How Much Should You Spend on Marketing?: Marketing Budget Calculator + Benchmark Report

You can have the best marketing team, the most creative campaigns, and an incredible product-market fit, but if you don’t have the right budget to power your marketing, your efforts will fall flat.

Many businesses aren't spending the appropriate amount on marketing to hit their targets. There are several reasons why this might be the case for your business—including not knowing if your spending is in line with other companies of your size and vertical. 

You might have heard various percentages of revenue or total budget suggested as the average amount to spend on marketing, but the reality is more complex. The amount businesses spend on marketing depends on their vertical and the company size.

This benchmark report shows how companies are spending their money on marketing. The raw data is drawn from Deloitte's CMO Survey 2021 and Gartner's Annual CMO Spend Survey 2020-2021. We’ve organized it so you can see at a glance the trends that impact the average marketing spend. Plus, our calculators will give you an estimate of how much businesses like yours are spending on marketing.

You'll get answers to these four questions:

• How much are other companies spending on marketing?
• How are businesses allocating their spend?
• Is the average marketing spend enough?
• How should you determine your business's marketing budget?

How much are other companies spending on marketing?

There are two main ways to compare how much businesses spend on their marketing budget: as a percentage of the total budget and as a percentage of the company revenue. 

Marketing Budget as % of Total Revenue

You can use the marketing budget calculator below to see the average spend for companies in your sector and industry with comparable headcounts and revenue. This calculator uses the data below on marketing budget as a percentage of total revenue.

Let's break down how company revenue, headcount, sector, and industry impact the percentage of revenue companies spend on marketing.

By company revenue

By company headcount

By sector

By industry

Marketing Budget as % of Total Budget 

By company revenue

By company headcount

By sector

By industry 

Key Takeaways For SaaS Companies

Smaller companies are spending larger proportions on marketing.

The companies spending the highest proportion of their budget or revenue on marketing are the smaller companies within this survey — those with under $100 million in revenue and fewer than 500 employees. Larger companies are spending comparatively less — until we look at the very largest companies. Companies $10+ billion in revenue and 10,000+ employees show an uptick in spending.

So, what can we learn from this?

Companies that are on the smaller side are putting the most money into their marketing. If your business is in the growth phase, you'll likely need a significant marketing investment to build the team you need and improve brand visibility. However, this doesn't mean that you should throw money at marketing based on gut instincts. Assess how your spending marketing budget to ensure you're deploying it in the most efficient and effective way. 

Businesses that are dealing with hundreds of millions of dollars in revenue are likely to invest less in marketing. However, the companies that are making the most revenue increase their marketing spend to make that happen. Follow their example: If you let marketing investment dip, you'll struggle to continue growing the business to a multi-billion dollar company. 

B2C products spend more than B2C services, but B2B products spend less than B2B services. 

B2C product companies spend the highest proportion of both their budget and revenue, while B2B product companies spend the lowest proportion. Interestingly, it isn't the case that B2C spends more than B2B across the board or that product companies spend more than services.

In the B2C sector, product companies spend significantly more than service companies. But in the B2B sector, service companies spend significantly more than product companies. For SaaS companies, this highlights the importance of factoring in whether your business is B2C or B2B.

SaaS companies spend less than the average proportion of their revenue. 

The average marketing spend as a percentage of the total budget is 11.7%. The average marketing spend as a percentage of the total revenue is 14.6%. Tech and software companies allocate roughly the average proportion of their total budget to marketing (12.05%), but considerably below the average proportion of their total revenue to marketing (8.61%). This suggests that most software companies have room to increase their marketing budget without spending more than the average proportion of their revenue.

What’s the average marketing spend for businesses like yours?

You can use the marketing budget calculator below to see the average spend for companies in your sector and industry, with comparable headcount and revenue. This calculator uses the data above on marketing budget as a percentage of total revenue.

How are businesses allocating their spend?

As we've seen above, the average marketing spend varies significantly based on the size and industry of your business. The same applies for the ways businesses allocate their spend. 

