Marketing and sales are the engines that drive revenue for the rest of a firm’s expenditures, but companies still need money left over to maintain a quality product or service. In this piece, we are going to discuss the optimal percentage of revenue for marketing and sales so businesses can strike the right balance.
To start, we’ll dive into the numbers that business leaders are looking for: The total spend for marketing and sales for businesses across multiple industries throughout their entire lifecycle, and how they break down between marketing and sales, respectively. We’ll then dive into more detail, and explain in detail what factors play into the way spending differs between industries.
Marketing & Sales Revenue Percentage by Industry & Company Lifecycle Stage
| Industry | Company Lifecycle Stage | Marketing Budget (% of Revenue) | Sales Budget (% of Revenue) |
| B2B SaaS | Startup | 25% | 20% |
| Growth | 20% | 15% | |
| Maturity | 10% | 15% | |
| Engineering | Startup | 15% | 10% |
| Growth | 10% | 10% | |
| Maturity | 8% | 10% | |
| Financial Services | Startup | 10% | 8% |
| Growth | 15% | 10% | |
| Maturity | 10% | 10% | |
| Home Services | Startup | 20% | 15% |
| Growth | 15% | 15% | |
| Maturity | 10% | 10% | |
| Industrial & Manufacturing | Startup | 15% | 15% |
| Growth | 10% | 15% | |
| Maturity | 8% | 10% | |
| IT & Technology | Startup | 20% | 20% |
| Growth | 15% | 15% | |
| Maturity | 10% | 15% | |
| Medtech / Medical Device | Startup | 20% | 25% |
| Growth | 15% | 20% | |
| Maturity | 10% | 15% | |
| Professional Services | Startup | 15% | 20% |
| Growth | 12% | 15% | |
| Maturity | 10% | 10% |
These numbers each represent a center point for marketing spending, meaning that companies looking to be conservative with their marketing efforts can undershoot them by 5-10%, and those looking to aggressively pursue growth can meet or exceed them by a similar amount.
Budget Example 1: Marketing for Aggressive Growth
One of the most common industries for aggressive growth is the SaaS industry, and this is especially true for B2B SaaS companies in new or emerging markets that don’t have a major player dominating them. For products entering markets like these, it isn’t uncommon for companies to prioritize growth over profitability, spending significantly more to acquire customers than the lifetime value of those customers.
A SaaS company in an industry like this will likely opt for a more aggressive marketing budget of 60-70% of revenue on marketing and sales, trying to maintain an even distribution between the two. However, there are even examples like Dropbox, which some outlets claim spent over 100% of their revenue on marketing and sales to quickly capture massive market share. While this level of aggression isn’t ideal for most companies, it illustrates the point that SaaS companies looking to be more aggressive in their growth can spend significantly outside of the recommended 45%.
Budget Example 2: Conservative Marketing Allocation
Conservative marketing is less common in successful companies, as many firms make the mistake of underspending as a percentage of revenue on marketing at times when it isn’t appropriate. Exceptions can include firms with products and services that don’t cost much to develop and small start-up budgets. For these firms, it can make sense to spend conservatively, and leverage internal talent and quality market research to get the most out of every marketing/sales dollar.
Dollar Shave Club is a perfect example of this strategy. They started as a company selling direct-to-consumer razors with refillable blade cartridges that could be sold on a subscription basis. Their product cost very little to produce at the start, and they felt they had enough internal talent to soft-launch with a budget of less than $15,000. Their first major marketing spend was a YouTube video that cost them $14,000, and it resulted in 12,000 orders in less than two days. This allowed them to create a customer base to create cash flow and proof of concept for their product, and in three years, they had raised almost $100 million in VC funding and sold to Unilever for $1 billion.
While opportunities like this are few and far between, spending 5-10% less than these recommendations isn’t altogether uncommon for companies with similar traits to DSC, like low-cost goods/services and quality in-house research and talent. Firms that choose this strategy need to be careful that they don’t overproduce their product in anticipation of outsized marketing results, though, because the likelihood of overwhelming market responses to conservative spending is low. Instead, use this strategy as a way to reduce risk and prioritize long-term stability by keeping your total spending low throughout the start-up phase. If you’re not spending big on marketing and sales, you shouldn’t be spending big elsewhere, either.
