How Much Money to Spend on Business Marketing and Advertising

A retired business executive, Ashu Bhandari spends part of his spare time providing consulting services. Seasoned in business management, operations, and promotion, Ashu Bhandari utilizes his expertise to counsel local businesses in areas of public relations and advertising.

Among the most difficult parts of owning a business is determining how much money to allocate toward business needs, such as marketing and advertising. For companies making less than $5 million in sales annually and earning 10 to 12 percent net profit margin, the United States Small Business Administration recommends setting aside 7 to 8 percent of a business’ gross revenue for marketing use.

However, this number varies according to the competitiveness of an industry and the length of time in operation. In some instances, marketing experts suggest small businesses use up to 3 percent of revenue to promote their products or services.

In fact, a 2010 Chief Marketing Officers Council survey indicated a majority of chief marketing officers spent less than 4 percent of a company’s gross revenue on promoting and advertising the business. In total, nearly three-quarters of survey participants allocated 6 percent or less to marketing initiatives.