to it. Therefore, having a marketing strategy is crucial. A restricted budget could only be able to support one campaign or event.

Do some research to determine the best kind of campaign to run. As you work backward, decide what you want your campaign to achieve first. Be explicit about it. Ask yourself questions like do you want to increase your social media following by a certain amount? Boost sales by a specific percentage? Boost your search engine rankings? It is simpler to develop a strategy once you are aware of your goals.

The amount you should spend is determined by how much capital you still have available after paying for other expenses. Find out how much money similar business owners regularly spend on marketing. Do some market research on your competitors and evaluate their spending. Be practical about it, though. Never compare yourself to your biggest competitor because they can have a much bigger budget and expenses.


With the help of these strategies, you can easily find out how much you should be spending on your annual marketing budget. While you are at it, try to understand that budgeting for marketing is a delicate balancing act. Spend too much and you’ll go bankrupt but spend too little and nobody will know what you are selling. You can easily allocate resources and track the success of your campaigns if you have a detailed plan outline for the budget, whether it is based on fixed earnings or a percentage of revenue. You’ll be on the right path if you combine research with insights and data analysis. So, do what’s needed and calculate annual marketing budgets like a professional.