How To Budget For Sales and Marketing Expenses

Sales and marketing are the heartbeat of any business. Without them, customers wouldn’t know your product exists, and growth would grind to a halt. But how do you know if you’re spending your money in the right way? That’s where sales and marketing expenses come in.

 These expenses cover everything from advertising and salaries to events and tools that help your team connect with customers. By understanding and managing them effectively, you can make smarter decisions, improve efficiency, and drive more revenue. In this article, we’ll break it all down for you.

What are sales and marketing expenses?

Sales and marketing expenses include all the costs that go into promoting your products or services and getting them into the hands of customers. These expenses are critical for building brand awareness, generating leads, and increasing sales. 

Here’s a closer look at the key components:

• Advertising: This includes spending on digital ads, TV commercials, print ads, and online campaigns to reach your target audience.
• Salaries: Pay for your sales and marketing teams, including commissions for sales staff.
• Marketing materials: Costs for creating brochures, flyers, and other promotional items to support your campaigns.
• Events and trade shows: Fees for participating in trade shows, setting up booths, and providing giveaways to attract customers.
• Digital marketing tools: Subscriptions for tools like email marketing platforms, customer relationship management (CRM) systems, and data analytics software.

 These investments drive revenue by increasing your visibility and connecting with customers in meaningful ways. While they represent a significant portion of operating expenses, they’re essential for business growth.

A quick look at SG&A (selling, general, and administrative) expenses

SG&A expenses cover the costs of running a business, excluding production-related expenses. They are typically grouped into three categories:

1. Selling expenses: Costs tied to sales activities, such as commissions, sales team travel, and client meetings.
2. General expenses: Day-to-day operational costs like utilities, rent, and office supplies.
3. Administrative expenses: Back-office costs, including HR, finance, legal services, and IT support.

 Sales and marketing expenses fall under the “Selling” category, making them a significant portion of SG&A. By managing these expenses effectively, businesses can improve their operational efficiency and maintain profitability.

Tips for effective budgeting for sales and marketing expenses

Creating a solid marketing budget is crucial for ensuring your resources are used wisely. Here’s how small businesses can plan effectively:

1. Analyse past expenses

Start by reviewing your previous marketing and sales spending. Identify patterns and trends to understand where your money is going and which efforts delivered the best results. This data is a foundation for smarter budgeting.

2. Set clear goals

Define what you want to achieve with your sales and marketing efforts. Are you aiming for brand awareness, lead generation, or increased conversions? Clear goals help you allocate resources to the most relevant strategies.

3. Use industry benchmarks

As a general rule, businesses spend 6-12% of their revenue on marketing, depending on their size and industry. For startups, this percentage may be higher to establish their brand. Use these benchmarks as a guideline, but adapt them to your unique business needs.

4. Prioritise ROI

Focus on channels and strategies that deliver the best return on investment. For example, if digital advertising consistently generates leads, it might warrant a larger portion of your budget compared to lower-performing channels.

 Summit’s tools enable businesses to track operating costs in real time. With detailed insights into your spending, you can allocate your marketing budget more effectively, ensuring every dollar works towards achieving your goals.

Sales and marketing expenses as a percentage of revenue

A common question for businesses is, “How much should I spend on sales and marketing?” The answer often depends on the stage of your business and your goals. 

• Startups: Typically allocate 5% of revenue to marketing. This higher percentage helps build brand awareness and establish a foothold in the market.
• Established businesses: Generally spend 5-10% of revenue on sales and marketing to maintain and grow their market presence.

The percentage can vary based on:

• Industry: Some industries, like technology or consumer goods, may require higher marketing investments.
• Competition: More competitors often mean higher spending to stand out.
• Growth stage: Businesses in rapid growth phases may invest more to scale quickly.

 Keeping sales and marketing expenses aligned with your revenue ensures sustainable growth while maintaining profitability. Regularly monitoring and adjusting this ratio is vital to staying competitive and efficient.

How to effectively track and manage sales and marketing expenses

Tracking and managing sales and marketing expenses is crucial for maintaining efficiency and driving results. Start by categorising costs into fixed expenses, such as software subscriptions, and variable expenses, like advertising spend. This helps create a clear overview of where your budget is going.

Next, leverage technology to simplify the process—tools like Summit provide real-time tracking, analysis, and reporting, making it easier to stay on top of spending. Regularly monitor the return on investment (ROI) of your campaigns to identify which strategies are delivering the best results, and reallocate funds to those channels.

Finally, compare your expenses against revenue goals and industry benchmarks to ensure your spending supports sustainable growth. By following these steps, businesses can optimise their sales and marketing budgets effectively.

How Summit can help

Summit simplifies expense tracking with real-time insights and advanced analytics. From understanding your sales and marketing expenses to managing broader categories like operating expenses, Summit ensures you stay on top of your financial game.

Ready to gain control of your sales and marketing expenses? Talk to us today to learn how Summit can help you optimise your spending and maximise ROI.