Having a marketing budget enables small and medium-sized businesses to compete with industry leaders, but keeping track of your marketing dollars is crucial for success.
The Ultimate Guide on How to Create a Marketing Budget Plan
Many small-to-medium-sized companies lose thousands of dollars every year by forgetting to optimize their marketing budget periodically – which should be performed typically every quarter, but most certainly on an annual basis.
This can result in dollars spent targeting the wrong demographic, overspending on the wrong kinds of ads, and reduced productivity as your marketing staff tries to implement a recycled version of last year’s marketing plan.
If this describes your situation, then I have some good news — next quarter is right around the corner, giving the perfect opportunity to refocus your marketing goals and strategies!
The best place to start?
This comprehensive marketing budget guide will aid in helping you understand the in’s and out’s of setting up your plan for success. Your small business’s success may very well depend on it, so let’s take a look at what you need to create and adhere to the perfect marketing budget.
What is a Marketing Budget Plan?
Your marketing budget is the amount of money and additional resources you’re investing in your promoting efforts over a specific period of time. This includes expenditures setting up, managing, and running your ads, as well as any additional maintenance work that’s required.
Your quarterly budget accounts for all the associated costs of marketing. This includes, but not be limited to things like.
- Website design and development
- PPC campaigns
- Content marketing (including blogging)
- Social media marketing
- Search engine optimization (SEO)
- Marketing staff and contractors
- Marketing automation software
- Press releases (public relations)
- Event marketing
- Radio advertising
- Television advertising
- Awards and recognition
- Direct mail
A quality budgeting plan will also detail a business’s marketing strategy, goals, and other associated themes. These things ensure that the budget is being spent on the right things and in the right way at the right time.
How Much Should We Spend on Marketing?
A company’s marketing strategy should do more than list investments like social media. Digital marketing now allows you to track every single penny you spend on your marketing, so you should re-evaluate your setup periodically as part of your budgeting plan.
Ready to fine-tune your marketing budget and success in the coming months? Here are 3 steps you can take to create a marketing plan that achieves results to determine how much you should be spending on marketing.
1. Every Good Marketing Budget Begins With Analysis
It doesn’t matter how big your marketing budget is, you won’t grow your business if you’re shooting all those dollars in the wrong direction! This is why every successful marketing budget begins with strategy.
Review your past marketing trends, expenses, and results.
Before creating your marketing budget, ask the following questions:
- What are your marketing results from last year?
- How much traffic did your website get?
- How many customers did your marketing campaigns generate?
- Did certain blog posts or ad campaigns perform better than others?
Analyzing all this information will ensure that you capitalize on the lessons learned in the previous year and carry your successes forward into the next 12 months.
Review your competition to determine where their marketing dollars are going.
Now that you know HOW your marketing efforts paid off over the last year, it’s time to analyze your competitors. Put on your sleuth’s hat and do some reconnaissance!
This can include reviewing competitor profiles on LinkedIn and Facebook (Did they report any big accomplishments or news this year?) and doing an SEO audit of their website (Did their traffic increase? What are their top-performing blog or social media posts from 2019?). We typically ask four questions when analyzing our clients’ competitors.
- What are they doing well with their marketing?
- What are they NOT doing well with their marketing?
- What is their core marketing message?
- What can we learn from them?
Update your unique selling proposition.
Armed with your competitor research, it’s time to sit down and compare your company to theirs. Are you clear on what sets you apart from the competition? Defining your unique selling points or key differentiators is crucial, but the only way to do so is to get to know your company and what you can offer that others currently don’t.
Update your buyer personas.
Your marketing results are only as good as your demographic research — after all, you won’t find success marketing skateboards to 70-year-olds! Review who your best customers were in 2019 and update your buyer personas with this data.
By taking these steps and nailing down your strategy, you can ensure that your marketing budget is aimed in the right direction.
2. Define Your Annual Goals & Marketing Strategies
Now that you’ve got some solid strategy under your belt, it’s time to envision — what are your goals for this coming quarter and year? You need to align your growth and sales goals with your marketing goals in order to create a successful budgeting plan for your marketing efforts.
