No matter how great a workout and customer experience your studio or gym offers, people need to hear about you first in order for your business to grow. Investing in marketing efforts is your first step to spread the word and increase revenue — but how do you know just how much to invest? Determining your marketing budget, whether you’re just starting out or have been in business for years, is often a balancing act. Spend too little, and you run the risk of going unnoticed in a competitive market. Spend too much? Well, you know what happens then.

To ensure you’re making the right spending choices when it comes to marketing, we’ve pulled together a few factors to consider. This way, you can start putting a clear plan in place to help you prioritize which resources to focus on and how best to evaluate their performance.

Calculate Your Revenue

The most obvious thing to consider when it comes to determining your marketing budget is your annual revenue. After all, you can’t spend money you don’t have or have no sight-line towards earning. This, of course, gets tricky if you’re a newer business and don’t have the data to forecast what you’ll be earning at the end of the fiscal year just yet — trickier still when you take into account that ultimately, marketing is the most crucial factor in impacting those numbers. Experts advise that newer businesses (i.e. those operating for less than 5 years) contribute between 12 and 20% of their gross revenue to marketing. For businesses over 5 years in age, this decreases to roughly 6-12%, given these businesses have likely established some name recognition and a client base.

Experts advise that newer businesses contribute between 12 and 20% of their gross revenue to marketing.

However, the U.S. Small Business Association cautions that you should only use this percentage approach if your margins fall at or above 10-12%. If you’re barely covering costs, then the aforementioned metrics may not be practical. That said, for newer businesses, spending a bit more on marketing up-front may pay off in the long-run. Yet if you’re tight on budget and resources, consider a fixed budget that takes into account what you have left over after other costs and expenses such as rent, instructor payments, etc. are already accounted for.

Competitive Analysis

Marketing practices may vary by your community, so look around to get a sense of what other studios and gyms in your area are doing. For example, in a highly-competitive metro area like New York City, where brand identity is so important to your staying power in the industry, you’re going to have to bite the bullet and spend more on branding and design than a studio in a smaller city might.

Do your research and ask around in your network to see what a typical marketing budget is in your area. You can ask other studio owners, or also consider like-minded service businesses, such as salons, restaurants, etc. as well. In our recent partner survey, distributed to ClassPass’s 8,500+ studio partners around the world, we found that 67% of survey respondents tend to spend less than $500 per month on marketing, with 26% spending less than $100 per month.

Learn more about ClassPass’s studio marketing trends report here.

Analyze ROI

Having the largest marketing budget in the world won’t matter if you aren’t spending it wisely. On the flip side, the smallest budget can still make a difference in bringing in new members if you focus on making the most of low-cost methods. When it comes to figuring out where to put your marketing dollars, do a ton of research and run tests to analyze what the return on investment will be for your studio.

Some of the most popular methods studios and gyms tend to employ include paid social media and search marketing, brand partnerships, flyers/mailings, free classes or other promotions, and physical signage.

In a recent survey, ClassPass partners reported that the most valuable forms of marketing in terms of ROI were word-of-mouth, paid social, and physical signage. No matter what your budget looks like, look to those three areas first when considering where to invest and how much.

Consider Marketing Methods

Want to get a benchmark for how much other businesses might be spending on certain areas? For professional branding, expect to pay anywhere from $3-5k for a smaller agency to create all your materials (such as flyers, logo, email templates), or upwards of $10,000 for a larger agency to design your entire “brandbook” and story. A web design may cost around $3500, but can go way higher in terms of how sophisticated you want it to be, such as whether you want to have an online store, fancy design components, etc. You can also build one yourself for free on a site like WordPress or Wix. For social media, one of the benefits is you can customize how much you want to spend when. Maybe one month you want to contribute a few hundred dollars towards a paid Facebook ad campaign, and others you can spend less/more.

With any of these methods, there may be ways you can barter or cut costs to make them more feasible. Consider recruiting college students or young professionals who are trying to build a portfolio to help out with designing your logo or taking photographs of your studio. Give away a series of classes in exchange for someone building your website or consulting on your social media presence. There are a ton of ways to still boost word-of-mouth in your community that will work just as hard for you as any other marketing measure would. Read our most effective marketing tips here!