One of the first questions I ask potential clients is, “What is your budget?” They almost always reply, “I have no idea. I don’t know what it should be.”
There’s no one-size-fits-all answer, and if you’ve Googled it, you’ve likely come across a lot of generic advice. Many articles you’ll come across list what should be included. Or they may suggest spending a blanket percentage of your revenue – I often see 5 – 8%.
While those tips sometimes work, they often miss the mark regarding your unique situation.
So, in this article I’m going to share some specific strategies that I’ve seen work for different types of businesses in different stages—whether you’re just starting, in early growth, or looking to accelerate. My goal is to give you clear, actionable steps to create a realistic marketing budget that fits your business, industry, and goals.
1. Research Your Industry to Establish a Baseline
I know I said we don’t want to be generic, but you must start somewhere. So first, you should look at what others in your industry are doing. And research is going to be key here.
Competitors, similar businesses, and even industry trends can give you a good idea of where to start. The key is to use this information just as a starting point.
Ask yourself:
- What are my competitors spending on marketing?
- What marketing channels work best for businesses like mine?
- Are there industry standards for marketing budgets?
Also, be very specific. If possible, don’t just look at the general landscape of “government contractors.” Look at “federal government defense contractors.”
In my industry, I need to compare myself with “digital marketing agencies” and “strategy consultants,” not just “marketing agencies” or “advertising companies.”
For example, let’s look at doctors. Family practice and internal medicine doctors typically spend about 1-5% of their revenue on marketing. Their need to actively promote themselves is often fairly low because referrals drive much of their business, and the bulk of their fees are insurance reimbursements.
On the other hand, market research shows that “cash-pay” physicians—such as cosmetic surgeons —who rely on patients paying directly out-of-pocket instead of insurance reimbursements typically allocate around 12% of their revenue to marketing.
This makes sense because these practices rely heavily on direct-to-consumer advertising, social media, and online presence to attract new patients. A larger marketing investment is crucial to stand out in highly competitive fields like this.
Understanding these variations in marketing spending based on industry and business type gives you a solid foundation on which to build your realistic marketing budget. It ensures that you’re not just pulling numbers out of thin air but basing your budget on actual industry standards that fit your business model.
For marketing research, we often rely on industry-specific annual reports from member organizations and CMO surveys for data on marketing spending.
2. Identify Your Stage of Growth
Once you have a baseline, the next step is to figure out where you are in your business’s growth cycle. This will dramatically impact how you allocate your budget.
Let me break it down using a consulting firm whose recommended marketing spend is 8% of revenue as an example:
Start-Ups
Let’s say you’re opening a consulting practice. As a new consultant, you may have limited cash flow, so your priority should be establishing the basics, such as setting up a professional website and a Google Business profile to help potential clients find you. You don’t need to launch an expensive, large-scale marketing campaign right away, but you will need to invest some money to get started.
For example, you could use a simple website builder like Wix or WordPress and set up some basic SEO. You might also run targeted LinkedIn ads or network through local business events, which can cost as little as $500 a month. At this stage, your goal is to build some brand awareness and establish credibility, focusing on low-cost tools that align with your initial budget.
As a start-up, cash flow is a concern, so build a website and focus on low-cost tactics.
Early Growth
Now that your consulting practice is starting to see consistent client engagements, you’ve moved into the early growth phase. You’ve built a base of loyal clients, but now you want to attract more.
Instead of spending the recommended 8% of your current revenue on marketing, think about your projected revenue. If you aim to increase your client base by 25%, your marketing spend should reflect that growth.
This might mean investing in targeted LinkedIn ads, attending industry conferences, content marketing, or increasing your online presence through platforms like Google My Business and industry directories. Your goal is to build more brand awareness within your industry, positioning yourself as the go-to consultant for your niche or area of expertise.
Depending on revenue, consider spending a percentage of your projected revenue.
Established Companies
Your consulting practice is now well-established with steady revenue. While things are going smoothly, marketing efforts shouldn’t stop just because your business is doing well. You need to maintain consistency.
Keep your website updated, stay active on LinkedIn, and consider hosting webinars or attending industry conferences.
The goal here is to maintain your brand awareness and reputation long-term, ensuring that potential new clients can easily find you while keeping your existing clients engaged.
You’ll also want to think beyond just client acquisition—your marketing activities should support employee recruitment, partnerships with other firms, and visibility within your industry.
