Need help creating a marketing budget that works? We share how to allocate your marketing spend effectively so that you can feel confident in your approach. Plus, hear from 29 business leaders for their top tips when it comes to creating a marketing budget.
There’s no easy way to create a marketing budget. The right allocation of budget depends entirely on your business, customers, impact, and more.
Whether you’re new to marketing or have been in the game a while, the pressure’s on when it comes to making sure you’re allocating the right amount of budget in the right places.
While there’s no right way to create a marketing budget, we asked 29 business leaders to share their best tips for when it comes to allocating marketing budget. Keep reading to learn:
A marketing budget is money set aside by a company to use across marketing channels, campaigns and advertising. The marketing budget is used to promote products and services for a set period, whether monthly, quarterly, or yearly.
Marketing budgets need to include tools and software, paid advertising, web maintenance and more. So, it’s important to have a set plan when it comes to creating your marketing budget.
And remember, the percentage of budget allocated to marketing varies by industry too.
Setting a marketing budget should be an absolute staple for any marketing team. And, it needs to be first on the list.
But remember, to set your marketing budget effectively, you need proper data.
Being able to attribute closed revenue back to your marketing means you’ll have a better view of which channels and campaigns need more budget.
There are a few key reasons why you need to have a marketing budget. Here are 4 reasons why marketing budgets are so important.
Implementing a marketing budget allows you to keep an eye on your ingoings and outgoings. It also means you can trim down unnecessary costs. And, with the right tracking in place, you can optimise your budget based on what works best.
Related: How to optimise your marketing based on what works
A marketing budget allows you to cover your current marketing initiatives and plan for your future marketing campaigns too.
Even better is to align your marketing budget to your company and team goals. Want to increase brand awareness? Make sure your budget has room for paid advertising. Want to improve your organic traffic? Ensure your budget covers an SEO tool and money for freelance writers.
Marketing budgets allow you to keep track of where you’re at, and where you’re going. With a proper budget in place, you can determine how much you’ve spent. And, more importantly, how much you’re making on the back of that.
This leads us nicely to our next point.
Return on investment (ROI) and return on ad spend (ROAS) are two key metrics that you’ll want to keep an eye on.
But, it’s not always so easy to track.
Related: Why ROI is so difficult to measure
With a proper marketing budget in place, you can ensure the right metrics are being tracked. If you know how much profit you’re making and how much you’re spending, you can ensure your budget is being appropriately allocated.
Creating a marketing budget isn’t easy. It requires a lot of back and forth between multiple teams. And, it needs to be flexible. You need to bend with your budget, and it needs to bend with you.
Bram Jansen, Chief Editor at vpnAlert shared some valuable insights. “You can only make a budget as useful as you want it to be. It’s important that you not only stick to your budget over the year but also assess how reliable your forecasting was. Otherwise, you’re squandering your time.”
With new channels and marketing trends available, it can be hard to get creative without data backing you.
This was a common feeling amongst marketers. Datis Mohsenipour, Director of Marketing at Outback Team Building & Training agreed, “In my experience, I mostly get push-back when it comes to testing new initiatives that I don’t have past data to work off of. If there’s benchmark data available online, I’ll leverage that to make my case. I also run into challenges when recommending an initiative that didn’t work in the past that was implemented by someone else. That’s a common hurdle you’ll need to overcome, but as long as you bring data and clarify that execution could have played a big part in the failure of that initiative, you should be able to get the go-ahead.”
Peter Horne, Content Lead at Geoff McDonald and Associates added, “The biggest challenge when it comes to acquiring more budget for marketing has been convincing people just how important marketing is. Until recently, marketing was an afterthought for leaders, and any budget that could’ve gone towards marketing was rather put into other areas of the business.”
Return on investment is a key indicator of what’s working and what isn’t. Without it, you’re in the dark about how your marketing is working.
