How much should my agency spend on marketing?

Spend as a percentage of your annual budget

Typically, an agency will put 5-15% of its turnover into its marketing spend. 5-10% is the minimum amount of investment necessary just to maintain performance; it’s the agencies that go beyond this that can really start to see turnover levels grow.

• The UK average is around 9.3% of annual revenue, according to a 2019 survey
• Fast-growing or competitive B2C/B2B services might want to aim higher (10-20%)
• For more aggressive growth, you might need higher investment (for example, 12-15%+)

Spend aligned with growth goals

Rather than base your agency marketing budget on a percentage of turnover, some believe the best approach is to define your specific objectives, then build your budget from the ground up, justifying each expense based on specific goals, not a fixed percentage.

Focus on clear goals (growth vs. stability), consider your industry, and build a data-driven budget, potentially starting with core activities like SEO and email, rather than just a percentage. 

You might decide your marketing spend with an audit based on your business and objectives, how many new clients you’re looking for, and the cost of finding them based on data to determine the marketing budget.

Younger businesses would probably need to spend more on client acquisition, websites, social media, client communication and strategy. Established businesses, with presence and clients, perhaps less.

The 70/20/10 strategy

This is the rule for setting a budget for balancing marketing spend that suggests allocating:

• 70% of the budget to core, proven strategies (like SEO and PR) for consistent results
• 20% on developing promising, emerging or experimental tactics (optimising existing channels, new audiences/formats)
• 10% on high-risk, innovative strategies to drive future growth without jeopardising current performance

This model allocates funds for experimentation while keeping your core marketing safe, allowing you to adapt to market changes and discover new opportunities. 

Referral-focused

Invest in client nurturing, for example newsletters, to drive referrals, which can be more effective than paid ads for professional services. 

For agencies, nurturing existing clients often yields the best ROI because it generates higher-quality leads at a lower acquisition cost.

Referred clients often have a 16-25% higher lifetime value, are 18% more loyal, and convert 3-5 times faster than those acquired through traditional advertising. For agencies on a tight budget, this type of marketing can be a gold mine. Although eventually you will exhaust your connections and might need to budget for other methods.

Let your ambitions decide your approach

Start with your business objectives, define your goals, assess your industry, and then decide if a percentage benchmark or a goal-focused budget better serves your agency’s needs. 

If you build bottom-up, determine costs for specific activities (i.e. SEO, content, ads) and sum them up, or use the percentage benchmarks as a guide.

While most people believe that allocating marketing spend is essential if you want to see business growth, the amount of spend depends on your business objectives. In any event, review past spending to see what worked and what didn’t, continuously measure performance, track ROI to monitor what works, and reallocate budget if needed.