There’s always a level of excitement as we head into the holidays but also some apprehension on how the next year will unfold. That’s why this is a great time to budget and forecast for 2023.
So let’s talk about how much you should spend on marketing activities in the upcoming year. In my experience working with small businesses, they usually underspend on marketing. They tend to look at it as an expense rather than an investment. This is a key shift in perspective because marketing plays a big part in the growth of a company. Allocating your budget correctly and maximizing it on the right activities will get you to your goals faster, and it takes planning.
According to Small Business Administration (SBA), the recommended marketing & advertising budget, on an average, is 7% to 8% of your annual gross revenue – if you are under $5M in revenue and have a profit margin of 10-12%.
The table below shows a breakdown of how it will look in different revenue brackets and across different verticals of business. Budgets can vary dramatically between B2B and B2C businesses, with direct consumer companies investing more in marketing.
The data also indicates that businesses continue to spend more on Online versus Offline channels. In current trends, approximately 56% of total marketing budgets are being allocated to online channels (Source Gartner). This leads to a perplexing question: How should you allocate your budget across various marketing activities? More than half of digital spending (56% Online Budget) is being allocated to paid channels like social, search, display, and video advertising. Check out the chart below to identify the percentage spent on each digital activity.
To calculate your 2023 Marketing Budget correctly, and allocate it optimally, follow these steps:
- Based on your current 2022 revenue, and your industry type, use the SBA table to calculate the overall marketing & advertising budget. If you are pre-revenue, use the projected revenue amount for calculation.
- Keeping in mind that 56% of the total spend is allocated to digital channels, calculate the recommended amount you should spend on digital marketing from the overall budget.
- List the top marketing activities that will help you achieve your ROI – Email Marketing, Social Media, SEO, Paid Ads, Video Marketing, etc.
- Refer to the Gartner diagram to calculate the amount you will allocate to each activity.
I’m sure you will have a lot of questions because every industry and type of business is different. You can write to me and I’ll be happy to discuss your concerns. I highly recommend you invest time calculating and allocating the right marketing spend to grow your business in 2023.
