Life offers many opportunities to revisit a business plan. Whether it’s at the hiring of a new employee, the launch of a new product or the start of a new year, it’s a good idea to periodically set goals, make plans and revise budgets.
During this time, a question that often comes up is how much a mom-and-pop shop or local small business should spend to promote its products and services.
Have a plan and set funds aside for marketing.
Regardless of whether a company is marketing business-to-business services or business-to-consumer products, a basic marketing plan should be in place and funds should be set aside for marketing-related expenses.
Having a plan and budget on hand helps business owners make informed (not impulsive) decisions throughout the year. These documents can be referred to when decisions need to be made about buying advertisements, participating at events, ramping up networking activities or even outsourcing things like graphic design, photography and social-media tasks.
How much should be spent on marketing and advertising?
Industry experts are all over the board when it comes to how much a small business should spend on marketing. Percentages range from 2% to more than 20% of gross revenues depending on the industry, size of the company and whether it’s a startup or established business.

Most businesses in Whatcom County fall within budgeting guidelines outlined by the U.S. Small Business Administration.
The SBA suggests that established companies earning less than $5 million per year should allocate 7% to 8% of revenues toward marketing. That percentage increases if a business is in the startup phase, if it wants to launch new products or services, or if it is marketing in business-to-consumer industries like restaurants and retail.
What expenses are included in a marketing budget?
Depending on target markets and what products and services are being promoted, marketing budgets may include the following expenses: digital and print advertising (think online ads, radio, and video production), participating in events and trade shows, networking-group memberships, social-media management, professional photography, graphic design, website maintenance, SEO or copywriting services, vehicle graphics, print materials like flyers and brochures, promotional items and even branded clothing items.
Ready to put together a marketing budget for the New Year?
The first step is to obtain a detailed report that shows all marketing-related expenses from the past year (ask your bookkeeper for this information). Take time to review those expenses so you understand exactly where the money has been going.
Once you know how much was spent and what it was spent on, you can work to set a marketing budget for the New Year that is based on a percentage of projected revenues and your business goals for the new year. Remember, if you want to aggressively grow your business or expand into a new market, you will need to consider increasing the percentage spent on marketing.
Next, think about your marketing plan and target market. Do you feel last year’s marketing expenses helped reach those consumers?
If there are obvious items on your expense report that did, or did not, produce results, make plans to adjust the budget and reallocate funds accordingly.
Lastly, as you’re going through the process of setting up a marketing budget, try not to get stuck in the “that’s how we’ve always done it, and I don’t know what else to do” trap. New marketing and advertising options pop up nearly every day!
If you are unsure what direction to head in, take a look at what competitors are doing successfully or ask a trusted adviser for suggestions.