Marketing budget, the bloodstream of marketing is most important thing to do at the end of the current year for the next year. There is no question should you do it or not, when we talk about marketing budget, you should do it. Sitting down with your colleagues, and thinking about marketing activities, planing and budgeting, means you are focused on achieving goals.
If you are small or medium business, maybe you think that marketing budget is something reserved for large companies, but you are wrong, you need to budget your marketing, regardless of your size. To create a great marketing budget, first you need to do a lot of analytics, you need to understand how and when your customers interacts with you, you need to know your sales funnel.
Then you need to calculate your operational costs. Because, everything costs, your time costs, your employees costs. Even when you are doing nothing, you are generating some costs. If you are thinking of hiring an agency like ours, that also costs, and you need to know how to work with outside agencies. Outsourcing is great, if you know how to use it, if not, then it is a bad relationship doomed to fail.
Marketing budget – build from a scratch
If you are just starting your company, and you have limited money to spend, you need to budget it. There is a assumption that you need to budget it only if you have a lot of money. But that’s not the case. Even if you have 1.000 GBP to spend in one quarter, you need to align that marketing cost to your business goals and you need to plan how to spend it.
Small and medium companies usually allocate 10-12% of their revenue to marketing. And that money covers for example website development, blogs, promotional activities like campaigns and advertising and even events. Important thing is to never base your marketing budget on leftovers (after you cover all expenses).
Example – In 2018. you had 100.000 GBP revenue, with marketing budget of 10.000 GBP. That means you had 2.500 GBP per quarter to spend. Let’s say, that you will finish 2019. with 125.000 GBP revenue, that means, you increased for 25.000 GBP, and you wish to achieve 200.000 GBP revenue at the end of 2020. that means, you need to invest more in marketing, you need to increase your budget to 20.000 GBP for 2020, or sometimes even a little bit more, 25.000 GBP.
2020 Marketing Budget
Example – You are an SaaS company, you have a product that helps small and medium business optimise their work. You have typical SaaS sales model – monthly / yearly subscription – payed per user. You are thinking of spending 25.000 GBP for 2020. in marketing activities.
First with your sales team you analyse 2019. and you find answers on questions like these:
– How many leads are you generating per month?
– What is your MQL price?
– How many of the leads convert to sales qualified leads (SQLs)?
– What is your SQL price?
– How many leads convert to opportunities?
Then you dig into your Google Analytics, do some market research (for example you want to try new market in 2020.) and do a lot of calculations on how much digital channels like Google Ads will cost you.
After all that, you will create a draft spreadsheet like this, and you will fill up with all activities you have in mind. Think of it as a wish list, after you put some expenses there, you will cut numbers until you fit into your budget.
This spreadsheet will go with your marketing plan. Marketing plan is a document in which you will explain all your activities, quarter per quarter in detail. Basically you will put your budget numbers in perspective.
After every quarter, or every month, it really depends how you setup your business process, you will align your marketing plan, your marketing budget and your marketing costs. Then, and this is most important element, you will do an analysis of your marketing results with sales results. You can’t have good marketing results and bad sales results. If you do, then you need to find where is your Achilles’ heel, in marketing tactics or, for example, you are generating great leads, but your sales team is to small to handle all the leads. In that case, you will hire more people in your sales team.
Occasionally, you will rebalance your marketing budget. For example, you will see that there is no need to spend 2.000 GBP in March, and you will relocate it to April, where you have more opportunities to drive conversions (or you just found that in April there will be an important event for your industry and you are invited to participate).
It is that simple, as you will budget your home expenses. Make a marketing budget, budget your year and measure everything. Steer your marketing plan and budget in direction where it shows most results, and those results support sales goals and eventually boost your revenue. More revenue means more marketing budget for you next year, and is there a better motivation than that?
p.s. if the crisis hits, don’t lose your marketing budget, everyone cuts their marketing budgets in time of crisis, the ones who don’t, they come from the crisis even stronger.