It’s a question we’re often asked, “How much should a firm of my size spend on marketing”? The answer is, it depends on many different factors such as:

1. How quickly you want to bring new business in? Entering into a new market or launching a new product or service would require more marketing budget than say a drip feed approach in your current market place.
2. What type marketing activities will you be carrying out as part of your annual plan? If advertising in regional newspapers and magazines is your plan, this will cost a lot more than implementing a proactive client referral campaign.
3. What one off costs are you likely to have? Redesigning your website, creating a new marketing brochure or rebranding are all likely to be ad hoc costs that you won’t need to budget for each year.
4. What staff costs or outsourcing costs do you have which are directly relevant to marketing?
5. How much does you average client spend with you per year? Don’t just consider how much a client may spend with you in one transaction, try to calculate how much they spend with you per year, or perhaps longer. Then consider the lifetime value of that client, rather than how much a mailing and a brochure may cost to send out to attract them in the first place.
6. How much can you afford? There’s no point in devising a marketing campaign that will cost £10,000 per year if you’ve only got a £2,000 to spend. In this instance you need to reflect your choice of marketing activities on what you can actually afford.

The Chartered Institute of Marketing has previously estimated that companies should spend between 10-15% of their turnover on marketing. This is all well and good for major fast moving consumer goods (FMCG) brands such as Coca Cola or McDonalds, but for most small businesses, particularly those in professional services, this is unrealistic.

In practice we have seen professional service firms spending as little as 0.5% of turnover through to 8% of turnover, with differing results! If you perceive marketing as an investment, you’re likely to have a higher annual marketing budget than if you feel that marketing is just an expense.

The key is to define what you want to achieve from your marketing strategy, identify how much you are prepared to spend on achieving these objectives and then choose your activities that will help you achieve both your objectives and within budget. However, if you cannot afford to spend lots of money on your marketing activities, do bear in mind that it is likely to take longer for you to achieve your goals, unless of course you get lucky!