Marketing can be an intricate part of your business to quantify and budget. Beyond determining what amount makes the most sense as a marketing budget for your business, you have to decide the best way to spend that budget for the maximum effect. Like most aspects of your SMB, the first concern to spending your budget in the best possible way is to start with the right people. Who can lead your marketing campaign and initiatives, who can you trust to spend your SMB’s marketing budget effectively and efficiently?
Regardless of your company is B2B or B2C focused, often this process ends with the titular question: should I hire a marketing agency for my business? As a marketing agency, Bold Entity is admittedly a little biased. We believe most businesses, especially small to mid-size businesses (SMB) in B2B, would benefit by engaging a marketing agency. But, today, we want to look at the advantages of hiring a marketing agency from a budget standpoint. To do that, we first should discuss how to determine a marketing budget.
Creating a Revenue-based Marketing Budget for Your SMB
There are a few different methodologies for building a marketing budget for your business. We’ll be using the revenue-based marketing budget for this example because it’s one of the simplest means to create a marketing budget from scratch with the least amount of guesswork. A revenue-based marketing budget is preferred for businesses that don’t have a reference point for what to spend on their marketing.
US SBA Revenue-based Marketing Budget Recommendation
As you would expect, building a marketing budget in this manner is setting a percentage of your business’s annual revenue as your marketing budget. The U.S. Small Business Administration has set a rule of thumb for SMBs to use 7-8% of their annual revenue as the basis for their marketing budget. What this rule of thumb doesn’t take into consideration are industry changes. The SBA last updated this article in 2013, and marketing costs have risen steadily over the past decade, so this number isn’t necessarily representative of the current market.
Deloitte’s 2020 Revenue-based Marketing Budget Findings
In 2020, Deloitte completed a survey of US companies to see what percentage of their annual revenue they spent on marketing. To no surprise, the averages are above the outdated recommendations from the US SBA. Overall, they found that companies spent between 9.4% and 15.9% of their annual revenue on marketing.
Deloitte Marketing Budgets by Offering
- B2B Products 9.4%
- B2B Services 11.4%
- B2C Products 15.9%
- B2C Services 12%
Because we’re looking at averages here, it’s essential to take these numbers with a grain of salt. They are a good place to use as a starting point for creating your marketing budget based on your revenue. Does your current marketing budget fit within this revenue-based range? If not, it may be time to reassess the budget you’re allocating for marketing.
Marketing Budget Adjustment
Taking your revenue and applying the percentages from above should provide you with a middle range for your future marketing budgets. You may also want to consider adjusting this budget allocation based on your upcoming marketing and business goals. For instance, if you want to be aggressive with your marketing, consider adding another 50% to your revenue-based marketing budget.
If you need to rein in your marketing, we always advise against turning the faucet off completely. Putting your marketing efforts to zero can create significant future problems by erasing all the momentum created with your previous marketing. Instead, we recommend taking a reduced budget at 75% of your expected revenue-based budget to maintain the marketing inertia you’ve already created.
Marketing Budget Guidelines
Most marketing budgets range between 1% and 25% of a company’s revenue. Again, using revenue as a basis for creating your marketing budget is just one approach, and every SMB is different. Your SMB’s marketing needs are dependent on your industry, individual business structure, and profitability. We advise comparing your marketing budgets of the past versus the annual revenue approach. If your numbers are far off the average, it may be time to reassess and develop a new marketing budget.
Bold Entity has plenty of experience helping B2B SMBs with every aspect of their marketing needs. We can help you determine your branding, marketing strategy, and yes, even a marketing budget that makes sense for your business and how to spend that budget best. If you’re looking for help developing any aspect of your company’s marketing, Contact Us.
How Much Should I Spend on Marketing Talent?
The biggest cost of doing business is most often the cost of labor, especially good labor. So, with your revenue-based marketing budget in hand, we can determine if you should hire a marketing agency for your SMB. To illustrate this point, we will utilize another standard business measurement or rule of thumb.
Standard business practice is to spend 15-30% of your business’s budget on the payroll. Of course, your business may vary based on your industry, offerings, and business structure, but this number offers a solid point of reference we can use for this exercise. Take a look at your marketing budget and portion out 15-30%. That’s how much you should be spending on the marketing talent who will implement the remainder of your budget. Now, you may find this isn’t a substantial sum of money for hiring labor.
Using this budget percentage approach helps avoid a problem where your marketing budget goes “upside down,” where you spend more of your budget on the people implementing your marketing budget than marketing your SMB. Instead, the amount of money you have to spend in your budget will determine the quantity, quality, and type of marketing talent that best meets your marketing needs.
Should I Hire a Marketing Agency, Internal Team, or Freelancers?
Now that you have a good range for the money you should be spending on your marketing talent, we can look at what makes the most sense for your SMB. Here are some critical questions you should first ask yourself:
- Who can help me put together a marketing campaign and oversee its execution?
- Who can communicate and coordinate the people outside my business (agencies, freelancers, vendors) working on my marketing?
- Who can manage the SMB’s routine marketing tasks like social media, website maintenance, and ensuring the marketing tools and subscriptions are working?
One of the most significant issues with hiring internal marketing talent or a freelancer on retainer is ensuring you have enough marketing budget and deliverables to keep them engaged year-round but not so busy to end the year with an unspent marketing budget. It can be a tricky balancing act that often requires direct management of that person, which is usually not a good use of an SMB business owner’s time.
