What Percentage of your Profit should You Invest in Marketing?


There is no better feeling for entrepreneurs than to start a business and profits start trickling in. This is because you begin to feel as though you are doing something right for your entity. Every businessperson alive knows that running any type of business is no easy fete.

Even when you are making good profits, you cannot just sit back, relax, knowing that everything will fall into place. You must put in place effective spending strategies. These will spell out how to utilize these profits for seamless continuity and growth of the business.

There are many ways to spend profits. These include:

(i) Paying yourself,

(ii) Growing the business saving for the future,

(iii) Refinancing debts and so on.

Today, we will focus more on the percentage of your profit that should be put into marketing.

Things You Need to Know Before Allocating Funds for Marketing

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Before diving straight into this, note that only the right content will market your products well on various platforms.

Before putting out any material, ensure it only features the best keywords. You can get assistance from keyword.com to identify the most appropriate phrases that will bring you success.  

Let’s swiftly go back to the profit percentage to invest in your marketing efforts. A report done by Harvard Business School a while back recommends that businesspersons should invest between 7-15% of their profits in marketing. This implies that if you make $200,000 in a month, set aside about $14k to $30k for advertising and marketing.

Naturally, this is not a figure that is set on stone. There are numerous factors to consider before arriving at the final marketing budget. For instance, if the company is relatively new, you may have to spend more money to attract a loyal customer base.

Businesses that are already thriving and achieving financial goals may be a bit flexible with the cash they spend on advertising.

At the end of it all, the primary aim is to get each marketing dollar to pay off. Several rules of thumbs can guide you in the right direction to help you allocate reasonable amounts for your marketing campaigns like:

5 Rules of Thumbs On What Profit Percentage You Should Invest in Marketing

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1# Nature of the Industry

Because industries differ significantly, it is impossible to use the same marketing approach for all the companies out there.

Obviously, some sectors are more competitive than others. An example is that the food and fashion industry is more competitive than the construction or engineering ones.

If you are operating the former, the marketing strategy should be more aggressive, if you want to beat the competition and stay relevant.

2# Spending Variables

As much as you may want to fit in, allow affordability to guide your spending habits. You do not want to spend all the money on marketing and have nothing else left. This is a move that can hurt your business in a significant way.

If you do not have money to explore certain advertising mediums, go ham on the ones you can comfortably afford. This can bring you more cash that will allow you to increase spending on marketing.

3# Intention of Marketing

Typically, there are 2 main reasons investors opt to market. The first is to grow the business by gaining a larger market.

The other is to maintain the current position in the industry. Depending on the reason you are driving out a marketing campaign, the percentages may end up changing.

You can go as low as 5% if you are retaining your position because the business is already performing as it should.

On the other hand, if you are looking for more clients, you need to up the percentage to 10% or even more subject to availability of funds.

4# Expected Goals

Asking the amount to expect from marketing investment is natural and expected. Sadly, not everything is black and white in this situation.

Understand that the tactics you employ to sell the business will bring in varying results. Some goals may be long-term, while others only work for a while.

For example, if you are working on branding, results will not show in a week. You need to constantly pump in money to get tangible results.

5# The Competition

There are times when the competition will play a huge role in the amount you use for marketing. Although this contradicts the previous point on allowing affordability to be your guide, some companies may put yours in a tight fix. This is not the time to retreat.

You also need to come out guns blazing if you want to survive in the industry. However, never do something that will jeopardize your entity even on the battlefield.

Always remember to prioritize on the most important marketing aspects, especially when working on a budget. Rather than rushing into unreasonable expenses, starting small can get you where you need to be later on.

Closing Remarks

Unsurprisingly, top advertisers spend billions of dollars advertising their products and services in America yearly.

Without a doubt, marketing is the backbone of any business, thus need to be handled with the seriousness it deserves.

Without marketing, it will be hard to experience progress. This is because the firm will not be getting the exposure it needs to make sales, profits, and build solid customer relationships.

Author Bio: Dancun Kanguri