Confession, this is an up to date revision of a much older blog I published well over 10 years ago. However, since the world is in turmoil, and markets are scrambling around, I thought I’d dust it off and give it a refresh for those out there who are still interested in competing in business, and I use the word competing judiciously.

As a marketer, I frequently have the same conversation over and over again with different businesses and it all pertains to spend. How much should I be spending? Isn’t that too much? We’ve never spent that much before, will it make a difference?

Now. We’re teetering on a global recession. So arguably the normal rules may not apply but if we also take in the trading context of the last 5 years it’s highly likely that your business will have seen some ups and downs, and may also have slashed marketing costs (or increased them) in that period as a result.

The fact is, it’s taking a LOT more effort to encourage customers to part with their cash at the moment so, arguably, your marketing budget will need to increase (not decrease) in times like this to cope with that additional influence required. There’s absolutely no point “hunkering down” to wait it out – your business will not survive (intact) and my news feed is full of long-established businesses calling in the administrators to prove it.

So I thought I’d lay everything out for you with the benefit of a formal marketing education and 20+ years of experience across well over several hundred different businesses, and then you can decide, yourself, if you are under-marketing your business (NB. In my experience, most businesses are…..).

At university we were always taught to measure marketing spend roughly as follows:

• New Business/Product Launch: 10-12% of Turnover

• Established Business Wanting to Grow: 8-10% of Turnover

• Established Business Not Wanting to Grow: 6-8% of Turnover

• Established Business Wanting to Contract: Less than 6% of Turnover

Some industries spend as much as 25% of turnover on their marketing efforts. In fact, you’ll find some of the global superpowers doing just that.

These figures are always flexible to a degree of 1 or 2 percent, depending on the industry and age of the business but, as a rule of thumb it helps me judge whether a business is over or under funding its marketing activities. You’ll notice the final option suggests negative growth – or, in other words, decreasing turnover and/or decreased balance sheet value. Very few companies are in business to achieve that.

Previous research suggests that around 39% of companies spend a “less than adequate” amount on marketing with 30% of companies spending 3-5% of revenue on marketing and 45% spending over 6% (most of those between 6-10%).

These figures are wholly consistent with what I was taught more than two decades ago in the halls of Strathclyde’s Business School and despite the rise of digital marketing solutions, that practice still stands strong.

Yet, despite that, I keep coming across businesses who are spending a lot less than 2-3% per annum and who seem puzzled by the fact their business is not growing.

If you are placing yourself in that category, let me put it really simply for you: at that level of marketing investment, your business won’t grow. At best you are maintaining the status quo. At worst, you’re diminishing your return on investment.

Modern business owners seem to have forgotten that age old adage “You gotta Spend Money to Make Money” – it’s still true. You want to grow your business? Then you have to invest more in your marketing activities.

So here’s a ready reckoner for you all out there, here’s what you should be looking to invest in your marketing spend (if you’re in B2B, include sales spend in this figure) if you want your business to grow:

• Turnover >100,000k: Marketing Spend: 6k – 10k

• Turnover >250,000k: Marketing Spend: 15k – 25k

• Turnover >500,000k: Marketing Spend: 30k – 50k

• Turnover >1million: Marketing Spend: 60k – 100k

• Turnover >2 million: Marketing Spend: 120k – 200k

I suspect some of those figures might shock some of you. How much? I can hear you calling?? She’s having a laugh.

But this really is no laughing matter. And I’m deadly serious. 85% of businesses in the UK do not survive their first year. Of those that remain, 30% fail during the following two years. Insolvency rates are up, businesses experiencing financial distress are also increasing, and Governments everywhere are intent on taking their pound of flesh in taxation.

These statistics are not funny. And reasons for failure, while I’m sure are anecdotally diverse, are fundamentally because a firm has failed to attract enough customers to make it solvent, profitable and successful.

Obviously, every business is different. Profit margins are different. Service and product based businesses are completely different and their marketing plans and expenditure will take account of this, however the percentages will only differ by 1 or 2 percent at most.

So, before you march forward into another week of hard work, long hours and an infinite number of business challenges (and tariff tweaks), ask yourself this: Am I under marketing my business, and what difference would it really make if I were to invest properly in my marketing? What difference would more customers make? What difference would increased cash flow make? How would more customers affect my bottom line? How would a higher turnover and profitability affect my balance sheet and the long term growth of my asset?

The sooner you start asking these questions, the sooner you might just start having a very good year, in spite of the turmoil. In fact, it may even be a good opportunity.