As we approach the end of the year, many businesses are reviewing performance, planning for growth and deciding how to allocate next year’s dollars. It’s a time when the pace of the market feels especially fast and clear decision-making becomes even more important.
A well-planned marketing budget helps companies stay intentional rather than reactive, communicate consistently and invest in work that delivers real value. The principles are straightforward: choose a method, understand the benchmarks and build a budget that supports long-term growth.
How Businesses Set Their Marketing Budget
Most for-profit companies that have a marketing budget use one of three methods to establish it. Many rely on the percentage method, assigning marketing a fixed share of total revenue that scales naturally as the business grows. Others prefer the dollar method, setting a specific amount based on past spending and expected return.
Companies that evaluate their marketing frequently often use the incremental method, adjusting the budget up or down based on recent performance or sales targets. Each approach offers a different level of flexibility, but all three give businesses a structured way to plan and measure their marketing activity.
For those using percentage, determining what number to allocate for marketing involves different variables. Many organizations begin by looking at industry benchmarks, since marketing allocations often vary by sector. Retail businesses, for instance, may dedicate a different percentage of revenue to marketing than service-based companies due to differences in customer acquisition costs, competition and sales cycles.
Most companies fall into familiar ranges, and those ranges have held steady even as competition has intensified. For example, the U.S. Small Business Administration recommends spending 7-8 percent of your gross revenue on marketing and advertising if you’re doing less than $5 million a year in sales. For businesses introducing new consumer products, that number can reach as high as 20 percent, and for nonprofits, the number is often in the 9-12 percent range.
While that has remained consistent, what has changed is the environment in which those dollars work. Businesses today operate across more channels, face more competition for attention and rely more heavily on consistent communication to stay visible. A defined
marketing budget gives companies the ability to plan intentionally rather than react to shifting trends.
What a Real-World Budget Looks Like
Percentages become more meaningful when applied to an actual business. For a company generating $500,000 in annual revenue, an 11 percent allocation results in a $55,000 marketing and communications budget. That amount covers the core activities most companies rely on to stay visible: advertising, design and printing, special events and the salaries or fees associated with marketing staff, consultants and freelancers. Sales and business development personnel, however, are often budgeted separately and are not typically included in marketing expenses, particularly in larger organizations.
When dividing up those dollars, consider what investments get the most value for your money instead of focusing simply on total cost. Some years will require additional investments in foundational pieces of your marketing funnel, like website upgrades. Advertising alone requires both production and placement, and companies should expect to spend one‑third of their advertising dollars developing and producing ads, with the remaining two‑thirds dedicated to running them.
Seeing the numbers in context helps business owners understand marketing not as an abstract percentage but as a tangible investment in the tools and expertise that shape customer perception and experience.
Why Value Matters More Than Cost
A successful marketing budget depends on prioritizing value over cost. Businesses often underestimate the investment required to produce effective advertising or develop strong creative assets and the cheapest option rarely delivers the reach or consistency they expect.
The one‑third to two‑thirds ratio in advertising illustrates this clearly: strong production is essential to making campaigns work. An updated website is another example. An inefficient website that isn’t converting leads will in the end waste more money than it saves by not regularly updating it. When businesses base decisions on value, they invest in the elements that strengthen their brand, improve communication and support long‑term growth rather than short‑term savings.
Building a Budget That Supports Growth
Marketing budgets are not static. They shift with revenue, competition and customer behavior. But the principles remain the same: understand the benchmarks, choose a
method and invest in the work that delivers real value. Set measurable goals and check to make sure your efforts are backed by a strong foundation: consistent and clear branding, a defined audience and a strategic plan to reach them.
Businesses that approach marketing with structure and intention tend to make clearer decisions, communicate more consistently and avoid the reactive spending that often leads to wasted dollars. In a fast‑moving environment, a well‑planned budget becomes one of the most reliable tools a company has to support growth.
This article was written by Jennifer Henderson, President and Founder of J.O. Agency, a Fort Worth advertising agency specializing in strategic marketing and public relations.