Amy Rose Herrick, ChFC, Profit Building Specialist at The Secret Profits said, “I calculate the expected ROI, if there is insufficient ROI, I do not move ahead. With the changing dynamics of advertising and marketing, I prefer being flexible and able to respond quickly as needed.
And ROI isn’t just useful internally. It’s an important stat when it comes to external stakeholders who might be managing the pot too. “Describing the value to shareholders is always tough. In the case they don’t know SEO or paid advertising, the best way to go about it is to show them past ROIs you’ve managed to achieve.” agreed Marcin Stryjecki, PM SEO at Booksy.
With ROI, you can have clear conversations with your business and teams. Michael Stahl, CMO at ServPro agreed, “It’s always about proving ROI. It’s not always easy to perfectly attribute spend to sales, but when you can do that as well as possible and show that a dollar spent brought in $10-15 of revenue in return, I think it makes the conversation easier.”
New tools and software can be expensive. And not all tools are going to have as much direct impact on your bottom line as others. Ryan Jones, SEO Specialist at Land of Rugs agreed, “My biggest challenge in acquiring more budget is justifying that cost to the owners of the business. Some tools, such as project management tools, are more difficult to get approval for than SEO tools for instance.”
Timmy Yanchun, Co-Founder at LTHR Shaving said, “There’s always a bit of a risk when extending your budget, and that can often be the biggest challenge – whether or not you’re willing to take on that risk. However, if you want your company to move forward, you’ll need to show that it’s the ideal time to go out on a limb.”
“Acquiring a new budget can be difficult in uncertain times, but the biggest challenge is typically illustrating exactly how that larger budget can bring in more revenue. Of course, nothing is ever certain, but you’ll need to show exactly how you’ll use that budget and the results that you expect. Details are everything!”, added Moody Nashawaty, CSO at MuteSix.
If you want to justify your marketing, you’re going to require a lot of data. Not just return on investment but how your different channels and campaigns are driving sales. But this can be complicated.
Sam Browne, Founder and CEO of Find a Band agreed, “Most people hate the budgeting process, either because they don’t understand it, because it takes too long to gather financial information to complete their budgets, or because the software and spreadsheet models they use aren’t very effective.”
Time is capital, and budgeting takes time. Alex Claro, VPN Analyst at CreditDonkey said, “The idea that you would find time out of your busy schedule to put the budget together adds to any other budget challenge you might have. And if you have someone on payroll to do it, it’s time that should be spent on something else.”
Chris Taylor, Marketing Director at Profit Guru added, “Budgeting is a time-consuming process, and time is capital. Adding to the other budgeting difficulties you will encounter is the fact that you may need to take time out of your busy schedule to create the budget. A budget is just as valuable as the person who creates it. If you make a budget and set it aside each year, it will do little to support your company. It’s important to carefully monitor not just the spending during the year, but also the accuracy of the forecasts. Otherwise, you would be squandering precious time.”
So now we know what’s holding marketers back when it comes to creating a marketing budget, how can you overcome that?
We spoke to experts in their field to get their top tips for allocating budget where you need it most.
Return on investment. The most elusive and most important marketing metric. Knowing what drives your ROI is key to creating, and then optimising your marketing budget.
Sasha Quail, Business Development Manager at Claims UK said, “We are increasingly amending marketing strategies that help us better target our audiences, such as paid social media, email marketing, and direct mail while decreasing general ads to cut expenses and higher return on investment.
“It’s all about figuring out what’s effective and laser-focusing on the people who matter to you, and reaching out to them in the most cost-effective and observable ways possible.”
💡 Pro Tip
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Amy Rose Herrick, ChFC, Profit Building Specialist at The Secret Profits agreed. “Before you agree to any marketing program, you need to take a few minutes to calculate your expected ROI before you move ahead and waste any more of your precious marketing dollars.
“You need to be able to estimate the sales that will be generated from every proposed marketing effort before you agree to proceed with any advertising program.”
