What Percentage of your Profit Should you Invest in Marketing?

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Marketing is a core operational area of any business, without which making a sale would be difficult. All the efforts that people put forth to better your company have to work hand in hand with the marketing department. Thanks to technological advancements, it has become very easy to practice marketing online. However, it is still a debate for most business owners what amount of profit is right to invest in marketing. Here is a look at what you need to know and consider before you set a part of your profit aside for marketing:

What percentage of your profit should you invest in marketing


The 5% rule

Without a proper understanding of what a marketing budget is, it is difficult to even set part of your profit aside for marketing. A marketing budget involves a breakdown of all the aspects of marketing that you may have to spend your fund on. These areas include advertising, communication, social media, SEO, promotions, public relations, branding, sponsorships, and marketing itself.

The rule dictates that you spend at least 5% of your sales revenue on marketing. Around 5% of all the money you make off of selling your products or services should go back to marketing. Ideally, 5% may cover most of your marketing needs, but not at all times. While you can spend more, 5% should not suffocate your marketing strategies.

Time of the financial year

Every year comes with different marketing demands. Talking of 5%, you may find that to be very little or too much, depending on the financial year of your company. Some of the financial years are tremendous, meaning you have had a high profit as compared to other years.

On a bad financial year, it is okay to spend less than 5% of your sales revenue for your marketing. Notice that the amount of revenue you generate also dictates the ROI you expect, and how to distribute the income appropriately.

Size of your company

Like it or not, the size of business matters when it comes to allocating funds for marketing. As a small business, you may not have too much revenue to work with, but your marketing needs are more than of most companies. As you try to build your brand and get it visible by the target audience, you need to invest a lot more on marketing – sometimes more than 5%. For big brands, those that have created a niche and a name for themselves; they may not quite have a lot of marketing needs. Given that their revenue is also considerably higher than that of small businesses, you can understand that even less than 5% of their sales revenue could cover a lot of their marketing needs.

The needs of your business

Every business owner may have a goal to make more sales and earn a higher profit each year, but the needs of different companies differ. Some businesses invest in marketing to push a brand into a new market, for higher rankings on Google’s SERP, to launch a new product, while others predominantly indulge in marketing as a way to attract more customers.

Depending on your needs, your marketing budget can stretch. The more needs you have to meet, the more funds you need. Sometimes, you can choose to spend most of your profits in a given financial year, as an investment in one major financial project. If you are mainly trying to build a foundation on a specific project, say rebranding, website design, launching a new product, or fixing a tainted reputation, you may need to source more funds to support the marketing foundation.

It is not cast upon a rock what the perfect number is for the amount you should use for marketing. In the end, all that matters is that all the operations of your business are running as your marketing goes on. Learn how you can use keywords as a marketing technique for better results here https://serpbook.com/blog/keyword-ranking-tracker/.

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