Over the past 14 years of running a marketing agency, the question of how much to allocate to a marketing budget comes up all the time. In this article I will attempt to answer this question as best as I can with the knowledge and experience gained over 20+ years.
Clients want a straight answer, but unfortunately, there’s no magic formula. You’ll often hear figures like 2-5% for B2B and 5-10% for B2C companies when discussing marketing budgets. While that’s a good starting point, the reality is that many variables come into play—especially for smaller businesses where every cent counts.
Here are some important questions you need to ask before setting a marketing budget:
1. How quickly do I want to see ROI?
Return on investment (ROI) is critical when determining your marketing budget. If you’re looking for fast results, you may need to invest heavily in paid campaigns like Google Ads or Facebook Ads. These require a significant portion of your marketing budget but can deliver quicker returns. The faster you want results, the more aggressive your marketing efforts—and thus your budget—need to be.
On the flip side, if you’re willing to play the long game, strategies like content marketing or SEO can be more cost-effective but slower to show results. These methods build a sustainable presence over time, requiring consistent but possibly lower monthly investments.
2. How broad or narrow is my target audience?
Contrary to popular belief, niche audiences aren’t always cheaper to reach. In fact, the more specific your target market, the more you may need to spend to capture their attention. Hyper-targeted marketing often requires precision and can involve more expensive platforms or channels that offer granular targeting options—think LinkedIn Ads for B2B professionals or specific trade publications.
Additionally, creating personalized content or messaging that resonates with a niche audience can drive costs up. Niche markets are often highly competitive in their own right, and since your focus is narrower, every piece of marketing needs to hit the mark.
If your target audience is broader, you may have more leeway in spreading your budget across multiple channels, but you might lose some personalization in the process. The key is finding the right balance between reaching enough people and tailoring your message effectively, which can ultimately affect your budget.
3. How quickly do I want to reach my target audience?
If speed is the name of the game, your budget should reflect that. Paid channels—whether it’s search engine ads, display ads, or social media ads—are a great way to get in front of your audience fast. But, as you might guess, that speed comes at a cost.
If you have the luxury of time, you can invest in more organic methods, like SEO or building your social media following, which are slower but don’t require the same ongoing spend. The bottom line: faster reach equals bigger budget.
4. How long is my sales cycle?
Sales cycles vary depending on your business. A long sales cycle (common in B2B) might mean you need more nurturing—think email campaigns, remarketing ads, webinars, and ongoing content to keep potential customers engaged over time.
If your sales cycle is shorter (like in B2C), you’ll spend less on nurturing and more on getting quick hits. Knowing how long it takes to close a sale will help you plan how much you’ll need to keep people engaged throughout the buying process.
5. How much can I handle internally vs. outsourcing to an agency?
Handling your marketing internally can save you money on agency fees, but it comes with its own costs—salaries, tools, training, and time. If you don’t have a team of marketing experts on hand, outsourcing to an agency can give you access to specialists without the overhead of hiring full-time staff.
Agencies are usually priced via retainer or project fees, but the value you get from their expertise often makes up for the investment. The key is finding a balance between what you can do yourself and what you need professional help with. We unpack more in our blog: Marketing Agency vs In-House: Which Is Best For You?
6. What does my customer journey look like?
Where do your customers find you, and how do they make a purchase? Mapping out your customer journey helps you focus your budget on the most effective channels. For instance, if most of your traffic comes from Google, you might want to prioritize SEO or Google Ads. If social proof is big in your industry, influencer marketing could be where your budget goes.
By understanding how your customers move through their buying process, you can align your marketing spend to match their behaviours.
7. Am I focusing on an inbound or outbound marketing approach?
When planning your marketing budget, consider whether you’ll be focusing on inbound or outbound marketing. Outbound marketing—like ads, email blasts, or cold outreach—can generate leads quickly but requires more upfront spend. The challenge with outbound is sustainability. As soon as you turn off your campaigns, the flow of leads stops.
Inbound marketing—like SEO, content creation, and social media—takes more time to ramp up, but it delivers a more solid and consistent inflow of leads in the long run. The beauty of inbound is that once you’ve built momentum, your content continues working for you, drawing in leads even when you’re not actively pushing out campaigns. It might require a longer-term investment, but over time, it offers a more cost-effective way to keep your pipeline full. Read our blog on why inbound marketing strategies work for b2b companies.
Ideally, most businesses find success with a blend of both, using outbound for immediate wins and inbound to build a sustainable lead generation machine.
8. How competitive is my industry?
Competition has a big impact on your marketing spend. If you’re in a highly competitive industry, like real estate or legal services, expect to spend more to get noticed. The cost per click (CPC) on Google Ads, for instance, will be higher in these industries, and you’ll need to fight harder for attention.
In less competitive markets, your budget may stretch further, but that doesn’t mean you can skimp. Even in niche industries, you still need to maintain visibility to stay ahead.
9. What marketing channels do I want to use?
Every channel comes with a different price tag. Paid ads, influencer marketing, and PR campaigns tend to be more expensive. Organic tactics like SEO, content marketing, and social media management can be more budget-friendly, but they require time and consistency.
Knowing where your audience spends their time helps you figure out which channels are worth investing in. Once you’ve identified the right mix, allocate your budget accordingly.
10. How long can I afford to invest before seeing a return?
Marketing isn’t always an instant-return game. Depending on your strategy, it might take months or even years to see significant ROI. If you’re planning to build long-term brand awareness or authority, you’ll need to budget for ongoing investment, even if the sales don’t roll in right away.
The key is balancing short-term wins with long-term growth. Make sure you can sustain your marketing spend for the duration of your marketing strategy.
in Conclusion
Deciding how much to spend on marketing isn’t just about percentages—it’s about your goals, audience, sales cycle, and industry. By asking the right questions and understanding the bigger picture, you can set a marketing budget that works for your business and maximises your ROI.