Source: 2020 Gartner CMO Spend Survey

For example:

A $100 million B2B SaaS business with 100 employees can expect to spend around $12,835,000 per year on marketing. If they follow the average budget allocation, their spend would look something like this:

A B2B financial services firm of the same size would expect to have a similar total marketing budget - around $12,727,500 annually. However, their budget allocation is likely to look like this instead: 

We can break down the marketing spend allocation even further. Below is the average percentage of marketing budgets spent on key channels:

Source: 2020 Gartner CMO Spend Survey

Let's say you have $5 million to spend across all channels. That split would look like this:

How does your marketing budget allocation compare to the average?

Use the marketing budget calculator below to see what the average annual spend would be for each channel based on your total marketing channel spend. 

Is the average marketing spend enough?

This data looks at the average budget - it doesn't necessarily show the recommended budget. The truth is that many businesses under- or over-spend on marketing, and this is partly because they pick a budget figure based on their gut or on the historical budget. 

So, how much should you spend on marketing in 2022?

The amount each business should actually spend on marketing doesn't have to be a guess - it should be a calculation. Depending on your average contract value, conversion rates, and cost per lead, the same budget could either be ample or nowhere near enough.

Let’s say you spend $200,000 to generate 10,000 MQLs. That sounds quite promising. But that math is based on some significant assumptions. You need more data to see if those assumptions are true.

For simplicity’s sake, let's say that the conversion rate from MQL to SAL, SAL to SQL, and SQL to closed-won is 50% at each stage. This means for every eight MQLs, you get one closed-won deal:

Multiplying those conversion rates gets us an overall MQL to Closed rate of 12.5%. This means that out of the 10,000 MQLs you're generating, you’re only closing 1,250 of them.

To figure out a sufficient marketing budget, you need both your ACV and your conversion rates:

If your ACV is $1,000, those 1,250 deals equate to about $1.25M in revenue, and your $200,000 investment is a success. In this case, you should consider increasing the spend on this campaign. On the other hand, if your ACV is $100, those same deals only amount to $125,000 in revenue, making that $200,000 campaign a failure and an unwise use of your investment.

However, if your MQL to closed-won conversion rate was only 1%, the 10,000 MQLs would lead to just 100 deals. Even if your ACV is $1,000, the $200,000 investment would only generates $100,000 revenue. In this situation, it would be unwise to scale the budget until you've increased the conversion rate.

How do you calculate the marketing budget your business needs?

Let's start at the outcome you want to see and work backward to calculate the investment you need to generate those results.

1. Find the number of closed-won deals you need to hit the bookings target.

To figure out how many deals you need to close to hit revenue targets, you need to know how much each contract is worth. Divide the revenue target by the ACV to gauge the number of closed-won deals.

E.g. Bookings target of $10,000,000 / ACV of $2,500 = 4,000 closed-won deals

2. Calculate the number of leads you need to close those deals.

Divide the number of closed-won deals needed by your conversion rates at each funnel stage to determine the total number of MQLs you need.

E.g. 4000 deals / 0.4 SQL to closed-won conversion rate = 10,000 SQLs

10,000 SQLs / 0.6 MQL to SQL conversion rate = 16,667 MQLs

3. Determine the budget you need to generate these leads. 

How much is the business spending on each MQL?

You should be able to answer this question in detail for each campaign and channel. (If you can't, consider improving how you track performance - click here to learn more about marketing data frameworks).

To give a budget estimation, find the average spend per MQL and multiply that by the total number of MQLs you need.

E.g. An average spend of $150 per MQL x 16,667 MQLs = $2,500,000 marketing investment to generate $10M revenue.

For context, an average B2B SaaS company with $10M revenue spends about $1,300,000 on marketing.

It is possible to generate $10M in revenue with $1,300,000 spend: Perhaps you have an ACV of $2,500, and a conversion rate of 24%, but a cost per MQL of just $78. However, unless your ACV and conversion rates are high and your cost per MQL is low, this average marketing spend won't be enough to maintain $10 million in revenue. And that's without factoring in growth: MQLs aren't free, so to increase the revenue, you'll need to increase the budget. 

With the data above on average marketing spend and our guide to calculating the budget, you should be ready to figure out the amount it makes sense for your business to spend on marketing.

Looking for expert help allocating your marketing budget or tracking channel and campaign performance? How To SaaS can help. Click here to learn more about our CMO consulting engagements and discover whether they're the right fit for your business.