Marketing Budget Allocation by Channel: Overview and Examples
Once you’ve nailed down the value of your marketing budget, it’s time to decide how it will be spent. This decision is equally important, if not more so, than the total dollar amount you’ll spend. We have a more comprehensive breakdown of demand generation fund allocation. But we’ll summarize the main points:
- Consider the goals for your marketing budget
- Identify the purpose and ROI of different marketing channels
- Allocate your budget accordingly
Consider the Goals for Your Marketing Budget
Business owners understand that marketing isn’t a single process, but rather two discreet processes:
- Lead generation, through which you fill the top of your marketing funnel
- Lead nurturing
Determining which of these your company needs to prioritize generally comes down to your industry and company size. While younger firms are going to spend a much larger share of marketing funds on lead generation and sales, older firms with large books of business will need to prioritize lead nurturing a bit more. Below are some things to consider based on your company size, and how it may impact your marketing goals.
| Company Size | Lead Generation Percentage | Lead Nurturing Percentage | Budget Allocation Considerations |
| Startup | 80% | 20% | With no history or preexisting leads, startups need to invest primarily in lead gen. Email marketing is a cost-effective lead nurturing channel for startups that can handle high volumes without taking too much of the budget |
| Small to Midsized | 70% | 30% | Smaller businesses have some existing leads, but will still need to bias lead generation over nurturing at this stage. Paid lead generation (PPC, traditional ads, etc.) costs should be kept low, and most of the lead gen budget should be focused on long-term, high-ROI channels. Organic social media is a notable low-cost, high-potential return option for lead-gen |
| Mid-to-large Business | 50% | 50% | Established companies have developed some recognition and existing leads allowing them to spend evenly on lead gen and lead nurturing. Investing in multiple channels allows for reduced per-channel content creation costs |
| Enterprise | 35% | 65% | Enterprise-level companies have name recognition and significant lead flow, but are typically battling a few key competitors. Investing in thought leadership content at this stage is essential as industry authority is more important than new leads; and (b) the content can be used on multiple channels to maintain lead flow. Social media marketing should make up a higher percentage of budget for companies with shorter sales cycles. Webinars, podcasts, and other long-form lead nurturing strategies are cost-effective and very valuable in this stage |
Identify the Purpose of Different Marketing Channels
Now that you know how much of your budget you’re going to spend on each of those two processes, the next step is breaking that down into specific channels. The goal of effective spending is to cover both long-and-short-term goals, but prioritizing ROI and sustainable growth from the outset. As a result, it is important to invest more in long-term, high-ROI marketing once you get out of the startup phase and you’ve established a channel or two for meeting short-term lead generation goals.
Below is a breakdown of different marketing channels, their average customer acquisition cost (CAC), the time they take to provide results, their use case (lead generation or lead nurturing), and their ROI.
| Channel | Average CAC | Time Until Results | Use Case | ROI |
| Thought Leadership SEO | $650 | 4-6 months | Lead Generation | 748% |
| LinkedIn Advertising | $1000 | 3-4 months | Lead Generation | 192% |
| PPC/SEM | $800 | 1 month | Lead Generation | 36% |
| Webinars | $600 | 2-4 months | Lead Generation/ Lead Nurturing | 430% |
| LinkedIn Organic | $650 | 6-8 months | Lead Generation/ Lead Nurturing | 229% |
| Podcasts | $1,450 | 12-18 months | Lead Nurturing | 307% |
| Email Drip Campaigns | $500 | 3-6 months | Lead Nurturing | 312% |
| Account Based Marketing (ABM) | $4,650 | 4-8 months | Lead Nurturing | 240% |
While it may seem wise to simply invest in the highest ROI marketing channels only, it is far more effective to use a mix of different marketing channels to cast a wider net. This also allows you to repurpose content, which can improve ROI across multiple channels by using time and money invested into one channel for free content in another.
Allocate Your Budget Accordingly
After identifying your goals and finding the marketing channels that will meet those goals, you can plan out your budget allocation. While you likely have the best idea of what will work for your business, we have some sample budget allocation recommendations organized by company size:
| Channel | Company Size | |||
| Startup | Small to Midsized | Mid to Large | Enterprise | |
| Thought Leadership SEO | $130,000 | $180,000 | $250,000 | $475,000 |
| Linkedin Advertising | $25,000 | $60,000 | $75,000 | $100,000 |
| Linkedin Organic | $15,000 | $35,000 | $30,000 | $50,000 |
| Email Marketing | $30,000 | $50,000 | $80,000 | $125,000 |
| Webinars | – | $100,000 | $150,000 | $250,000 |
| Podcasts | – | – | $75,000 | $150,000 |
| SEM/PPC | $50,000 | $75,000 | $140,000 | $250,000 |
| Traditional Advertising | – | – | $200,000 | $600,000 |
| Total Marketing Budget | $250,000 | $500,000 | $1,000,000 | $2,000,000 |
These can be used as is, or simply as benchmarks to compare your budget allocation to if something isn’t working. Feel free to scale the numbers to your total budget size, as this will be necessary in most cases to perfectly fit your level of investment.
Getting Help with Your Marketing Budget
Budget allocation is a complex process, and finding the right percentage of revenue for marketing can take significant time and expertise. If you’d like an expert marketing consultant to review your business’s budget or answer any more questions, feel free to contact us.
If you want a more comprehensive partnership to build out your lead generation, you can schedule a call with us here. We have over 15 years of experience helping companies across several industries leverage high-ROI organic marketing channels to grow their business.
