Marketing budget: What percentage of revenue makes sense?

Many businesses aim for around 5 to 10 percent of revenue for marketing. Large surveys of marketing leaders regularly arrive at figures of around 7 to 8 percent. But the percentage is only a rough framework. You are better off deriving your budget from your growth target and your cost per new customer.

Why the percentage alone is not enough

A percentage of revenue means: those who sell little advertise little, and those who sell a lot advertise a lot. For a business that wants to grow, that is exactly the wrong way round. Industries also differ widely. An online shop facing fierce price competition needs proportionally more than a specialist provider with regular customers.

Deriving the budget from your goal

1. Set the goal: how many new customers do you want to win next year? Example: 40.
2. Know your close rate: how many enquiries does it take to win one order? Example: one in four enquiries becomes an order, so 160 enquiries.
3. Estimate the cost per enquiry: from past campaigns or industry benchmarks. Example: €60 per enquiry via Google Ads.
4. Calculate the budget: 160 enquiries × €60 = €9,600 ad budget per year, plus costs for management, content and tools.
5. Check against customer value: if a new customer brings €3,000 contribution margin, that is €120,000 in return. The budget is well invested.

For cost per click in your industry, our Google Ads budget calculator can help.

How to split the budget

• Channels with demand first: Google Search and SEO reach people who are already searching. Here the path to an enquiry is shortest.
• Test budget: 10 to 20 percent for new channels such as YouTube or LinkedIn, with a fixed review date.
• Do not forget the foundations: tracking, website and reporting cost money, but they are what makes every other euro measurable.

When to adjust the budget

Review the budget quarterly. Increase it when the cost per new customer is stable and sales can handle more enquiries. Reduce or reallocate it when a channel becomes significantly more expensive over two months without bringing more orders.

Related reading: Customer acquisition cost: What does a new customer really cost us? and Marketing dashboard: Which metrics does management need?

FAQ

What should a marketing budget include?

Besides pure ad spend on channels such as Google Ads or social media, it includes agency and freelancer fees, tools, content such as copy, photos and videos, your website and tracking, plus trade fairs and print. Whether you also include a share of your marketing team’s staff costs is something to decide once and then stick to. Only then can you compare budgets across years.

How do I plan a marketing budget without historical data?

If you have no figures of your own, for example as a new business or with a new offering, start with a limited test budget in a channel with existing demand, typically Google Search. Decide in advance how long the test runs and which metrics you will judge it by. From the real cost per enquiry and your close rate, you then calculate the annual budget based on your target.

Should you cut your marketing budget in a downturn?

Cutting across the board is risky because enquiries usually drop off with a delay and only build back up slowly later. It makes more sense to save specifically on channels that demonstrably bring no orders and to keep channels with a stable cost per new customer. The decision should be based on figures per channel, not on a percentage applied to the whole budget.

When to hand this over

• You set the budget every year by gut feeling.
• You cannot say which channel costs how much per new customer.
• The budget is growing, but enquiries are not.

We plan budgets from goals and figures and show you every month what comes back. Find out more under strategy & analysis or in a free initial consultation.