Given the national average of 8% of revenue spent on marketing in consulting, this continued investment will help you stay competitive and grow sustainably.
Continue investing around 8% of revenue to maintain brand visibility and client engagement.
Established Companies with Accelerated Growth Goals
Let’s say you’re now planning to expand your consulting practice by opening another office in a new region. The standard 8% of revenue marketing rule for consulting may not be enough.
If you want to successfully establish that second location and create a larger presence in a competitive market, you may need to increase your marketing budget to 10% or even more.
This could involve running more aggressive online ad campaigns, investing in paid LinkedIn promotions, or launching a targeted email marketing campaign to attract new clients. Strategic marketing investments like these will help you scale faster, capture a larger share of the market, and ensure both locations thrive.
Increase your marketing budget to 10% or more to support expansion into new markets.
3. Budget Beyond Your Current Revenue
Here’s the thing: if you only budget based on your current revenue, you’re limiting your potential. Growth doesn’t happen by standing still—you have to plan ahead.
Think about what your projected revenue looks like in six months, a year, or even further down the line. If you want to compete with bigger players or expand into new markets, you’ll need a bigger budget to get there.
If you’re currently competing with “average” businesses but want to go head-to-head with a larger competitor, you’ll need to match their budget or at least part of it.
Allocating your marketing spend based on projected growth allows you to make bolder moves and stay ahead of the curve.
4. Adjust Your Marketing Spend as You Grow
As your business grows, so should your marketing budget. You might not need to keep increasing it forever, but during growth phases, reinvestment is critical.
A crucial goal is to build brand awareness among your target customers. Once you’ve achieved that, you can start to stabilize your marketing spend. When people know your brand, you won’t have to push as hard to stay visible. But until then, you need to keep reinvesting.
And don’t forget—this isn’t a set-it-and-forget-it process. I recommend revisiting your budget quarterly or at least annually to see what’s working and where adjustments need to be made. Maybe you’ll decide to expand into new markets or launch new products, which means you’ll need to rethink your budget.
5. Common Marketing Budget Mistakes
Now, I want to share some common mistakes I see when people try to build their marketing budgets. These are the pitfalls you should avoid:
- Not including Your Marketing Team in the Marketing Budget Conversation
One of the most overlooked mistakes I see is not involving the marketing team when setting the budget. It might seem obvious, but the C-suite often makes decisions without consulting the people who actually understand the marketing needs and strategies.
When you leave marketing out of this conversation, you risk setting a budget that doesn’t align with current goals, campaigns, or growth targets. Your marketing team knows which channels are performing best, where the opportunities for growth lie, and how much investment is needed to stay competitive.
Including them in the discussion ensures you’re setting a realistic budget that drives results rather than just cutting costs.
- Putting Less Money Toward Effective Methods
I often see companies stick to their longtime favorite processes even when newer, more effective marketing channels prove successful.
The market shifts fast—what worked last year might not work next year. It’s crucial to consistently invest in both new and tried-and-true tactics. By doing this, you’ll keep up with changing conditions and upgrade your strategy with higher-quality automation, personalization, and more.
- Not Correcting Bad Data
Taking a shot in the dark with your marketing is risky. Bad data can lead to misguided decisions and wasted budget.
Make sure you’re auditing your data regularly to remove inconsistencies or outliers. Bad data means bad results, and you want to base your campaigns on solid information.
- Discounting Current Customers
Many businesses focus so much on acquiring new customers that they overlook the ones they already have. It costs more to acquire new customers than to keep existing ones happy. Your marketing should include retention strategies to increase profits from your current customer base.
- Using the Previous Year’s Marketing Budget
The market changes year over year, and so should your marketing budget. Just because something worked last year doesn’t mean it will work this year.
Always reexamine your company’s goals and analyze current market trends when planning your budget. Doing so will open up new opportunities and help you avoid outdated tactics.
Building a realistic marketing budget is more than just assigning a percentage of your revenue or copying what worked last year. It’s about understanding your industry, knowing your growth stage, and being strategic with your investments.
If you take these steps—researching your industry, aligning your budget with your growth goals, and avoiding common pitfalls—you’ll be on the right track to building a marketing budget that helps you grow without breaking the bank.
If you’re feeling stuck or need some help figuring out what makes sense for your business, I’m here to help. Let’s talk, and I’ll help you craft a marketing budget that fits your goals and your growth potential.