How Much Money Should You Spend on Your Marketing?

The million-dollar question: “How much money should I spend on my marketing?” Ah yes, the age-old conundrum that keeps business owners and marketing leaders up at night. It’s the riddle wrapped in a mystery inside an enigma, sprinkled with a touch of the unknown. The perfect marketing budget is also never finalized, but rather it’s much like Google’s algorithms – always evolving because so does the landscape and your return on investment. So, where do you begin? Start here…

Before You Decide How Much Money to Spend on Marketing

There are a few factors you should consider before setting your budget and launching into a campaign:

Define business objectives. Before you can allocate a budget, you need to establish clear objectives. Are you trying to create awareness for a new group? Generate leads? Expand geographic reach? Each objective will require a specific approach and allocation of resources.

Align goals with your budget. Aligning your marketing budget with your business objectives is equally important. For example, if you’re aiming at rapid growth, you will likely need to allocate more budget to your marketing.

Understand industry standards. Each industry comes with a different set of standards. You need to get a sense of what other, similarly situated firms are spending on their marketing to get a sense of benchmarks. Keep in mind that even firms who are not as similarly situated to you (think larger firms you compete against) should be part of the equation. If larger firms with deeper pockets are making it difficult to compete from a budget standpoint, that needs to be considered. 

Identify target audiences. Understanding who you want to get in front of is critical to effective marketing. Different industries and demographics will respond differently to various channels and messaging. A personal injury law firm may want to place greater emphasis on an ad campaign to reach consumers, whereas a business litigation law firm may dedicate more of its budget to thought leadership tactics to get in front of a corporate audience.

Analyze past performance. Analysis of prior marketing and public relations initiatives can provide valuable insight into what worked well and what did not. How many clients did your print ad campaign generate? Is your blog receiving website traffic? Did you receive phone calls from your recent client alerts? Are you getting referrals from your sponsorship of an organization? Looking at these metrics can help identify which strategies are most effective and where you should be putting forth more of your marketing dollars.

Assess marketing channels. Firms can leverage various channels, such as their website, email marketing, and social media, but you need to consider which will best reach your target audience and capture their attention. It’s also important to recognize the strengths and weaknesses of your firm’s platforms. If you’re sending out an e-newsletter that leads people back to your website, but you haven’t updated your website in ten years, it’s probably not going to be an effective strategy to convert visitors. Similarly, if you’re reaching out to prospects and referral sources via LinkedIn, but you have an incomplete profile that doesn’t offer more background on your expertise, they may not bother opening your message. Part of your marketing budget may need to go toward enhancing these channels first.

Consider the PESO Model

Have you heard of the PESO Model? Yes, it relates to money, but not the Mexican kind. The PESO Model is a framework developed by Gini Dietrich and explained in her book Spin Sucks. PESO is used in marketing and public relations to categorize media into four types:

• Paid Media: This includes anything your firm is paying to get eyeballs on, i.e., advertising, such as print and digital ads, billboards, boosted social posts, pay-per-click and sponsorships.
• Earned Media: This is the most trusted type of media because you are not paying for visibility. It includes third-party placements such as media interviews, bylined articles, and awards and rankings.
• Shared Media: Social media is considered shared media because, while it is your content being published, it is shared on another platform not owned by your firm (LinkedIn, Facebook, X, Instagram, etc.)
• Owned Media: This refers to the content being published via channels your firm owns and controls, including your website, blog and email newsletters.

A comprehensive marketing and public relations program should incorporate some aspect of each category. But don’t forget, while “Paid Media” is the only category where your firm is handing over money to someone else for the placement, there is still a cost to employ the other tactics. It takes time and resources to distribute newsletters, write articles, draft social media posts, submit nominations, etc. You may need to hire in-house marketing staff or a PR agency to handle these projects, and your other professionals’ participation in these efforts takes time away from billable client work.

Budget Allocation and Next Steps

Most articles you read online put a marketing budget ranging from 5% to 25% of gross revenue, depending on the firm’s size. Companies seeking to maintain their marketing position, typically budget 2% to 10%, whereas companies that are looking for fast growth will budget much more. Breaking it down by industry, recent surveys have reported:

• Law Firms: Solo practitioners are dedicating about 5-7% of their gross revenue to marketing, while larger firms are investing up to 10% or more, (American Bar Association) with nearly 90% of firms indicating they are prioritizing specific practice areas, industries, or locations for increased investment (Thomson Reuters Institute’s 2023 Marketing Partner Forum Survey)
• Financial Services: Allocating approximately 9.5% of company revenue (Statista CMO Survey) which has increased more than 2% in recent years (CMO Council)
• Real Estate: Allocating approximately 10.6% of company revenue (Statista CMO Survey) which has increased more than 2% in the past 12 months (Deloitte / American Marketing Association CMO Survey)

For additional guidance on calculating your marketing budget, you can find calculators online that help determine your range based on your firm, industry and geographic location.

As mentioned above, competing with larger firms with bigger marketing budgets can be tough for small firms. They seem to flood every platform and it might seem like an impossible task to compete, but in reality, bigger budgets don’t always win. It’s more a matter of being wise about how your marketing dollars are spent, and being very targeted rather than taking the “spray” approach that many big companies do.

It’s important to not take a “set it and forget it” approach to budgeting either. Marketing campaigns require continued analysis to track and measure performance against goals. Ongoing evaluation allows you to adjust strategies and reallocate your budget as needed to ensure maximum ROI. And no campaign is perfect. You may need to test new channels and strategies over time to get results, which can eat up part of your budget.

So, when our clients ask us how much they should be spending on marketing and where, our honest answer is – it depends. The amount a firm should invest in marketing isn’t a one-size-fits-all figure. Every firm has different goals, so a thorough evaluation is necessary to determine how to best allocate resources.

Partner with a Trusted Los Angeles Marketing and PR Agency

Berbay Marketing & Public Relations has nearly three decades of experience providing law, real estate and financial firms with strategic marketing and public relations services that propel your business forward. Berbay’s dedicated team has demonstrated success securing media placements, achieving nominations and rankings, revitalizing websites and social media, obtaining speaking engagements, and more.

Looking to grow your firm with a proven marketing and PR team? Contact Berbay at 310-499-2584 or info@berbay.com