Marketing requires a significant budget to make an impact. It’s the nature of the game. However, if you present this as a negative thing, as opposed to an investment, it’ll be hard to get it signed off.
Sara Cemin, CEO at Realiaproject.org said, “The biggest tip to developing a marketing budget is to see marketing as an investment and not an expenditure. But an even more important tip is that it must be prepared by someone who understands the marketing mix comprehensively.”
Aaron Agius, Co-Founder at Louder Online agreed, “You need to position your marketing as an investment rather than just a cost. Small businesses often have to go into “growth mode” and operate at a loss for a few months or even years before they see returns. Developing a good marketing budget is all about how you position your company and your finances. The money is always there, and marketing should be a priority.”
Your sales funnel is key to knowing how your business is currently functioning. By tracking the right sales pipeline metrics, you can work to generate better quality leads. And with this, you can optimise your strategy and your budget.
Related: 22 sales pipeline metrics to track
Harriet Chan, Co-Founder at CoCoFinder said, “Knowing your sales funnel is the biggest tip in developing a marketing budget. That involves tracking your results throughout the revenue cycle from prospect to customer. Harvest this data by analysing the site visits and the number of leads you have per month.
“Also consider the number of tips that convert to sales qualified leads and the cost of generating them and factor in the leads that convert into opportunities or close as new leads and the typical revenue of a new converted deal. Having all this data at your disposal will allow you to get targeted with the optimisation of your budget.”
Creating a budget usually comes from the top. But realistically, what involvement do those business leaders have in your marketing?
Matt Lally, Founder at TheGiftYak said, “There are two types of budget: top-down and bottom-up. In a top-down approach, the marketing leadership will generally come up with a pot of money that teams can fight over. In a bottoms-up approach, each team puts together their plan and advocates for how much money they will need to carry out that plan. I’m a big believer in letting managers who are doing the marketing lead with budgeting guidance. It is great for morale.”
Bethany Harrington, eCommerce & DigitalMarketing Executive at Transform Co agreed, saying, “Use a bottoms-up approach to get to your overall paid media spend including any tools, agency fees, or commissions needed. Then monitor spend to an aggregate monthly number rather than live item by line item. Your goal is always to maximise awareness, consideration, and conversion within your marketing investment, not spend to a set amount.”
And remember, to get a pot of money for your team, you need to understand your impact. Nilesh Surana, Demand Generation Manager at Fyle said, “Back calculate the total budget you would need based on the revenue target for the period of time you are developing the marketing budget for.
“For example, if the revenue target is $1MN, back-calculate how many deals, opportunities, SQLs, MQLs would be required to hit the target. This helps decide the budget to acquire x number of MQLs to achieve the revenue target.”
Not sure how to prove what’s working? Gather key stats around your marketing performance. Greg Kozera, Senior Enterprise Account Executive at ELM Learning said, “Developing a marketing budget should be as simple and straightforward as possible. Look to facts and data to support the funds needed in each area of your budget. Then, show the projected results of attributing these funds.”
Darshan Somashekar, Founder and CEO at Spider Solitaire Challenge, “You’re resourcing your company blindly unless you know which campaigns and activities are producing real revenue.
💡 Pro Tip
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“Long before you spend a dime, you must have processes and resources in place to monitor your progress. Trying to figure out where to put your money without understanding how and the channel is doing is akin to playing blind darts. Define and set up monitoring for your marketing platforms so you can see where you’re getting the best return on your investment before you spend some money.”
Ryan Patel, Founder at Lottery Sambad agreed, “You need to understand that when it comes to getting a marketing budget, results always matter most. So if you have recent major success, it’s one solid proof that will back you up.”
Marketing budgets are complicated, we know that. And many aspects need to be considered before you can start assigning budgets to channels and campaigns.