The Cost of Internal Marketing Talent
Answering the questions, you may naturally decide that a marketing director would be an excellent addition to your SMB. A good marketing director is capable of addressing all the question points. But is it within your budget for marketing talent?
According to salary information from Salary.com, Glassdoor, PayScale, and Randstad, a marketing director in the US, average an annual salary of $144k. Of course, this salary information is big data without considering whether the marketing director works for a Fortune 500 company or a mom-and-pop shop. Still, looking at that average salary and your allotment for marketing talent in your budget will give a very clear idea of whether hiring internal marketing talent makes sense for your SMB.
While hiring internal talent can be prohibitively expensive to build an internal marketing team, having someone in your organization with marketing experience to develop your SMB’s marketing direction, manage outside marketing agencies and freelancers, plus make marketing decisions for your SMB cannot be overstated. If a full-time hire doesn’t make sense for your budget, consider an alternative source like an Outsourced CMO.
Ruling Out Marketing Agencies, Employees, and Freelancers by the Numbers
Using the numbers we’ve deduced, we can make some informed decisions about the type of marketing talent that makes sense for your SMB to hire. If your budget for marketing talent is less than $300K, hiring an in-house marketing team of 4+ specialized, full-time employees may not be the best use of your budget.
If your marketing talent budget is below $100K, you may not have the budget to hire an experienced and talented marketing director to lead your SMB’s marketing. Furthermore, if you could hire a competent marketing director within this budget, that director would not have much left to engage an outside agency or freelancer to help deliver on your SMB’s marketing goals.
Should your SMB’s marketing budget for talent look more like $12K, even paying for an agency or freelancer’s retainer becomes difficult. Most marketing agency monthly retainers minimums range from $2,000 to $10,000 per month. And, most freelancer minimum retainers sit around $1,000 per month. The actual price of a monthly marketing agency or freelancer retainer is determined by your client contract’s scope of work and the services offered. The higher the retainer, the more and varied projects your outside partner marketing agency or freelancer can provide for you. With monthly retainers, the value comes from determining what you want to accomplish and what type of services do you need from your marketing vendor to make that happen.
So, for SMBs with marketing talent budgets in the sub-$12K category, your best option may be a project-based approach to your marketing. Instead of hiring a marketing agency or freelancer on a retainer, you can ask them to price specific projects. Using a project-based approach is also a great way to start a relationship between your SMB and a marketing agency. Working together on one specific project can help you determine if a marketing agency is the right fit for your company. If things go well, you can consider a retainer with the agency.
Finding a local marketing agency that makes sense for your SMB is easy with a bit of online search, review, and research. Finding freelancers, especially project-based freelancers, is a bit more complicated. Consider using a platform like Upwork to research and hire individual freelancers. These freelancer platforms help protect your interests and provide a straightforward way to see how other companies rate freelancers.
Example: Should I Hire a Marketing Agency for My Business?
Here’s an example that will show you how to use the information we’ve discussed to answer the question for your business. Our example business is a B2B, SaaS company. They’re a service-based SMB with $5M in annual revenue. Using our handy numbers provided by the Deloitte survey, we take 11.4% of our $5M yearly revenue for an expected marketing budget of $570K.
Our B2B SaaS company has a new offering in development, but it won’t be market-ready until next year. So, we’ll keep the $570K marketing budget for this year. Next year the company will want to promote its new offering, so we would expect to use the 1.5 multipliers for an aggressive marketing budget to be applied next year, for a marketing budget of $855K.
How Much Should My SMB Spend on Marketing Talent?
We take our current revenue-based marketing budget, $570K, and multiply that by 15% and 30% to give us a range on what to spend for our marketing talent. It would be a good idea for our B2B SaaS company to spend between $85.5K and $171K on marketing talent. With an average salary of $144K, a marketing director may not be the right hire for our current budget. So, we may need to look at an outsourced CMO option or in-house marketing talent with a smaller price tag.
Ideally, let’s say our SMB found a diamond in the rough, an experienced marketer transitioning between manager and director we snagged for $120K. We would also consider hiring a marketing coordinator, whose annual salary averages about $55K (Salary.com, Payscale, Glassdoor, Randstad USA, and ZipRecruiter). And, we’re over budget.
Instead of hiring a marketing coordinator, the best use of our remaining marketing talent budget (<$51K) would be to use it on a $1-4K monthly retainer for a marketing agency or freelancer(s).
Why Should I Hire a Marketing Agency for My Business?
By running the numbers, especially looking at the provided example, it’s not difficult to see how hiring a marketing agency is the best choice for most SMBs compared to hiring internal employees or multiple freelancers to service your marketing needs.
Marketing agencies generally provide the best bang for an SMB’s buck. Agencies offer your SMB a stable of talented, experienced, and specialized marketers for pennies on the dollar compared to hiring internal marketers or multiple freelancers that someone in your company will have to manage. Agency retainers offer you an entire team of marketers who already work with each other, so you don’t need to coordinate communication between freelancers. And your marketing agency team is diverse and specialized; replicating the same as an in-house marketing department is prohibitively expensive for an SMB.
If you’ve run the numbers and are looking for a new marketing agency partner for your SMB, we’d love to talk; Contact Us. If you’re still unsure, did you know Clutch.co featured Bold Entity on its list of the Most Highly Recommended Companies in Texas? And don’t forget to take a look at our Portfolio to see what you can expect from us for your SMB!
