How to create a marketing budget (from scratch and from prior year)
Creating a marketing budget is essential if you don’t want to go over budget and get fired. Usually done in tandem with a marketing plan (which can become something you work on obsessively, if you’re not careful), a marketing budget outlines how you plan to spend that sweet, sweet company dollar in a way that nets you the most bang for your buck.
If the company you’re working for has been operating for at least a year, there’s a good chance that they already have a marketing budget. At the very least, accounting should have a record of advertising expenditures. If they don’t have a record of advertising expenditures, you may just have to start from scratch (which sounds scary, but has upsides).
In either case, here’s how to get started, if you’ve never had to devote your beautiful marketing brain to thinking about your department holistically.
- Get an idea of what you can spend – with most companies there is a ball-park or well defined figure that has been allocated for marketing from accounting. The amount of flexibility on this number will vary by company. In cases where the figure is more flexible, it’s a good idea to develop a marketing program that can scale, in the event that there need to be changes down the line (up or down – if something happens and there’s a windfall profit, be sure to know what you plan to ask for before everyone else can get their hand out [money pweasssee!!!]).
- Identify what programs you want to undertake – This is best done in conjunction with a marketing plan and a solid understanding of what kinds of metrics you and your company are aiming to hit in the next year. Be sure to figure out or ask if you have specific targets that need to be achieved, and get a sense of how these targets have been met in the past. With the exception of businesses that are brand new, there is usually some performance history associated with most of a company’s initiatives (and in the event that there actually aren’t any metrics – Don’t Panic!). Keep what performs the best and toss what doesn’t give you a return on investment. For anything that you’re unsure of a contribution to the bottom line, figure out a way to track it moving into next year. Additionally, be sure that anything that is contractually mandated is accounted for; most of the time there will be at least a few expenses that occur on an ongoing basis that can’t simply be turned off.
- Check in with other teams – It may also make sense to check in with those in neighboring departments who use marketing services whether they have any special initiatives they are planning to undertake. How expenses like that are allocated to departments varies from company to company, but it’s better to know when someone else’s performance metrics are dependent on your own.
- Get pricing – Once you know what programs and initiatives you plan to run, get an idea of how much it will cost to carry out each of them. Sometimes, there are existing providers that have been used, and now is the time to evaluate those providers in context with their competitors. Usually, it’s okay to use a padded version of last years budget figures for known items, but it’s always a good idea to pad the figure a bit to account for any year to year price increases. For some major initiatives (large trade show presences), it can be impossible to know what your spend will be in total because the factors going into it happen later in the year, but having an idea of the general costs based on history and adding 20% is a safe way to go.
- Compare plans to reality – Once you have your initiatives and pricing in place, compare what you’re planning on doing with your performance objectives. Ideally, every single line item in a budget will be connected to meeting at least one performance metric. Additionally, this is a good time to get a sense of how each of your initiatives might perform measured against each other. Do trade shows cost more per lead than digital initiatives, but close more quickly? This is essential information to get a handle on prior to sending your budget in for approval.
- Send for approval – once you’re in a good spot with your budget, and you believe that it is the right approach to help the company meet its goals, submit your budget for review. Often this takes place with a senior team member, or in an adjacent department, like accounting. Once you’ve submitted it, you may be asked to defend certain parts of it (particularly if you’re doing something new or cutting something that’s been undertaken for a long time). Having your understanding of performance metrics will help here immensely.
Just remember as you move through this process, that there’s usually nothing personal in the feedback you receive; marketing is one of those things that many people feel like they know something about, but very few people really understand how all the pieces in marketing fit together. Sometimes, this budgeting activity will break down into event smaller pieces (social media ad spend comes to mind), but the process will be similar.