Marketing serves as the engine that propels business growth. For New Zealand SMEs, solopreneurs, and non-profits, determining the right amount to invest can be challenging. Spend too little, and your business may remain unnoticed; spend too much, and you risk straining your finances. This guide offers a straightforward approach to establishing a marketing budget for small business that balances growth aspirations with financial sustainability.
The Common Pitfall in Marketing Budgeting
A frequent misstep among businesses is treating marketing as an optional expense, allocating funds only after other costs are covered. This reactive approach often results in inconsistent marketing efforts and missed opportunities to build a strong, recognisable brand. Instead, view marketing as a strategic investment—an ongoing effort that yields long-term returns.
Standard Marketing Budget Benchmarks
Typically, businesses determine their marketing budgets based on gross revenue:
- New Businesses (0–3 years old): Allocate 10–20% of gross revenue.
- Established SMEs (3+ years old): Allocate 5–10% of gross revenue.
- Businesses Pursuing Aggressive Growth: Allocate 15% or more of gross revenue.
Planning your marketing budget 2 to 3 months in advance is advisable. Consider creating a separate marketing bank account to keep these funds organised and distinct from operational cash flow. However, every business is unique, so a more tailored approach may be beneficial.
A Practical Formula for Your Marketing Budget
Rather than adhering strictly to generic models, consider this Hybrid Marketing Budget Formula, which combines a stable base with growth-oriented flexibility:
Step 1: Establish a Base Budget (Non-Negotiable Minimum)
Determine a fixed amount to consistently invest in marketing, ensuring ongoing visibility regardless of revenue fluctuations.
Formula: Base Budget = Essential Monthly Marketing Cost.
Example: If your business relies on social media advertising and promotional products, your base marketing cost might be NZD 1,000 per month.
Step 2: Allocate a Percentage of Gross Revenue
In addition to your base budget, allocate a flexible percentage of gross revenue to accommodate growth.
Formula: Flexible Marketing Budget = Gross Revenue × Allocated Percentage
Example: With a monthly gross revenue of NZD 20,000 and an allocation of 5%, your marketing budget would be NZD 1,000 (NZD 20,000 × 0.05).
Tip:
- Start with 5–10% of gross revenue.
- Increase to 15% or more if launching a new product or pursuing aggressive growth.
Step 3: Adjust Based on Profitability
When experiencing profitable months, consider allocating additional funds to marketing to further enhance growth.
Formula: Additional Budget = Net Profit × Growth Investment Percentage.
Example: With a net profit of NZD 8,000 and a reinvestment of 10%, you would add NZD 800 to your marketing budget.
Suggested Profit-Based Allocation:
- If net profit is low, adhere to your base budget.
- If net profit is strong, consider investing an additional 5–15%.
Tools and Resources to Manage Your Marketing Budget
Effectively managing your marketing budget can be streamlined with the right tools:
- Spreadsheet Software (e.g., Google Sheets or Excel): Create a simple budgeting tracker.
- We have we’ve created a FREE Marketing Budget Calculator that does the calculations for you. Download it HERE
- Accounting Software (e.g., Xero, MYOB): Monitor revenue and marketing expenses.
- Marketing Calendar (e.g., Google Calendar, Click-Up): Plan and schedule your marketing activities over time.
Keep It Simple and Consistent
Establishing a marketing budget need not be complex or stressful. By setting a base budget, allocating a percentage of revenue, and adjusting based on profitability, you create a flexible yet stable framework that supports sustainable growth.
Curious how this applies to your business?
Note: This article has been adapted from The Why Marketing’s original LinkedIn post to provide a comprehensive guide tailored for New Zealand SMEs, solopreneurs, and non-profits.
About The Why Marketing
Founded by Geoffrey Campbell in 2019, The Why Marketing specialises in providing tailored marketing solutions for SMEs in Tauranga, New Zealand, and the broader North Island area. With a focus on strategic planning, brand management, and digital marketing, we act as your Virtual Marketing Officer, delivering in-house and outsourced services designed to meet your unique needs. Our ethical approach and commitment to quality ensure that we deliver results that matter. Let’s build something great together.
