How to Set a Marketing Budget
Most marketing budgets are guesses. Here's how to set one based on what you're actually trying to achieve — three methods, what to include, how to allocate.
How to Set a Marketing Budget
Most marketing budgets are guesses. A founder picks a number that feels right — usually 5% of revenue, sometimes 10% — and the team spends against it until the number runs out. That's not a budget; that's a spending limit. A real budget starts from what you're trying to achieve, works backward to what it costs, and allocates deliberately.
The 3 ways to budget
Three methods, each defensible if you know which one you're using:
Percentage of revenue. Allocate 5–15% of revenue to marketing. Typical range; higher for growth-stage companies, lower for cash-generative mature ones. Simple, predictable, but detached from what you're actually trying to do.
Objective-and-task. Start with the objective — "generate 200 qualified leads this quarter" — list the activities required, cost each one, total them. More accurate, more work. The right method when you have specific goals to hit.
Competitive parity. Match what competitors spend. Useful in mature markets where competitor spend is observable and the relationship between spend and share is well understood. Less useful in emerging markets where data is thin.
Most companies pick one and pretend it's another. Be explicit about which method you're using and why.
Which method for which stage
The method should match the stage:
- Early-stage (product-market fit, under 10M EGP revenue): Percentage of revenue, 5–10%. You're still learning what works; budget simplicity matters more than precision.
- Growth-stage (scaling, 10–100M EGP revenue): Objective-and-task. You have specific growth targets; budget should be built from them, not from last year's revenue.
- Mature (stable, over 100M EGP revenue): Competitive parity with objective-and-task overlay. Match competitors to defend share, layer objectives to chase specific growth.
Wrong stage, wrong method is the most common budgeting mistake I see. Growth companies using percentage-of-revenue underfund marketing and stall. Early companies using objective-and-task over-engineer and burn cash.
What to include
A marketing budget should cover:
- Paid advertising (Meta, LinkedIn, Google, TikTok)
- Content production (writing, design, video)
- Agency or freelancer fees
- Marketing tools and software (CRM, automation, analytics)
- Events and sponsorships
- Marketing team salaries (if not in a separate line)
- Contingency (10% — things cost more than planned)
The line most companies miss is contingency. Without it, every overrun eats into planned activities, and you end the quarter doing less than you intended.
How to allocate
A useful starting split:
- 60% acquisition — channels and campaigns that bring in new customers
- 30% retention — keeping, growing, and reactivating existing customers
- 10% experimentation — testing new channels, messages, or audiences
Most companies over-index on acquisition (90%+) and under-invest in retention and experimentation. The cost of that imbalance shows up in 12 months — rising CAC, declining LTV, no new channels in the pipeline.
Experimentation isn't optional. Without it, when your current channel saturates, you have nothing to fall back to.
Common mistakes
Four mistakes I see repeatedly:
- No experimentation budget. Every pound allocated to "what's working" today. Tomorrow you have nothing working.
- All-in on one channel. Common with Meta-dependent B2C brands. When the algorithm shifts or CAC spikes, the business stalls.
- No measurement. Spend allocated by channel, not by outcome. You can't optimise what you don't measure, and you can't measure without a tracking setup that ties spend to result.
- Budgeting annually, never revisiting. Markets shift quarterly. A budget set in January and untouched until December is fiction by June.
If you skipped ahead to this topic from choosing channels, the two fit together — channels tell you where, budget tells you how much.
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