Need help defining your company’s goals? Here are some questions to answer with your leadership team:
- What is our business’ vision?
- What are our sales targets for the next quarter? What about the next year?
- What are some of the obstacles we need to overcome
- What trends in our industry and market are we facing?
- What are the long term changes we’d like to see in our company over the next 5 years? How about in 10 years?
Answering these questions will help you set your goals for this year. When Fannit helps plan for marketing performance we look at qualitative and quantitative goals.
An example of a qualitative goal could be – improve the way our website converts visitors so they have a better experience and we convert more leads from our website.
An example of a quantitative goal – improve lead conversion on our website from 4% to 6% to get 50 new qualified leads each month.
Looking at your marketing goals from both qualitative and quantitative angles will serve as your compass.
In addition, if you are unable to quantify your goals, it will provide an indication of the work needed in order to track your numbers.
3. Learn Percentages of Marketing Spend to Revenue for Your Industry and Business Size
Your marketing budget plan will, of course, be unique and tailored to your business strategy and goals. That said, it can be helpful to understand marketing budget trends in your industry. For example, maybe you don’t need to be spending 10% on marketing when all your competition is only spending 3%.
Some marketing budget trends from the past couple of years include:
- B2C companies spend twice as much on marketing than B2B companies (14.9% vs. 8.9%).
- CMOs report that they spend an average of 7.9% of overall company revenues on marketing.
- According to CMOs, companies that make more than 10% of their sales online spend 13% of their total budget on marketing.
- Businesses that lack internet sales only allocate 10.6% of their budget to marketing.
- Since 2017, B2B and B2C businesses have all consistently increased their budgeting.
- Marketing budgets are consistently shifting to digital channels — a trend that is projected to continue for the foreseeable future. Studies predict that digital marketing budgets will increase from 44% to 54% by 2024.
- The majority of B2B marketers spend 40% of their total marketing budget on creating content for your large or small business.
Of course, numbers like these are averages across economic sectors. In addition to these, you need to find numbers on your specific industry and market.
Also, remember that these percentages are guidelines. Many companies spend over or under the industry average depending on their unique business goals and strategy — your business will likely do the same.
Need a full marketing plan rather than just the budget? You may benefit from reading our ultimate marketing plan guide.
How to Determine Your Marketing Budget
Combining the three previous steps will help most definitely, but how do you decide on the final dollar figure?
One of the biggest factors that should impact how much you spend on marketing is the age of your company. How long have you been in business?
Marketing Budget Recommendations for Young Companies
If you are a new company, say, 1 to 5 years old, then you need to be more energetic and competitive in your budgeting plan for marketing. You are competing with older, more established businesses, and by investing more in marketing you increase your chances of converting clients away from the competition and into your business.
For young businesses, most experts recommend that you invest 12 – 20% of your gross revenue into your budget. This should be spread out across PPC, SEO, social media, email campaigns, and other measurable forms of content marketing.
Marketing Budget Suggestions for Established Companies
Are you an older company? Businesses that have been around for 5 or more years don’t need to spend as much on marketing because they already have an established brand presence.
For older companies, experts advise spending 6 – 12% of your gross revenue on marketing. Again, this should be divided into multiple channels, which is part of what your marketing budget will help determine.
Marketing Budget Best Practices for Start-Ups
If your company is a start-up or new business, then the amount you spend on marketing is highly subjective to your unique situation and your working capital.
Because you’re a new face on the market, you’ll want to invest a greater amount into marketing, but you shouldn’t sign off on any large marketing expenses until you know for sure that your business is viable. Our team of SEO experts can help you create a sustainable marketing budget that includes high-impact elements to help jumpstart your small company’s finances.
Benefits of Setting a Budget and Adhering to It
Creating a budgeting plan for your marketing strategy can bring many benefits to your business. These include:
Creates a Sustainable and Predictable Business Model
Business owners struggle with a huge number of challenges, but uncertainty may be the worst one of them all. By creating a budget for marketing, you’ll be able to track expenses and make projections based on the performance of your marketing machine.
