I’ve been talking a lot about money lately, especially with my ​strategy session​ clients. Most of them know they should be investing in marketing but they don’t know when and how much.

The first question is easy to answer: as early as possible. For the second one, I apologize, but I can only give you marketing’s most hated answer: it depends.

There is a framework I use with my clients to get to the bottom of it and come up with actual numbers and this is what we’re exploring today: how to figure out how much you should spend on marketing.

But first, a quick primer.

What’s included in your marketing budget?

I’m including this bit because I’ve talked to one too many digital entrepreneurs who think they invest nothing in marketing. That’s completely false: everyone spends on marketing.

Let’s make one thing clear: marketing isn’t just ​paid ads​ — it’s everything you do to make your brand more visible, including but not limited to:

Your marketing infrastructure

  • Email platform — I use ​ConvertKit​. It’s not the cheapest but it has everything you need as a creator/consultant.
  • Premium social media subscriptions (​pay-to-play​ is already the norm on most platforms)
  • Web hosting — ​BlueHost​ is my provider.
  • CRM and various other SaaS solutions you pay for

Staff and contractors

  • Graphic/web design
  • Ghostwriting/copywriting
  • Marketing consulting
  • Agencies

Whether you have an in-house marketing team or you outsource to freelancers, agencies, consultants, and so on, all this counts as part of your budget.

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You could be doing everything alone, from building your own server to host your website to sending emails manually. Yeah, I know, it’s weird to even think about it.

But you don’t — you pay for the convenience of plug-and-play services. You invest in marketing solutions that help you work better and faster.

However, this is just the bare minimum. Irrespective of the size of your business, you need to spend more than the bare minimum if you want to grow.

Marketing budget rule(s) of thumb

Marketing budgets are usually a percentage of your revenue or your profit.

With marketing getting more expensive (social media pay-to-play is a big factor here), these numbers have increased across industries. In 2021, the average business spent 6.4% of revenue on marketing. In 2023, ​they spent 9.1%​.

This is a good visual representation of marketing budget growth:

​Image via Deloitte​

Take these numbers with a grain of salt because they are averages and because the actual numbers vary widely depending on the industry you’re in. Here are some examples from ​Deloitte’s CMO survey​:

  • Banking/finance/insurance: 9.49%
  • Communications/media: 14.27%
  • Consumer goods: 25.19%
  • Professional services: 7.08%
  • Service consulting: 21%
  • Tech/software: 11.8%

That’s cool and all but how do I know how much I should be spending on marketing?

This is a sneak peek at the framework I use with the clients I do consulting work for.

Brand-new business

Start by allocating the budget for the marketing infrastructure and the bare necessities. Unless you’re in eCommerce or another consumer-facing business, this will rarely amount to more than $300/month, excluding personnel expenses.

To cover everything, you should spend around 20% of your entire launch budget on marketing in the first few months, while you get everything set up — website, social media profiles, freelancers, consulting, and so on.

Consolidation phase

This is my favorite phase — you’ve been in business for a while and you’ve reached a comfortable MRR (Monthly Recurring Revenue) or ARR (Annually Recurring Revenue). Your job is to consolidate your MRR/ARR before you jump to the next phase.

Typically, this entails:

  • Investing in loyalty programs
  • Making sure your best clients won’t jump ship
  • Re-assessing your branding (most SMEs outgrow their initial branding in a couple of years).
  • Keeping the channels you’re already on afloat while you consider expansion and ​channel diversification​.

This is a GOOD kind of plateau. It comes with breathing time and time to regroup, re-assess, and analyze. Don’t dread it, embrace it; it’s the calm before a storm.

Your budget here should be roughly 10% of revenue or 20% of profit, depending on your margins.

Growth phase

Feel like you’re ready for another growth spurt? Then it’s time to allocate resources!

In this phase, your marketing budget will be the highest. The numbers can vary widely depending on your goals, your current position in the market, and your profit margins.

