How Much Should Your Firm Spend On Marketing?

The question that every boutique consultancy wants to answer.

“How much should we spend on marketing?” is one of the questions consulting partners ask me the most.

If you ask that question to an agency founder, he will almost always say “more.” If you ask the firm's partners, they will say "less, we already spend too much on it." It's unlikely that these are the right answers, though.

Most of the time, partners are looking for a straightforward answer. They want to (understandably) benchmark their spending with those of other firms and establish some kind of magic number. "Is 3% of total revenue enough?"

This is not the right question to ask. Partners are trying to solve the problem by looking around at what other consultancies do, and benchmarking is a solid attempt. But they lack experience in marketing strategy and implementation.

When clients ask me how much to spend on marketing, I ask them three questions:

  1. “What are your marketing goals?”
  2. “How fast do you want to achieve them?”
  3. "What standard do you want to operate at?

When you know the result, the timeframe, and the quality standard you want to operate at, then establishing the required marketing investment becomes simple.

The faster you want to reach your goals (top-line growth, brand awareness, or any other strategic objective), the more money you need to spend. If you can afford to go slower, you will typically spend less.

Similarly, in most cases “80% perfect” is enough to generate great marketing outcomes. We can perfect things later once you get some results in the door. But for some firms, their standards for what they produce are much higher (95%+ or nothing). The trade-off to aiming for 95% perfection is time and money.

If you can clearly answer those three points, the key to determining how much you should spend is reduced to a very different question: What are the initiatives I can execute to reach those goals under these constraints, and what do I get in return for investing in each one of them?

If you can't answer this question, then you're either (1) not effectively measuring your marketing efforts or (2) starting a consulting practice from scratch. In that case, no number or benchmark can help. You should definitely look for specialized marketing support.

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