This allows you to focus on the areas that provide sustainable growth and develop a predictable model that gives you accurate projections of your finances. By knowing an accurate projection of your performance, you’ll also be able to make adjustments to your strategy based on how well your campaign performed early on.
Guides Your Business Decisions
Increasing order sizes, changing marketing approaches, and developing additional services are all decisions usually taken on a reactive basis. By developing an effective budget for marketing, you can make smart decisions ahead of time, which will help prevent issues like stock shortages and losing competitive advantages.
As part of your budget creation process, you should analyze past performance and learn about your potential customers to determine the type of results your strategy may yield. In addition to logistics, the information you get will also help improve your marketing and sales mechanisms as well as the interaction between the two.
Allocates Resources to High-Impact Areas
Visualizing how your resources are spent will help ensure that they are invested into channels that have the most impact. While creating your budget, you’ll be able to see the different areas where your money is being spent, so you can prioritize actions that are more likely to yield the best results.
For example, if you notice most of your marketing resources are going into outdated methods, you can make changes and ensure that you allocate these to inbound strategies and other trackable mechanisms instead.
Tracks Your Expenses
One of the most obvious benefits of any budgeting plan is that it allows you to track where you spend your money. In addition, online marketing provides the ability to further trace your resources, which helps determine how well your company is performing from a financial and efficiency perspective.
Unfortunately, many business owners see marketing as the most expendable part of their operation. The reality can’t be more different. After all, companies need clients to stay in business, and if done properly, your marketing should consistently reel in more customers.
Instead of tracking your finances and looking at marketing as an expendable practice, include it into your core operating costs and watch it lift the rest of your company.
Promotes the Development of Structured Departments
The only way to successfully craft a budgeting plan for your marketing is to have structured departments in your business. Even if they are only made up of one or two individuals, it’s important to establish units in your company to understand how these affect your marketing spend and what you can do to keep costs at a minimum without compromising performance.
Allows You to Accurately Calculate ROI
Calculating the real ROI of your company’s marketing efforts is impossible without creating a budgeting plan. To determine the return on your investment, you have to take into account all of the expenses related to your marketing, which means that you have to keep track of how much you spend on every activity.
With a marketing budget, you’ll already have most of the information you need, so you simply have to adjust for any changes you made and use the final number to determine your ROI.
Keeps You Focused on Your Goals
It’s easy to get distracted by last-minute ideas and new marketing gimmicks, but the results are rarely as good as your original plan. If you have a budget to help hold you accountable for your actions, there’s a much lower chance you’ll be willing to invest in activities that have a low chance of yielding positive results.
Compartmentalizes Your Expenses, Income, and Savings
All companies have to keep track of their finances, regardless of size or industry. Your marketing budget will help maintain close tabs on expenses, income, profits, and savings by working on each one of these separately.
A well-thought-out budget should include short and long-term milestones for income measurement as well as near-exact expenses projections, so you can calculate your savings and profit margin according to these numbers.
Works as a Thermometer for Your Business
When creating a budgeting plan for your business, you’ll get a real feel for how well it’s performing. This is the reason why many business owners use this practice as a thermometer for their company. If you’re able to easily afford all of the marketing tactics you need to implement, it’s usually a sign that your company is doing well enough to think about expanding.
Gives Your Company the Ability to Make Extra Money
Many companies lose a significant amount of money to impulsive marketing decisions. By taking the time to develop a budget, you’ll be able to figure out which parts of your marketing are worth investing in and which ones should be discarded.
For instance, you can decide to invest in website forms and other tools that help collect name, email, and other pieces of information from your clients. This will help you invest money into areas of higher impact and give you the ability to make more money through your marketing.
Get a Custom Marketing Plan for Your Business
Are you still a little confused by how to make a budget plan? Contact my marketing team professionals today and we’ll create a custom marketing plan that boosts your marketing ROI and increases sales.
We have been helping large and small businesses for over 10 years and have the expertise and resources necessary to fine-tune a marketing strategy for your business.
For even more details check out Fannit’s B2B Sales and Marketing Playbook