{"id":297,"date":"2022-03-10T15:05:56","date_gmt":"2022-03-10T14:05:56","guid":{"rendered":"https:\/\/redline-re.design\/?p=297"},"modified":"2026-03-27T13:56:37","modified_gmt":"2026-03-27T12:56:37","slug":"how-your-marketing-budget-affects-the-success-of-your-business","status":"publish","type":"post","link":"https:\/\/www.redlinecompany.com\/da\/blog\/how-your-marketing-budget-affects-the-success-of-your-business\/","title":{"rendered":"HOW YOUR MARKETING BUDGET AFFECTS THE SUCCESS OF YOUR BUSINESS"},"content":{"rendered":"

A good marketing plan<\/a> can either make or break a business. Not convinced?\u00a0 Well, you might be more receptive to this fact if you knew that more than 90% of small businesses fail within the first three years of launch.<\/p>\r\n\r\n\r\n\r\n

According to Forbes Coaches Council member, Chris McIntire, a 22-year study into entrepreneurial success rates in Texas (USA) found that the unsuccessful businesses managed to hang on for just under 3 years before closing. These figures are also representative of the rest of the US and Europe.<\/p>\r\n\r\n\r\n\r\n

PLAN, INVEST AND IMPROVE<\/strong><\/h2>\r\n\r\n\r\n\r\n

So, the big question is\u2026what can you do to make sure your business does not fail and become just another statistic.<\/p>\r\n\r\n\r\n\r\n

We\u2019re all familiar with Benjamin Franklin\u2019s wise words, \u201cBy failing to prepare, you are preparing to fail\u201d and it couldn\u2019t be more appropriate.\u00a0 The solution is forward planning, marketing and intelligent budget allocation.<\/p>\r\n\r\n\r\n\r\n

SET YOUR MARKETING BUDGET<\/strong><\/h2>\r\n\r\n\r\n\r\n

The size of your marketing budget<\/a> will depend upon your goals and also the amount of money you have to spend.\u00a0 However, as a rule of thumb, when starting a new business, you should expect to allocate between 12-20% of your gross estimated revenue for marketing, as you need to establish the brand and also work towards gaining loyalty.<\/p>\r\n\r\n\r\n\r\n

Whereas a more established company would expect to spend between 6-12% of gross revenue. Marketing is still needed but may not be such a hard push, as your target market most likely already know your brand and loyalty has been established.<\/p>\r\n\r\n\r\n\r\n

5 STEPS FOR CALCULATING YOUR MARKETING BUDGET<\/strong><\/h3>\r\n\r\n\r\n\r\n

Calculate revenue (gross and estimated revenue).<\/p>\r\n\r\n\r\n\r\n

Company size.<\/p>\r\n\r\n\r\n\r\n

New \u2013 1-5 years or 5+ years with brand equity and market share.<\/p>\r\n\r\n\r\n\r\n

New companies \u2013 between 12-20% of gross revenue.<\/p>\r\n\r\n\r\n\r\n

Established companies \u2013 between 6-12% of gross revenue.<\/p>\r\n\r\n\r\n\r\n

SET MARKETING GOALS<\/strong><\/h2>\r\n\r\n\r\n\r\n

No matter the size or type of business, it is important to plan ahead and to set goals. This is crucial to the success of your marketing and subsequently your business. By the end of 2021, you should already be drilling down on your long-term strategy for 2022. To a large extent, the size of your budget will determine your strategy and the channels used.<\/p>\r\n\r\n\r\n\r\n

CREATE A LONG-TERM MARKETING PLAN<\/strong><\/h2>\r\n\r\n\r\n\r\n

Now you have your budget and you have set your goals you need to consider your target market. You need to understand the buyers\u2019 journey<\/a>. You need to understand how will your marketing activity will reach potential clients and how it will affect their perception of your company. In other words, how will your marketing drive them from first discovery through to becoming loyal to your brand.\u00a0<\/p>\r\n\r\n\r\n\r\n

RETURNS ON INVESTMENT (ROI)<\/strong><\/h2>\r\n\r\n\r\n\r\n

Working within the confines of a relatively small budget requires a savvy marketing plan, as you need to put your money where it will work most effectively. Choose the activities that will provide the best ROI, which could be SEO<\/a>, PPC, your website<\/a>, email marketing<\/a>, social media<\/a> etc. \u00a0Don\u2019t worry there is an accepted guideline of the ratios for marketing budget allocation: 70\/20\/10.<\/p>\r\n\r\n\r\n\r\n

70% – proven strategies<\/p>\r\n\r\n\r\n\r\n

20% – new strategies to help business grow<\/p>\r\n\r\n\r\n\r\n

10% – emerging and experimental strategies<\/p>\r\n\r\n\r\n\r\n

CALCULATING ROI<\/strong><\/h2>\r\n\r\n\r\n\r\n

To measure the effectiveness of each channel, the first step is to estimate costs and ROI. This calculation must include all costs, including professional marketing fees, third party costs and marketing channels that haven\u2019t converted (delivered any results).<\/p>\r\n\r\n\r\n\r\n

Industry benchmarks can be used to estimate the ROI, for example, Google Ads on mobile search is around 3.48% across all industries (2018). Obviously, this varies depending upon the nature of a business, but it provides a useful benchmark.\u00a0<\/p>\r\n\r\n\r\n\r\n

Here is an example of how you may want to split your budget based on the 70\/20\/10 calculation:<\/p>\r\n\r\n\r\n\r\n