How Much Should Small Businesses Spend on Advertising and Marketing?
Today, a marketing budget covers a number of areas including social, search, email and mobile
Like large corporations, small businesses must rely on advertising and marketing to make potential customers aware of their products/services and drive sales. If you are a new startup and haven’t grasped the finer points of promotion, you aren’t alone. Maybe you’re bewildered about what avenues to take and how much you should be spending on marketing and advertising.
Data shows that the average small business invests about 1 percent of its revenues into advertising. It may not sound like a significant expense, but the rate has been steady for the past few years.”
Thus, if your sales are $500,000 annually, 1 percent would mean spending $5,000 on advertising. If your sales are $2 million annually, then 1 percent would mean budgeting $20,000 on advertising. However, small businesses in certain industries spend significantly more than 1 percent and certain industries allocate significantly less toward advertising.
Small Businesses Spend on Advertising
Source: Sageworks Data – 12 months ending 8/31/2017
- 4.44% – Furniture Stores
- 4.16% – Jewelry, Luggage, and Leather Goods Stores
- 3.84% – Offices of Real Estate Agents and Brokers
- 2.87% – Other Schools and Instruction
- 2.73% – Beverage Manufacturing
- 2.18% – Other Amusement and Recreation Industries
- 2.16% – Home Furnishings Stores
- 1.99% – Personal Care Services
- 1.93% – Restaurants and Other Eating Places
- 1.88% – Specialty Food Stores
- 1.85% – Agencies, Brokerages, and Other Insurance Related Activities
- 1.83% – Death Care Services
How much should you spend on digital marketing this year? What is the right allocation for digital marketing spend of total marketing budgets and on what channels should it be spent? These are important questions to tackle. When making decisions for your business, consider these takeaways:
- Marketing budgets are increasing overall
- Marketing spend is shifting from traditional advertising channels to digital channels
- Social, mobile, email and search marketing represent the lion’s share of the digital marketing budget
- Smaller companies spend more on marketing as a percentage of their total revenue
- B2Cs and online companies spend more on marketing compared to B2Bs
Rebecca Stewart | Brand Strategist
I specialize in growth marketing for Grolo by optimizing social media, digital advertising, branding, and content creation for small business clients. I would love to hear about your brand or business that would benefit from fun, creative and most importantly effective growth strategy.