Marcin Stryjecki, PM SEO at Booksy said, “You should start with short and long-term goals. Assign a budget to each of those goals, based on past data and experience. A good rule of thumb is that the marketing budget should account for 6-8% of revenue, with 30-40% of that spent on advertising.”
Avinash Chandra, Founder and CEO at BrandLoom agreed, “Have clear long-term and short term goals, and then check the methods which will help you achieve both. Now, you can check which methods give the best ROI. If you spend all your budget at one go for some short term goal (like hiring a celebrity spokesperson to take advantage of some trend), you will not survive. Do not go overboard with spending to create a splash unless you have huge cash reserves. You have to maintain your momentum for a long time.”
Getting smart with your budget is key to maintaining consistent growth. Markus Albert, Managing Director at EatFirst added, “An effective budget should be based on quantifiable KPIs from the very beginning. Each tool and channel being budgeted for should come with an easy-to-explain ROI metric.”
Similarly to the bottom down approach, your team needs to be in on your budget allocation.
Michael Stahl, CMO at ServPro said, ”It’s important to make it a collaborative exercise with a team. The more brains and vantage points you can gather – from creative people to analytical people and anyone in between – the better off you’ll be in developing a plan and proposed spend against the various elements of it.”
Not sure where to begin when it comes to creating a marketing budget? Then start small and work up.
Stephanie Scheller, Founder at Grow Disrupt said, “There are repeatedly proven instances where more funding caused more problems because it was easier to make wild stabs in the dark and funds were extravagantly wasted.
“Instead, start with testing your conversion process to ensure it works, then worry about putting small budgets to test traffic drivers. Set specific goals for how much traffic that technique needs to produce to receive additional funding. With a confirmed conversion process and tested traffic generators, it’s substantially easier to set a budget that makes sense and produces results.”
Timmy Yanchun, Co-Founder at LTHR Shaving added, “If you want to develop a straightforward marketing budget, include ‘budgets within your budget,; with portions allocated to particular initiatives. Additionally, always have some funds available for those necessary pivots, as you never know when they may need to happen.”
Daniel Foley, SEO Manager at Litta agreed, “The more your marketing department is segmented, the more each community can claim a budget for their specific area of focus. By guaranteeing that the whole marketing team is on the same page with the high-level objectives, money and attention should be focused only on the areas that have the greatest effect at the moment. For each campaign, you will not have to trigger against every marketing category; and only those who will deliver are needed.”
Ideally, your marketing budget should be planned months in advance. But remember, it’s a fluid document that can change with you and your business.
Rachel Jones, Head of PR at Hope Health said, “To develop a marketing budget, you should think in terms of what you could achieve six months from now. You always want to remember to look to the future, and not always focus on short-term goals for next week or even next month. Developing a budget takes time, so be sure to consider that when viewing data and doing your research.”
Your budget shouldn’t be set in stone. If you try a new campaign or channel and find it works, adjust your budget accordingly.
Jordan Dwayne, CEO and Co-Founder of 6 Ice agreed, “My tips for developing a marketing budget is to expect the unexpected. No one wants to find themselves in a position where they miss a stellar opportunity due to a lack of funds. So, keep this in mind when deciding where, when and how your budget will be spent.”
Jared Zabaldo, Founder at USAMM added, “My biggest tip for developing a marketing budget is to look at it as something fluid. While you will need to accurately allocate your funds, you should always leave yourself with a little wiggle room for new ideas, or for allocating less to one source and more to another.”
Marketing budgets aren’t easy to create. But, with the right data in place, you can simplify the process and optimise your budget based on your real-time marketing performance.
At Ruler, we use our own platform to help us optimise our marketing budget.
Our software allows us to see in real-time how our marketing is working. It tracks every new lead and attributes leads and closed revenue back to our marketing channels and campaigns.
It’s the perfect tool to help you take your marketing to the next level.
Sound good? Find out more about how Ruler can attribute your closed revenue back to your marketing. Or, look at the data in action by booking a demo.