“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 5% 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:
When you know the result, the time frame, 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.
“A(nother) mistake we often see when it comes to setting marketing budgets involves what is included and what isn’t.
Does it include staffing costs, for example? Generally, staffing expenses are not included because they tend to over-state the actual marketing investment – especially when FTEs are assigned to marketing while, in fact, some of their responsibilities are allocated for other operational needs.”
In case you’re curious: In 2019, consulting firms dedicated only 7% of their revenue to marketing. The rate has risen each year since, and in 2023 it sits at 12%. Much of this rise may be attributed to investments in digital infrastructure that firms had to make during the pandemic.
Over the past four years, consulting firms increased their investment in marketing by 71%.
Source: 2023 Hinge High Growth Study
If you use historical data, what does it take you to reach your high-level marketing goal?
Let’s say you want to take your consulting practice from $300k to $400k / year. Instead of blindly following benchmarks to define your marketing budget, you can collect:
Using this historical data, you can have an idea of how many leads and/or upsell opportunities you need to generate the additional $100k of revenue in a given time frame. This exercise is not 100% accurate. But it’s certainly better than guessing.
Now, since I know that many of you don’t measure your marketing effectiveness, here’s a different question for you:
What do you need to start measuring your marketing initiatives and performance?
Feel free to drop me a line if you need support. You can go far without doing it.