How much should your company spend on sales and marketing?

Step 1 of 3

How much revenue do you earn on your average invoice or sales transaction?(Required)

Take all the revenue you earn in a year and divide it by the number of invoices or individual transactions you do in a year. For example, if I did $1,000,000 in revenue last year and sent 200 invoices, that would be an average of $5,000 per invoice and that's what I would enter above.

How many transactions are you likely to do with a single customer over the lifetime of your relationship with them?(Required)

For example, if I bill my clients based on a monthly retainer and the average customer stays with me for 2 years, I would enter "24" for the number of bills I would send them for two years. Alternatively if I run a job/gig/project-based business and the average client uses me 3 times, and I send one invoice for each project, I would enter "3."

What is your average gross margin on sales?(Required)

Please enter a number from 0 to 100.

Based on the information entered, the amount you should be willing to spend to acquire a new customer is

This is also known as Cost of Acquiring a new Customer or CAC. It should include all direct sales and marketing expenses on a per customer basis. We calculated this as an estimate based on how aggressively you were willing to spend.

Your total estimated sales and marketing budget should be

Notes:

How did we calculate this?

A good budget will always be tied to the value that you want to deliver to your company in return for the investment. What you likely want in exchange for your money is the profit you're going to earn for each new customer you acquire (i.e., Lifetime Value). This calculator takes the Lifetime Value of your average customer and allocates a portion of that value to be reinvested in sales and marketing. The size of that portion depends on how aggressive you said you wanted to be: more aggressive means a bigger spend. We then multiply that number by the number of customers you said you wanted to acquire, to create the total budget.

What does this budget include?

This budget should include all direct sales and marketing expenses like salaries, commissions, travel to customer meetings or trade shows, the cost of marketing and advertising campaigns, sales/marketing software, etc.

Why a combined sales and marketing budget?

Because sales and marketing both perform the same basic role in a company; to facilitate revenue growth. In practice though, sales and marketing are often at odds with conflicting goals and measures for success. The more that sales and marketing are aligned and share resources and success, the better performance tends to be. Framing budget as one of those shared resources facilitates that cooperation and positions the company for greater success.

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