Key Takeaways
- Defining Hypergrowth and Investment Needs: Hypergrowth companies are characterized by a compound annual growth rate (CAGR) of 40% and often need to reinvest heavily in product and talent. To support this aggressive growth, their PR and marketing budgets should reflect their ambitious goals, often exceeding average spending benchmarks for traditional companies.
- Importance of PR as a Long-Term Investment: Unlike short-lived marketing initiatives, PR has a longer shelf life and is viewed as a more trusted form of marketing. A well-planned PR strategy can yield ongoing returns, contributing to various aspects of the business, including talent acquisition, capital investment, and customer loyalty.
- Strategic Budget Allocation: Hypergrowth companies should adopt a cross-functional approach to their PR budgets, integrating it with other departments like recruitment and product development. This ensures that the budget aligns with overall business objectives and supports growth initiatives, particularly in competitive environments where effective PR can significantly enhance market position.
By definition, hypergrowth companies are outliers. Hypergrowth is defined by a compound annual growth rate (CAGR) of 40%. Companies grow that fast by pouring on the gas and reinvesting every dollar back into the company – usually, in the earliest stages, the reinvestment is heavily based on product and talent. Slack is a great example of this; it had a $1.1 billion valuation before ever hiring a CMO. When marketing and PR become a priority, and that’s when the question of how much hypergrowth companies should spend on PR starts to circle, and it’s difficult because hypergrowth companies can’t use baselines of slow-moving Fortune 500 companies or even those in the pre-IPO stage.
PR and Marketing Spends: Rules of Thumb
You know that adage, “Dress like the job you want?” Hypergrowth companies need to spend on the valuation they want. Companies spent an average of 7% of revenues on marketing in 2024. B2B companies tended to be around 6% of revenue while B2C products spent 10% on average. Companies in Q4 of 2024 were predicting heavy increases in brand building and new product introductions, as well as customer acquisition. In short, companies were shoring up reputation and focusing on a land grab of new customers, but while revenues continued to grow through 2024, that didn’t trickle down to marketing budgets much. Companies are expecting more from their marketing spend, since it’s down from the 2023 peak of 13%.
In 2023, because many companies invested heavily (marketing budgets went up 13% on average) in branding and marketing during the pandemic, VC-backed business valuations rose considerably in the wake of the pandemic, 68.5% in some verticals.
Average Companies Have Average Spends in 2024
- 8% of revenues/10.1% of overall budget on marketing /2023: the average marketing budget was 10.6% of the overall budget and 9.2% of revenues.
- 10% of revenue and overall budget for companies between $10M-$25M in revenue /2023: For companies with $10-$15 million in revenue, the average spend was 15.5% of revenues.
- 9% of revenue, 7% of an overall budget for companies $26M-$99M in revenue
- 15% of overall budget, and 17% of revenues for companies under $10M/2023: For startups, the average marketing spend was 11% of revenue.
- 6% of revenue for B2B companies
- 10% B2C products
Source: CMO Report
While CEOs agree marketing and PR investments are just that: investments, budgets in 2024 reflected the continued uncertainty of the economic forecast.
So the question is – are you average? If you’re in hypergrowth, you are decidedly NOT average. Hypergrowth companies aren’t average and are often in dogfights for additional funding or customer acquisition against better-funded competitors. So, there’s no question that hypergrowth companies need a hypergrowth PR budget that reflects their ambitions. It’s unreasonable to think you can stagnate your budget but grow revenues aggressively.
We are now managing a sustained period of uncertainty. But for ambitious companies, this presents a genuine opportunity. Especially if you’re looking to creep into market share, according to Christine Moorman, at Duke University’s Fuqua School of Business:
“Companies tend to cut back on marketing in periods of economic uncertainty,” said Christine Moorman, the T. Austin Finch, Sr. Professor of Business Administration at Duke University’s Fuqua School of Business. “This general tendency should be tempered with an understanding of the cost of reaching consumers and what competitors are doing. Inflation may be a chance to leap ahead if others pull back.
Hypergrowth: What’s PR Worth To YOU?
Unlike other initiatives, it has cross-functional importance. This is important because, in a moment, we’ll discuss how hypergrowth companies can make their marketing and PR budgets go further.
Before we do, a note about marketing spend distribution: most companies lump PR into their marketing budgets, and all companies face the dilemma of marketing budget balance. Again, this takes some introspection into your goals, audience, and competition. But one thing about PR is that it has a very long shelf life. Whether you do a publicity stunt, a Super Bowl ad, or a social media post, the impression is seconds long, and then it’s gone while PR lingers, both physically and in the audience’s mind. We’ve seen clients continue to get traffic to their sites for years after posting a piece of content. In addition, it’s still the most trusted form of marketing. According to the Edelman Trust Barometer, 65% of consumers trust earned media more than any other form of marketing. PR is an investment like buying a house, whereas marketing is like renting.
Be sure that your overall marketing budget matches your ambitions. If you’re growing at 40% CAGR, your budget should match, and remember that today’s marketing and PR investments are tomorrow’s returns. You may need to increase your marketing and PR budget by more than 40% to achieve 40% CAGR; once you’re on that track, perhaps you pull it back to match your growth, and once you’re publicly traded, your budgets may more closely match the average CMO projection.
Ask yourself, “How will we use and activate PR?”
Will PR help you secure top talent?
Will PR help you secure capital?
Will PR give potential customers confidence in the company?
Will PR support low customer acquisition (CAC) and high word of mouth?
Will PR increase loyalty and reduce churn?
Will PR support culture and purpose?
Will PR support our pre-IPO and post-IPO phases?
PR is cross-functional, so it stands to reason that PR’s budget should be cross-functional as well. If you’re using PR as a recruitment tool, then-candidate marketing or internal comms could help increase the budget. Product development and PR can collaborate on low CAC, so there’s an opportunity to mix those budgets as well.
What Should the Hypergrowth PR Budget Include?
Your hypergrowth PR budget scope should reflect your priorities for your business and how you will use and activate PR. Typically, when I speak to hypergrowth companies, I immediately assess whether the following PR tactics will work for them:
Thought Leadership
Word of Mouth Activations or Stunts
Media Relations
Corporate Awards Programs
Plus, any company investing in its reputation should do crisis PR planning.
That’s not to say these are the only PR tactics that will work for a hypergrowth company, but these are the immediate things that come to mind. Different hypergrowth strategies will dictate how each of these will be executed.
If you’d like some specific examples of budgets across a variety of ranges that worked for hypergrowth companies we’ve worked for, we can share what we’ve seen work throughout our executive-level experiences, contact us, we’d be happy to talk about effective PR strategies based on your goal.
