The answer to that question depends entirely on who you ask. 

There are no hard and fast rules about how to set a budget and so for many businesses, the plan drives the budget. They create a wish list – kind of like the one your kids take to Santa – of all the things they want to do and then back into a budget. Somewhere along the line reality takes over and some items are cut or at least postponed.

For others a budget always comes first. I know my franchisee clients have a set % of sales they are encouraged to carve out for marketing. This makes budget-setting a little easier for them because they have a guideline but can also sometimes be a little painful when the % is greater than what makes them comfortable.

For those businesses without a mandate from on high, the % of sales question continues to puzzle them. I’m seen numbers run anywhere from 1-10% depending on whether yours is a product or service-based company, the size of the organization and the current phase of your business (startup, growth mode, etc.).

My current marketing spend runs about 1 ½ % of sales, slightly less than the 2-3% most service-based businesses should be allocating to stay in maintenance mode and much less than the 3-5% recommended for growth mode.

Whether you can afford – notice I used the one ‘afford’ – to invest at this level is entirely between you and your CPA. And whether or not you’ve got a figure in mind, you can return to forming the wish list… er… plan.