How Should I Develop My Marketing Budget?

You may have been bootstrapping your marketing for a few months or years while you wait for your company to catch a break, but this year you’re ready to invest thoroughly in building your empire. Fortunately, you have a marketing plan, so much of the foundation is already in place for you to continue building your brand equity, but now you need a marketing budget and a plan on how you’ll deploy your investment. The truth is that there as many ways to create a marketing budget as there are companies, and there are many factors that can affect your marketing budget. The most important of which is your company’s specific goals for the year (or the fiscal year, as the case may be).

However, there are some guidelines to help you organize. If you are shooting for the stars, then you should have a budget to match. If your goals are more terrestrially oriented,  then a good rule of thumb is to allocate between 8 and 15 percent of gross annual revenue for your marketing budget. Of course, if you’re in an industry with narrow margins, this number might feel like a reach.

Your budget should be something comfortable, but it’s okay to feel strained at first. Once your firm is well-established with a strong roster of repeat clients and great references, you can consider trimming this figure. There are, of course, many companies that make do with much smaller marketing budgets, but they have either substantial in-house talent or a product that hits their market at an extremely opportune moment. In any case, here are a few questions to help you get started:

What are your targets?

The great thing about spending money on marketing is that when it’s well done, it brings excellent return on investment. The challenge is aligning your marketing efforts with your goals. If you have a family-run restaurant that serves the local community, do you really need an extensive and expensive website? On the other hand, if 75% percent of your projected sales will be coming from your website, then you need to invest serious money in developing your infrastructure. That word infrastructure is a word of advice because, in this case, you’ll need more than a website. You’ll need a team that can deploy SEO, content creation, and interaction design. The bottom line is that your spending needs to be in line with your goals.

Where are you spending money?

There are unlimited ways to spend your marketing dollars...the only real limit is your chequebook. However, the main areas where almost every company will need to spend money include branding, a website, social media presence, advertising, content, and possibly events.

Companies that are just starting or rebooting may need to spend more on branding this year whereas a company that’s celebrating an important milestone may prefer to invest in a newsworthy event. What’s most important is to have precise goals and allocate accordingly. A medical practice that’s looking to expand a client list (ads in local papers or magazines, regional celebrity endorsements via social media, or deployment of SEO to own local results) will spend money differently than a small business that makes artisanal jewellery (strong social media component, build content for blog posts, and create sleek visual assets).

How are you connecting?

While it’s great to get your message out, you must be able to measure its reach. If you’re paying for fliers to be placed on doors, but you don’t see a timely increase in business or customers taking advantage of your call to action, you might be left wondering what’s the use of marketing. The unfortunate thing is that you might be having an effect, just not the one you set out to make.

A great rule of thumb is to establish a clear goal for each dollar you spend. Keep this in mind when you spend money on website enhancements or social media campaigns. It is imperative that you confer with your colleagues or consultants, listen to their assessments, and together develop measureable and attainable targets as well as benchmarks to ascertain which actions work and which experiments don’t. In this way, you’ll develop an understanding of those engagements that perform well in your specific market with your distinct audience and gain insight into the power of well-deployed marketing efforts.

By Andrew Patricio

February 10, 2016