How to calculate your marketing budget
Most disappointing marketing experiences are decided before any work starts. Somebody sets a budget, usually by looking at last year or at what felt affordable, and then hires an agency or a marketing coordinator and waits for growth. When the growth does not match the hope, the conclusion is that marketing does not work.
The budget was the problem. It was set without a result in mind.
We built a free marketing budget calculator to fix that. It takes 5 minutes and it starts from the only number that matters: the sales you want to reach.
Open the marketing budget calculator
The rule of thumb
B2B businesses aiming for moderate growth typically invest 5 to 15 percent of revenue in marketing. Maintaining your position sits at the bottom of that range. Aggressive growth sits at the top.
The part most people miss is which revenue number you apply it to. Apply it to the sales you want to reach, not the sales you have. A business doing $4 million that wants to be doing $6 million next year should be budgeting against the $6 million. Budgeting against the $4 million buys you a $4 million business.
That percentage covers everything: internal staff, agencies, advertising spend, software, events. It is the whole marketing function, not just the agency invoice.
A worked example
Say you turn over $4 million today and want to reach $10 million in three years. A realistic year one target is $6 million. At 10 percent, the marketing budget is $600,000 a year.
If an average client is worth $40,000 a year, that growth needs 50 new clients. Which means $600,000 buys you a cost of $12,000 to win each one.
Now the question changes. It is no longer “what does marketing cost?” It is “what will it take to win 50 clients worth $40,000 a year, and is $12,000 a fair price to win and keep each one?” A client worth $40,000 a year who stays five years is a $200,000 decision. Most business owners answer that question differently to the first one.
Three questions before you set the number
1. What is the growth actually worth?
Put a lifetime value on a client before you decide what you are willing to spend to win one.
2. Has what you have done so far bought the results you expected?
If the answer is no, a bigger version of the same plan will not fix it. The plan needs to change, not just the spend.
3. Do you want growth, or do you want what is cheap?
The lowest quote is priced to win the job, not to win you clients. Both are legitimate choices. The mistake is choosing the cheap option and expecting it to perform like the expensive one.
We use a car analogy with clients.
At the top end is a Ferrari, in the middle is a Hyundai.
Both get you to work.
Both are the right car for someone.
If the budget does not extend to the Ferrari, then Hyundai it is, and that is fine.
The mistake is buying the Hyundai and expecting it to drive like the Ferrari.
Where the money goes
A budget is only useful once it is split into the jobs it has to fund. The calculator breaks the total into seven buckets with a starting allocation you can move:
| Bucket | What it covers | Starting share |
|---|---|---|
| Strategy and planning | So the rest is not guesswork | 5% |
| Internal marketing team | Loaded cost of staff or contractors, including super, leave and management time | 25% |
| Agency and outsourced services | Retainers, projects, specialist help | 25% |
| Paid advertising spend | Money paid to Google, Meta or LinkedIn, separate from the fee to manage it | 20% |
| Website, search and content | The channel you own | 12% |
| Brand channels | Email, social, events, PR | 8% |
| Tools | CRM, email platform, analytics, design software | 5% |
Move one slider and the others adjust so the total stays at 100%. There are presets for a balanced split, an agency led model, an internal team led model and an ads heavy model, so you can see what each approach does to the other buckets.
Two things are deliberately left out. A rebrand happens once, and a new website is an asset on your balance sheet, so neither belongs in a recurring annual budget.
Your competitors marketing budget
Whoever is ahead of you in your market has likely already invested to get there, and is still investing to stay there. Matching them costs at least what they spent. Overtaking them costs more.
A low budget is effectively a decision to hold your current position. That is a perfectly good decision, as long as you make it on purpose.
How to use the marketing budget calculator
- Enter current annual sales and the sales you want to reach into the marketing budget calculator
- Set the percentage. Start at 10% and move it to match how hard you are pushing.
- Choose whether to apply it to year one target sales or only to the new sales you are adding.
- Enter your average client value to see how many new clients the growth needs and what each one costs to win.
- Adjust the allocation sliders or pick a preset.
- Print or save the summary and bring it to your next planning meeting.
It is a guide, not advice. Every business is different, and if you would rather work through your version with someone, we are happy to do that with you. Email hello@sotogroup.co or call 1300 204 834. Got a question before you start? You might find the answer on our FAQ page.
