What Percentage of Your Profit Should You Invest in Marketing?

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(Newswire.net — December 17, 2019) — There is no better feeling for entrepreneurs than to start a business and profits start trickling in. This shows evidence that your efforts are paying off. Even when you are making good profits, you cannot just sit back, relax, hoping 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: 

  • Paying yourself.
  • Growing the business.
  • Saving for the future.
  • Refinancing debts and so on. 

Today, we will focus more on the percentage of your profit that should be put into marketing. 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 https://keyword.com/ to identify the most appropriate phrases that will bring you success. 

Swiftly moving back to the profit percentage to invest in your marketing efforts. Small businesses should invest at least 7-8% of their revenue for marketing according to The U.S Small Business Administration. This is if the firm is earning less than $5 million in sales annually. Other marketing experts advise allocating 2-3% of the revenue and up to 20% for those in competitive industries. Naturally, this is not a figure set in stone. There are numerous factors to consider before arriving at the final marketing budget. Take a peek at how much the average company spends on marketing in different industries based on a CMO survey and Deloitte Digital. 

Evidently, some industries spend more money on marketing and advertising than others. Besides the nature of the industry, there are other factors that affect marketing decisions. Let’s look at the top variables that can help you determine the profit percentages to be plunged back into your business for marketing and advertising purposes. 


As much as you may want to fit in and allocate a huge marketing budget, you should always allow affordability to guide your spending habits. You do not want to spend all the money you make in advertising and have nothing 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. 

If at the moment, you can only manage to use 1% of the profits, don’t try and stretch this further “stealing” from your entity. You may find that using that 1% can help bring in more sales, allowing you to work with a bigger budget say 5% for the next marketing campaign. Within no time, you might join the big leagues having a huge budget to work with. Always remember that having a solid marketing plan in place will ensure that you wisely utilize the resources you have at hand. 

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. 

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, it is not possible to work with a fixed budget that says you should spend 5% of your profits. This is because the results will not show overnight. You need to constantly pump in money to finally get tangible results. 

The Competition 

There are times when the competition plays 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. If your main competition is using $50, 000 for marketing, you may find yourself on the losing end if you only invest $1,000. Such a case calls for strategizing to ensure you are both playing on a level field. 

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, needs 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.