Communication Budgets as a Percentage of Business Revenue
Q: I am communications manager for a global chemical company and am putting the final touches on communications budgets for each of the businesses I support. I am also championing an overall communications budget for the enterprise. Is there a general rule of thumb I can use with executive management that speaks to how much percentage communications monies (budget) should be put forth in relation to annual revenue?
A: Dear Eric:
You might want to check out the PRSA website. They recently conducted a study of how much various companies spend on different aspects of communication. They even were able to show that the companies with the best reputations spent more per capita than other companies.
Another source to check would be the Public Affairs Council in Washington, DC. They do annual benchmarking studies that include budget issues.
My own advice is that the amount of money that should be spent needs to make sense relative to the nature of the business. For example:
- Public corporations will need to spend more than privately held ones.
- Consumer-focused companies will need to spend more on external communication than wholesalers.
- Service companies should spend more on employee communication than manufacturers because so many more employees have unsupervised direct contact with customers and prospects; they need to be far better informed on a wider variety of issues.
- Decentralized companies need to spend more than centralized ones in the same industries.
- Companies with more locations need to spend more than those consolidated within a few places.
- Companies in industries prone to crisis communication, such as yours, need to invest more heavily because of the operational costs if communication in crises isn’t well planned or executed.
So, while you should gather the benchmarking data in the places I suggested, temper your recommendation with this type of analysis of your own organization.
Angela D. Sinickas