Building and maintaining a marketing budget isn’t a once-a-year task. To get the most of your spend, you must combine careful planning with a willingness to pivot.
The budgeting process can often feel like drudgery for marketing leaders trying to chart the future. They may rush the process—or put real effort into finishing the budget but then set it and forget it, waiting for next year to start the process again.
Setting a marketing budget is hard but necessary work to get the most of your team and your strategy. And it’s not a spectator sport! A sophisticated budget requires not only careful planning but also attention to results and trends—and a willingness to be flexible when changes are needed. And make no mistake, there will be changes …
Budgeting for Marketing Headcount
Naturally, the marketing talent at your organization will comprise a significant portion of your marketing budget. However, many companies struggle to determine an ideal headcount for their marketing teams.
A good rule of thumb: Businesses should employ in-house marketers equal to 3-5% of total headcount. So in a company of 200 employees, there should be at least six marketing professionals. Stable, established companies often are well served by 3%; ambitious startups and organizations prioritizing growth can achieve more with 5%. If you’re at that 3-5% range, you’re in good shape to craft the rest of your budget.
Distinguishing Expenses
Beyond personnel, consider two types of marketing expenses when building your budget. The first is evergreen costs: baseline marketing activities that produce reliable results in the short and long term. This might include blogging, producing premium content and webinars, optimizing SEO, and anything else your audience responds to.
The second type of spend can be categorized as “pay to play”: running paid ads, attending conferences, sponsoring events, and so on. These expenses can bring in leads, but when the spend concludes, the flow of leads dries up. That’s not necessarily a bad thing—it all depends on your strategy and your anticipated/desired ROI.
Historical Data Is Your Friend
A sophisticated marketing budget not only looks ahead at your upcoming spend, but also values the history of your previous efforts. Take advantage of that history by establishing internal benchmarks that allow you to compare past performance as well as industry and, especially, competitor averages.
Of all the metrics available to marketers, perhaps none are as vital as customer acquisition cost (CAC) and customer lifetime value (CLV). Knowing what it takes to gain customers and what those customers will spend should guide every marketing decision you make—and help you discover trends and find better ratios.
Swinging for the Fences
Big bets can make big money; small spends typically make small money. Both are valid approaches depending on your needs and risk tolerance. However, the idea of going big often feels daunting. How do you identify the right opportunity to take a big chance? And what happens if you’re wrong?
Unfortunately, no magic formula exists to dictate when and how you should swing for the fences. Many startups and businesses with smaller marketing budgets don’t possess the resources to absorb big risks—and can’t afford for a risk to not pan out.
Mature organizations with established marketing operations and sufficient budgets may have the runway for taking chances—as long as their steady, foundational low-risk campaigns are producing solid results and can absorb the hit if the high-risk initiative falls short. Before proceeding with a big bet, establish what the cost in money and resources will be and what your ideal project outcomes are, defining what success and failure will look like.
Also, be sure key stakeholders, including perhaps the C-suite and the executive board, are aware and supportive of your plan. Share your plans and your data, and explain what you will do if you hit or miss goals. You never want the people who greenlight and fund your efforts to be surprised—unless the surprise is runaway success that you weren’t even expecting.
Prepare for the Pivot
Strategy should drive marketing budget, not the other way around. What is the historical data telling you? Your goals and plans will influence how you budget.
That said, marketing leaders should be active stewards of their budgets, planning ahead for expenses and campaigns that are essential—and more cost-effective to commit to sooner than later—but also allowing some room for immediate decisions. When something isn’t working, be ready to pivot. When something is working, consider adjusting other strategies to build upon success in progress. When a new opportunity emerges, you don’t want to miss out simply because of an inflexible budget.
In other words, the budget process never really ends. A sophisticated approach to marketing spend helps maintain optimum performance and increase ROI. You can’t do that from the sidelines; active marketing means active budgeting, which leads to innovation, versatility, and, ultimately, growth and success.
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ABOUT THE AUTHOR
Stephen Lackey, vice president of marketing at SmartBug Media
Stephen Lackey is the vice president of marketing at SmartBug Media, HubSpot’s largest, deepest, and most decorated elite partner in the world and the digital agency of choice for organizations looking to create resilient growth across the entire customer lifecycle. He is an INBOUND speaker and HubSpot advocate with a proven track record of leading teams, growing revenue, and maximizing efficiencies in marketing and sales. Stephen thrives on identifying and executing new methods of product and company growth.