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What Percentage of Revenue Should Small Businesses Spend on Marketing?

by | May 28, 2024 | Advertising, Marketing | 0 comments

Every small business owner faces the challenge of determining how much of their revenue should be allocated to marketing. Striking the right balance is for obvious reasons crucial; spend too little, and you may not reach your target audience effectively, but spend too much, and you risk straining your financial resources.

Understanding the appropriate percentage of revenue to dedicate to marketing can help your business grow while maintaining financial stability. So we’re going to talk about the average percentage of revenue small businesses should spend on marketing in the UK.

calculating percentage of revenue for marketing

Factors to consider

Before diving into the numbers, it’s important to understand the factors that can influence how much a small business should spend on marketing in the UK.

It’s not a one size fits all.

  • Industry: Different industries require different levels of marketing investment. For example, a retail business may need to allocate more towards marketing compared to a service-based company.
  • Growth stage: A new business may need to invest more in marketing to establish its brand and reach potential customers, while a well-established business may require less to maintain visibility.
  • Marketing goals: The type of marketing goals you have set for your business can also impact the percentage of revenue allocated. For instance, if your goal is to increase brand awareness, you may need to invest more in advertising and promotions.
  • Target audience: The size and reach of your target audience also play a significant role in determining the marketing budget. Reaching a larger audience may require a higher percentage of revenue to be allocated towards marketing.

Industry benchmarks

According to a Gartner, Inc. survey of 395 CMOs and marketing leaders, the average marketing budgets for small businesses in the UK have decreased from 9.1% of overall company revenue in 2023 to 7.7% in 2024.

Experts in the field of marketing suggest that startups and small businesses should allocate anywhere from 7-20% of their revenue to marketing, depending on the industry and goals.

Typically it’s recommended that new and small businesses spend closer to 12-20% of their revenue on marketing while more established brands spend between 7-12%.

Gartner survey of 395 CMOs and marketing leaders for average revenue spent on marketing

In addition to that, research by Alba SEO Services shows that:

  • 38% of small businesses spend less than £1,000 annually on marketing.
  • 38% allocate between £1,000 and £5,000.
  • 5% invest between £5,000 and £10,000.
  • 14% of small businesses spend over £10,000 on their marketing efforts.

However, it’s important to note that these numbers are just benchmarks, and each business may have unique considerations that could impact the recommended percentage.

Determining what percentage of turnover should be spent on marketing shouldn’t be a one-size-fits-all approach and solely determined by these statistics. It’s crucial that you analyze your business needs, goals, and budget before making any decisions.

How to Determine How Much You Should Spend on Marketing in the UK

To determine the appropriate percentage of revenue to allocate towards marketing, consider following these steps:

  1. Set clear marketing goals: Identify your business’s current stage and what you want to achieve through your marketing efforts.
  2. Research industry benchmarks: Look into the average spending of businesses in similar industries and sizes as yours.
  3. Analyze your budget: Evaluate your financial resources and determine how much you can comfortably allocate towards marketing without straining your business’s overall operations.
  4. Test and track: Continuously monitor the effectiveness of your marketing efforts and make adjustments as needed to ensure you’re getting a good return on investment.
  5. Seek expert advice: If you’re still unsure about how much to spend, consider consulting with a marketing professional who can provide personalized recommendations based on your specific business needs.

small business owner in the uk

Where Should You Spend Your Marketing Budget?

Once you have determined the right percentage of revenue to allocate towards marketing, you can decide where to invest your budget.

You want to get the most out of your investment, so it’s important to choose channels and tactics that align with your target audience and goals. For example, if your target audience is predominantly active on social media, investing in social media marketing may be a wise decision.

Some of these marketing channels and tactics include:

  • Digital advertising
  • Social media marketing
  • Content marketing
  • Email marketing
  • Events and sponsorships
  • Guerilla warfare marketing
  • Promotional product advertising

Determining which ones to use is going to depend on the factors discussed earlier, such as industry and target audience. It’s crucial to regularly evaluate and adjust your marketing strategy to ensure you’re making the most of your budget.

Digital Advertising

Digital advertising, such as pay-per-click (PPC) ads and display ads, can be a valuable tool for small businesses to reach their target audience. This type of advertising allows you to track and measure your results, making it easier to make informed decisions about your marketing budget.

These can be quite expensive on platforms such as Google now and only continue to rise in prices every year.

Content Marketing

Creating valuable and relevant content, such as blog posts, videos, podcasts, or infographics, can be a great way to attract new small business customers. Content marketing can be a cost-effective approach for small businesses to establish their brand authority and drive organic traffic to their website.

Unlike ads, once you’ve spent your money on the content though, you don’t need to continue dishing out money to maintain visibility.

business owner allocating revenue towards marketing

Social Media Marketing

Social media has become an essential aspect of modern-day marketing, with platforms like Facebook, Tiktok, and LinkedIn offering advertising options for businesses of all sizes. Social media marketing allows you to target specific demographics and interests, making it an effective way to reach your target audience.

Promotional Product Advertising

Promotional products, such as branded merchandise or promotional mugs, can be an effective and relatively low-cost way for small businesses to advertise their brand. These items allow your customers to interact with your brand physically and create a lasting impression.

This is another great example of where to use your marketing budget as a small business because surveys have shown that around 83% of consumers are more likely to do business with a company after receiving a promotional product.

promotional mugs in the uk

Email Marketing

Email marketing is far being dead and is a great way to have a direct and cost-effective communication channel with your customers. It allows you to personalize your messages and target specific segments of your audience, making it a targeted and effective marketing tactic.

Events and Sponsorships

Participating in industry events or sponsoring local organizations can be an effective way for small businesses to gain visibility and credibility within their community. It’s important to carefully select events and sponsorships that align with your business goals and target audience though.

There are plenty of different ways to promote your business at trade shows and events, including having a booth, doing presentations or workshops, and offering promotional items. It’s essential to have clear goals and strategies in place to make the most out of your event or sponsorship investments.

Guerilla Warfare Marketing

This type of marketing involves unconventional and low-cost tactics to create buzz and attract attention. Some examples of guerilla marketing include street art, flash mobs, or viral campaigns on social media.

While these tactics can be “risky” more or less, they can also be highly effective in gaining brand recognition and generating excitement around your business. However, it’s crucial to carefully plan and execute these tactics to avoid any negative impact on your brand.

small business owners determing revenue for marketing

Maximizing Your Marketing Budget for Optimal Impact in the UK

Ultimately, the key to getting the most out of your marketing budget is to regularly track and analyze your results. This will allow you to make data-driven decisions about where to allocate your funds and make adjustments as needed.

Start by setting clear goals and objectives for your marketing efforts, and regularly review and analyze the performance of each channel. This will help you determine how much revenue should be spent on marketing, which tactics are most effective in reaching your target audience, and generating a return on investment (ROI).

It’s also important to stay informed about industry trends and changes in consumer behavior, as this can greatly impact the effectiveness of different marketing channels. With a smart and strategic approach, your marketing budget can have a significant impact on the success of your small business here in the UK.


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