You can toy with the following benchmarks:

  • 20% of revenue
  • 40% of profit
  • 50-60% of your profit in recent months, after the growth phase has started and you began to see some traction.

Here’s an example for the last benchmark: say you started investing in paid Meta ads in February. Thanks to these ads, you added an extra $3k/month to your net profit. You can use 50-60% of that $3k — to replace your current budget or as an add-on to it if your P&L (Profit & Loss) model allows it.

Build your own marketing budget

I have yet to meet a company whose budget falls squarely within industry benchmarks or recommendations.

Let’s face it: some years are great and we can invest in branding re-hauls, tons of ads, new staff members, and so on. Other years suck and we work on shoestring budgets, DIY-ing everything that can be DIY-ed.

This is particularly true for solo businesses, where profit = your livelihood.

In these cases, decisions are tougher: should you re-invest your profit or use it on your first vacation in three years?

I’m not a life coach, so I can’t tell you what to prioritize in your personal life. I can tell you how to build your marketing budget, though:

Your goals tell you how much you should spend

It all starts with properly documenting your marketing strategy. If you don’t have a written roadmap, you’re going to jump from shiny object to shiny object and you’ll waste your marketing budget, however big or small it may be.

My Guided Strategy Template comes with me in your corner at every step. ​Grab it here​ and start documenting like a pro, in hours, not weeks!

Now that you know your goals, you have to ask a fundamental question: what will it take to get me there?

Answer this question by studying two things (you’ll find how-tos and frameworks in ​the Guided Strategy Template​):

  • Your competition: what assets do those competitors who have met their goals invest in? How many of them make sense to you and what would you change? → Don’t copy their strategy, it will NOT work for you. Use it as a starting point to guide yours.
  • Market conditions: how’s the demand for what you’re selling, growing or declining? Are there any new opportunities in your market? Any government-sponsored programs you can apply to?

Identify how much you need to invest to meet your goals

Start with your average conversion rate and work backward:

  • How big of an audience would you need to reach to increase your revenue by, say, 20% this year?
  • Where does your ideal customer hang out → this will tell you what channels you should use.
  • How much do you need to invest in those channels? Include platform fees, staff salaries/payments, paid ads, everything.

Pro tip: one of the biggest fallacies I see is addressing too small a market. It’s very common to simply run out of people to target, either because your niche is too small or because you’re not using enough channels/​don’t have a large enough audience​.

This is ​a good resource that takes you from TAM (Total Addressable Market) to SOM (Serviceable Obtainable Market)​.

It will require a bit of research and math but this is budgeting after all. Crunch the numbers and you’ll know how much you should spend and on what.

How do you calculate your marketing budget? Reply and let me know, I’m curious about these formulas the way I’ve never been curious about formulas and equations in school.

When NOT to cut your marketing budget

At the end of 2023, ​I predicted​ that the economy would take a turn for the worse after the 2024 election cycle. I can’t call it yet (the elections have yet to happen in most countries), but the signs are still there.

When the economy is bad, most companies cut their marketing budget haphazardly.

This is an irrational decision. This is precisely when you should invest MORE because it will take MORE to get people to buy since everyone is pinching pennies.

Sure, cut some of your experiments and the tactics that don’t yield the best results. But don’t cut your entire budget. You need marketing more than ever — if you see a company thriving in an economic downturn, know that they understood this lesson very well.

Adriana’s Picks

  1. Substack has reached that growth phase where it annoys its users. Writers say the new “follow” feature ​caused their subscriptions to plummet​.
  2. MIT researchers have built ​a tool that estimates​ how many “outdoor days” your region will lose in the coming decades due to climate change.
  3. Microsoft is ​unbundling its Teams and Office products globally​ — six months after doing so in Europe — to avoid antitrust fines.

Need me in your corner? There are three ways I can help you:

  1. Boost your chances of success by 400%: document your strategy with The Guided Strategy Template.
  2. Get my product launch email templates that sell: 5+1 emails you can send to your list in 45 seconds.
  3. Book a 1:1 strategy session with me. Let’s unlock your growth in 60 mins!