How much should you spend on marketing your small business? According to the U.S. Small Business Administration, if you have less than $5 million a year in sales and your net profit margin (after all expenses) is in the 10 percent to 12 percent range, you should spend 7 to 8 percent of your gross revenue on marketing and advertising. Alternatively, we gathered data from Franchise Direct and created a summary that we think you might find helpful.
Industry-Based Marketing Costs
When it comes to marketing, you have two basic categories, initial marketing/advertising costs (which tend to be calculated in dollars) and ongoing costs (which tend to be revenue-based percentages). Based on the information we gathered from Franchise Direct, here is what to expect in terms of marketing costs for a variety of different industries.
- Automobile Services - For automobile services the initial costs range from $0 to $72,000. Annual set fees for ongoing marketing run from $0 to $20,000 while percentage-based costs go from 0 up to 5%.
- Business Management - Initial costs for business management can go from $0 to $45,000. Ongoing costs tend to be percentages and run from 0 to 12%.
- Eating/Drinking Establishments - Eating and drinking places can expect initial marketing costs from $0 to $60,000. Ongoing costs generally run between 0 and 5%.
- Educational/Social Services - This category has initial costs from $0 up to $55,000. Ongoing costs will range between 0 and 4%.
- Interior/Exterior General Building Contractors - Contractors should expect initial marketing costs of $0 up to $30,000. For ongoing costs, expect to pay $500 to $15,000 or 1.5% up to 15%.
- IT Services - Initial IT marketing fees range from $4,000 up to $12,000. Ongoing IT marketing costs are shown as 1% to 2% of gross revenue.
- Landscape Services - Landscapers’ initial costs run between $0 and $50,000. The cost of ongoing marketing ranges from nothing to 20% of paid royalties.
- Personal Services - Personal services initial marketing costs go from $0 up to $30,000. For ongoing costs, expect anywhere from nothing up to 5%.
- Realty Services - Initial marketing costs for realty services run from nothing up to $120,000. Ongoing marketing costs range from nothing up to 3%.
- Recreation/Sports/Health Facilities - In this category the initial costs go from $0 through $170,000. Costs for ongoing marketing tend to range between 1% and 5%.
- Retail Stores - Retails stores have an initial marketing cost range of nothing all the way up to $165,000. For ongoing marketing, costs tend to range between 1% and 8%.
- Specialty Trade Contractors/Emergency Services - If you have this type of business, the initial marketing costs go from nothing up to $100,000. Ongoing marketing costs range from 1% to 12%.
- Veterinary Services - Veterinary service initial marketing costs go from $0 up to $30,000. In general, ongoing marketing costs should be in the 1% to 5% range.
What You’re Paying For
The types of marketing you’ll need to do when you first start are different from the kinds of marketing you’ll be doing on an ongoing basis. Here are some general expenses that you should plan for.
- Technology - This includes things such as the software to create product pages
- Research - You may need to pay for research into things such as your target audience if you don’t have the time to do it yourself.
- Automation - If you don’t have the financial resources to pay for people to do things like organizing leads and managing your website, you can save some money by automating these processes at a lower cost.
- Production - This includes any expenses related to creating your marketing message such as graphic design, photography, video production, etc.
- Paid Advertising - If you’re going to run radio, TV, or online advertising (such as pay-per-click or social media ads) put the expenses into this category.
- Branding - First impressions matter so you’ll want to budget for things like business cards, signs, billboard ads, or stickers.
- Content Marketing - Content marketing is an essential part of modern digital marketing and how of it you do yourself and how much you pay a professional to do will determine your costs.
- Traditional Advertising - Any non-digital advertising such as print and billboards falls into this category. Not all businesses will use these.
- Unexpected Expenses - Nobody can think of everything and so there will be unexpected marketing expenses such as extra fees that you didn’t account for. While planning your budget make sure to put a little on the side for things of this nature.
This summary serves as a good general guide but if you want a professional marketing cost analysis that’s based on your unique needs and goals Ellipsis is ready to help.