How to create a marketing budget

Successful marketing isn’t just about strategic thinking and effective campaigns – it’s about adhering to a strict budget and choosing the most cost-effective option for your small business. A marketing budget will help you plan your income and expenditure, keeping costs low and lean will help ensure you have enough money for the things you need. If you don’t plan and manage your budget tightly, your business may run out of money. Equally, you need marketing to scale, so if you don’t spend it on the right things, you’ll risk wastage and missed opportunities.

A marketing budget outlines all the money a business intends to spend on marketing-related projects over a period of time, such as a quarter or year. Expenses can range from paid advertising to print ads, public relations, and events to new marketing staff, as well as website development and efficiency tools. As you can see, the marketing net is very much wide-cast, making it even more important for your spending to be clarified within a marketing budget.

As you’ll see, there’s a lot to take into consideration when creating a budget and tracking the results of your investments. But don’t worry – there are some incredible tools out there, whether standalone or part of a platform you’re using that can help you assess your return on investment.

Depending on the scale of your business, it’s likely you’ll need a few different budgets that each focus on different operational elements of your business. They should all work together in tandem. Separate budgets can include:

• Sales – an itemised list of forecasted sales in both units and value
• Stock and product – inventory / stock levels, production costs, direct labour, raw materials 
• Overheads – any costs not directly related to sales or production
• Marketing – although marketing expenditure could be included within your overhead budget, in most cases businesses will choose to have a dedicated marketing budget.

Your most effective marketing channels will depend on the type of business you own and the audience you’re targeting. Review this list of channels and choose a few that seem to suit your business best (this will depend on your products/services, customers, resources, skills, and budget). Straight away you can probably pick out the ones that appeal most or eliminate some due to practicality or cost:

The above list isn’t exhaustive, as there are new marketing channels and tactics emerging daily. What’s important to note when establishing your marketing budget is the importance of a test-and-refine approach. Even though you commit to a specific spend on cherry-picked channels you feel could be a good fit with your target audience, you should be tracking your campaigns’ spend vs effectiveness. Review web analytics regularly – it will become clearer what you can afford to spend. By monitoring your marketing costs and refining your efforts, you will be able to generate more accurate budgets as time goes on.

It’s crucial to have a marketing budget in place, outlining all the money your business intends to spend on marketing-related activities. Here are some recommended steps to creating a comprehensive budget that reflects your goals.

1. Understand your target audience
2. Outline your marketing goals
3. SWOT analysis
4. Marketing strategy
5. Marketing plan
6. Calculate your ROI

Let’s look at each of these steps in a bit more detail. 

Unless you invest time in understanding the customers you’re marketing to, you’re going to be throwing money into the wind. What’s your buyer’s journey? What steps do they take as they journey from prospect to paying customer?

Understanding this will help you learn how your audience interacts with your marketing – giving you a clearer view of where to set your goals and budget to better reach them. 

As part of this process – ask yourself:

• How are customers finding my products/ services online?
• How many site visits do I get a month? How long are they spending on it? Is the content engaging enough? Is the user journey clear to them? 
• What’s my cost per acquisition across my advertising campaigns? 
• How many leads am I generating per month? How many are converting into customers?
• What is the typical value/revenue of each lead?
• What’s the deciding factor for customers when it comes to selecting my business over my competitors? 
• Have I fully grasped their pain points?
• Have their preferences changed during the impact of COVID-19?

Never stop asking these types of questions as data and buying habits change. This process will flag any marketing tactics that are/aren’t working, helping you decide whether your marketing goals need altering as well as clarifying the areas your marketing budget should focus on.

Marketing goals should be SMART:

• Specific – What is the goal?
• Measurable – How will I measure my progress?
• Attainable – Do I have the skills and the resources for it?
• Relevant – Why is this goal important?
• Time-bound – When will I achieve this goal I’ve set?

Don’t forget to keep in mind your broad marketing objectives such as:

• Generating leads
• Increasing brand awareness
• Connecting and engaging with my audience
• Building an online presence and growing my online audience.

Your marketing strategy forms the backbone of your budget – but before this can be formalised, a SWOT (Strengths/Weaknesses/Opportunities/Threats) analysis is helpful in providing an objective look at your business and signposting worthwhile areas to include in your budget. For example, committing extra budget in places you’re excelling in, while investing in areas that require improvement. For example:

• Are you successful in generating leads to your website, but struggling to convert them into a customer?
• Are your competitors more present on social media? More visible in search engine results for your top keywords?
• Is your brand as well known as your competitors?
• Are you unclear on your unique selling points?
• Do you have positive online reviews? Could there be more?

As part of your Threat analysis, take a look at your competitors’ marketing. What are they doing well? Are there any gaps/opportunities? Do they seem to be spending more of their marketing budget in certain areas?

Developing a marketing strategy is an essential part of running a successful small business and will ensure that your organisation has focus, as it’s shaped by and should reflect your goals. It means resources such as time and money are spent on the things that will best work towards achieving your objectives. A free marketing strategy template can be found clicking on the button below, so you’ll have a great reference point when establishing your marketing budget.

Your marketing plan is your roadmap. It sets out how you’re going to achieve this – the channels, tactics, timings and budget that you will use – based on your marketing strategy. Your marketing budget is an essential component of your marketing plan so you need to ensure you have a firm understanding of both your strategy and plan when creating your budget. It can’t be a standalone spreadsheet – it’s an important piece of the overall marketing jigsaw.

The marketing plan download below includes:

• your marketing objectives
• your budget
• your target customers
• your brand and USP (unique selling proposition)
• marketing channels
• tactics and messaging 
• responsibilities 
• timings
• tracking and measuring ROI.

Not all marketing activity leads to income – it can be a challenge to quantify, but is equally vital to a company’s success. A regular return on investment (ROI) review on your marketing efforts is a method that produces hard evidence of its importance. Here are some ways to get the best ROI on your marketing efforts:

• Be aware of your total revenue, gross profit and net profit when calculating your ROI. This will help you target marketing efforts that bring you the largest return
• Commit time to measuring and tracking the ROI on all marketing activities to quickly learn which tactics are the most successful. For example, are your Google Analytics goals set up correctly on your website? Are you using UTM tracking codes to understand the effectiveness of your digital marketing campaigns? Create a well oiled reporting framework that gives you the data you need to make smart marketing decisions moving forward
• Be prepared to manoeuvre your marketing budget to support the activities that offer the best ROI
• An efficient way to learn which digital ads are proving to be the most effective is by running split tests. For example, you could run three different Facebook adverts featuring different messages and imagery. One focusing on the benefits of your product, another on the trustworthiness of your business and the final one a behind-the-scenes blog post showing what goes into making your product. Product and lifestyle images and design styles can be tested too. Which call to action gets the most clicks? Free trial? Sign up to our mailing list? 10% off? Learn more?
• Refine your audience targeting. Again, split tests early on will start to signpost the most successful groups that engage with your promotional content. These audiences might vary from channel to channel. 
• Set maximum budgets for your digital advertising such as social media and Pay Per Click (PPC) ads. This will ensure you don’t go over budget while learning what’s most effective before expanding investment in the right areas
• Make use of analytics tools to assist your ROI analysis. The platforms you use want to prove their effectiveness, and part of this is to provide the data you need to help you get the best results
• Marketing budget templates are also a useful way to ensure you’ve considered your channel options by breaking down your master marketing budget into specific areas. For example, you can create a specific paid advertising budget, a content budget, a product marketing budget, a public relations budget and so on. This can assist in ROI analysis as it gives a clearer view of what’s being spent where.