How much marketing budget should I plan for from my turnover?

Annual financial planning for your company also raises the question of how much of the current year's turnover should be allocated to the marketing budget in the coming year. Marketing is an individual topic in every company. Various factors therefore need to be considered when planning the budget.  

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How much of my turnover should I budget for marketing? The average value that German companies plan as a marketing budget from their turnover is 6%. However, the optimal amount depends on your company's market position, industry, marketing strategy and company size.  

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There is no generally valid amount as a recommendation. The factors for creating a budget are as individual as your company itself. Even your company's objectives are relevant. 

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The issue of personnel costs should also not be underestimated. An internal marketing department for the company or in the individual departments entails ongoing costs. With an external marketing department, such as the one we provide at MORE, you are also more flexible with your budget. 

The different methods for determining the marketing budget

The basis of every calculation is the company's turnover. You can use various methods to determine the proportion of the turnover that you use as a marketing budget.

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Other possible methods for calculating your marketing budget are 

• Financial strength orientation

• Update method

• Competitive orientation

With the financial strength orientation, you use the budget that is possible for your company based on your financial resources. The extrapolation method is comparable to the percentage method. You look into the past and stick to the proven budget based on turnover. 

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For the competitor orientation, find out about the usual marketing budget in your industry and use the average value. This can be useful if you have not yet had much experience with marketing for your company. 

Information on the implementation of the goal-oriented method 

We recommend that you calculate the marketing budget that you use from your turnover using the target-oriented method. The following points are necessary for this: 

#1 Determine your starting situation

What is the current status quo in terms of marketing and sales? By presenting your initial situation, you have the basis for further decisions. We use an example to illustrate how the figures from the past year can give you a possible indication of next year's marketing budget. 

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Imagine you have generated an annual turnover of 2,000,000 euros. A look at your finances shows that 200,000 euros were spent on marketing in the financial year. This puts your marketing budget at 10% of your turnover. 

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Several questions are now relevant for the coming financial year: 

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• Did you manage on a budget? 

• Was it also planned in terms of height? 

• If it was planned lower, what are the cost-intensive areas? 

• Were the marketing objectives achieved with the budget? 

#2 Derive marketing goals and plan measures

Once you know the current status of your company, the marketing goals for a defined period are derived. The development of a strategy and the planning of measures are usually the responsibility of the marketing department. If you do not have experts in-house, it makes sense to commission an external marketing department to compile an initial overview. At MORE, we have extensive experience in concept and action planning and can support you with all our expertise. 

#3 Determination of costs and financial feasibility

Once the objectives and measures have been defined, the next step is to determine the expected costs. It makes sense to calculate the costs by area . In the next section, we will provide you with a list of the individual components that are relevant in marketing. 

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Determining the costs also raises the question of affordability. You now have an amount at hand that represents the required marketing budget. Check to what extent it is possible to invest this budget from your turnover. 

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If there is a gap between the possible budget and the required budget , it is necessary to list the priorities in the marketing area. This will help you to identify where you can potentially save costs. 

#4 Regularly check the costs 

Once you have drawn up a plan and checked its financial viability, the marketing budget should not take a back seat. In order to learn for future planning, we recommend that you regularly check the costs. Many companies work with a flexible marketing budget. This means that they calculate a buffer from the outset, which can be used to adjust the budget upwards over the current financial year. 

The individual components of marketing budget planning

In order to determine the right marketing budget for your company in terms of turnover, we recommend taking a look at the individual planning components. A detailed list will show you which components involve the highest costs. 

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1. Personnel costs

Personnel costs in the marketing sector are often underestimated. Salaries as well as travel costs and expenses for the training and further education of your employees are incurred. 

2. Creation of concepts

In order to create concepts, it is necessary to conduct market research, create and evaluate analyses. You may also need the support of external service providers, which increases costs. 

3. Creative costs

To implement marketing strategies, it may be necessary to create graphics, work with creative programs, program or create videos. 

4. Production 

If it is part of the strategy to work with brochures, posters and other print designs, a budget must also be planned here. The budget also changes depending on the desired quantity and quality of the prints. 

5. Media costs

Advertising via social networks or billboard and television advertising are so-called media costs. The budget is determined by the strategically planned amount of advertising you want to place. 

6. Costs for tools

There are various tools available in the marketing sector that can be used to work strategically and analytically in order to achieve the highest possible increase in sales and evaluate results. There are often regular or one-off costs for the tools. 

Seeing the marketing budget as an investment for the future 

We have often found that companies underestimate their marketing budget. However, it is important to see the marketing budget not as a necessary evil, but as an investment in the future of your company. 

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Marketing generates attention and new leads. Brands and products become better known. Campaigns increase the visibility of your company. Marketing also makes it possible to establish a brand in the first place. 

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In the best-case scenario, the money you spend on marketing will come back to you in the form of increased sales. However, precisely because companies' products and services vary, it is not possible to make a standardized statement on the recommended marketing budget based on turnover. 

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The following points alone make a clear difference: 

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• How big is your company? 

• What industry do you work in? 

• How many employees does your company have? 

• What are your goals for the coming financial year? 

• What communication measures are implemented or planned in marketing? 

To give you some figures, here are the recommended average values according to annual turnover: 

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1. With an annual turnover of 250,000 euros, the recommended marketing budget is 6% of turnover. 

2. With an annual turnover of 500,000 euros, the recommended marketing budget is 5% of turnover. 

3. With an annual turnover of 3,000,000 euros, the recommended marketing budget is 3% of turnover. 

4. With an annual turnover of 10,000,000 euros, the recommended marketing budget is 2% of turnover. 

5. With an annual turnover of 50,000,000 euros, the recommended marketing budget is 2% of turnover. 

These are approximate values, but they make it clear that your marketing budget requirements will decrease as your sales increase and your brand and products become established on the market. 

Hand over marketing to an external department

More and more companies are deciding not to have their own in-house marketing departments, but to use an external department instead. This way you have variable marketing costs as you don't have to finance your own marketing department on a permanent basis. 

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In addition, the marketing budget also depends heavily on the expertise of the employees. There are rapid developments in marketing that make it necessary to adapt the strategy quickly. Companies are often unable to ensure that their marketing employees are always up to date. 

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At MORE, we attach great importance to always being one step ahead in the field of marketing through continuous further training. 

Conclusion: The marketing budget of sales is individual 

It is difficult to give a clear answer to the question of how high the marketing budget should be set in relation to turnover. This is a highly individual area of financial planning. In addition to components such as the industry and the size of the company, it is above all the marketing objectives that influence the budget. 

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As an external marketing department, we at MORE work with modern marketing methods and focus entirely on your ideas. In joint discussions, we discuss the marketing strategy and also provide estimates of the required marketing budget. 

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