Setting a Budget for Search Engine Marketing

     

Published: August 14, 2017

There are many things to consider when determining your marketing budget including how long you’ve been in business, what your current goals are, what the market saturation looks like, and how prepared you are for expansion. A simple answer is difficult to pin down.

On the other hand, we can take a look at what companies are spending on average to get a good baseline and then fine-tune it to your needs.

How Much to Spend on Marketing
On average, most companies spend around 5 percent of their total revenue on advertising and marketing. For those businesses that are trying to grow, that might be closer to 10 percent. 

There are also some industries that rely heavily on marketing and promotion. For example, retail establishments that have continually changing lines (i.e., fashion), or many rotating promotions (i.e., consumer goods) can spend as much as 50 percent of their revenue on marketing activities. 

If these numbers sound high, remember that this portion of your budget should include all advertising including overhead expenses, salaries and bonuses, and expenses such as printing.

Breaking Out Digital Marketing
If we stick with the 5 percent average, at least 30 percent of that should be dedicated to digital. As more companies get results from social media, blogging, search marketing, and other digital activities, more resources are being allocated in that direction. Most companies are planning to boost their digital spend over the next several months, but 30 percent is a good starting point. 

From the total spent on digital marketing, between 10 and 15 percent should be dedicated to SEM, although the best results are usually achieved when you start small and increase your spend over time when you’ve found a proven route to new leads.

Here Comes the Math
Thinking about a percent of a percent of a percent is not everyone’s idea of a fun morning activity. To make it simpler, here’s a breakdown of what that might look like for an average revenue stream of $5 million.
  • For $5,000,000 revenue, 5 percent--or $250,000--is dedicated to advertising and marketing.

  • For a $250,000 advertising budget, 30 percent--or $75,000--is dedicated to digital marketing activities.

  • For a $75,000 digital marketing budget, 10 to 15 percent--or 7,500 to $11,250--is dedicated to SEM.

  • With an annual revenue of $5 million, the monthly spend for search engine marketing would be between $600 and $900. We recommend that every company starts with a minimum of $500 to dedicate to SEM, and consider an increase after a few months.
Be Flexible
These figures are here so you can get an idea of what others are spending and what we consider to be good rules of thumb. Of course, rules are made to be broken and when it comes to digital advertising, the long game is the one that counts.

It’s easy to overspend on AdWords in the beginning--before you have fine tuned your keywords, landing pages, and other variables. No matter how much money you throw at bad keywords, you won’t get results. 

Our approach is to start small and slow and build up over a few months. We take the time to get to know each of our clients’ needs, goals, and budget and minimize the initial costs. That way, we can create long-term, lasting success.

Categories: Search Engine Marketing
Tags: Search Engine Marketing, SEM, Budget
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