The need to invest in marketing is undeniable if businesses want to accelerate their growth, but when you’re aiming for results, the line between spending and overspending is easily blurred. When you want to make sure your expenses never exceed your returns, a strategic marketing budget template will help you plan wisely throughout the year.
Every marketing plan needs a budget to keep it grounded. With financial restraints in place, you keep your team focused on the tactics that will have the most positive impact on your marketing return on investment (ROI). Instead of trying to take on the entire list of ideas from your strategy session, you’ll have a budget that keeps you creative, while stopping you from getting overambitious.
We’ll explain what it takes to set your marketing budget and provide a free template for you to plug the numbers in.
Podium’s Free Marketing Budget Template
As you build your annual marketing budget plan, you can use this free template to visualize your spending maximums for each quarter and marketing type listed above. You’re always free to add more line items as needed. After all, the more detailed your plan can be, the better.
How to use this template:
- Open the template in Google Docs (must be signed in to a Google account).
- Click File > Make a copy.
- Fill in the template with your marketing budget information.
Understanding Marketing Budgets
As a small business owner or employee, you’re well aware that resources and money are scarce commodities. That’s why investments must be made strategically, and one of the most critical investments for any business is marketing. Unlike larger companies with massive marketing budgets, small businesses need to be more agile and precise with their marketing strategies to bring in new customers and retain existing ones. And that’s precisely where a marketing budget becomes indispensable.
What is a Marketing Budget?
A marketing budget is, simply speaking, a roadmap of projected expenses dedicated to promoting and advertising a business. To put it more precisely, a marketing budget outlines the estimated costs for social media advertising, event sponsorships, improving website user experience, and email marketing campaigns. By laying out these costs in advance, small businesses can understand how much they can afford to invest in promotions and advertising without overspending, thereby maintaining their financial health.
Without a marketing budget, small businesses most likely won’t be able to attract potential customers, leading to a stagnant business that will eventually fail. A solid marketing budget can help companies keep their brand top-of-mind for their target audience, generate leads, and ultimately drive new business.
Why Small Businesses Need Marketing Budgets
Marketing budgets can significantly improve the effectiveness of marketing strategies. Without a budget, business owners won’t know how much they can afford to spend on various promotional activities. As a result, they might be hesitant to invest in marketing campaigns that could potentially bring in new business. By creating a budget, however, you can plan your marketing tactics carefully and get more bang for your buck.
Moreover, investing in marketing is crucial for small businesses looking to grow their customer base. A well-planned and executed marketing campaign can reach a broader audience, which is especially crucial for small businesses looking to expand beyond their immediate geographic area. With targeted advertising campaigns, small businesses can catch the attention of potential customers without breaking the bank.
How Much Should Small Businesses Spend on Marketing?
So, you need a marketing budget, but…how much should you be prepared to spend? The answer isn’t a one-size-fits-all solution—the amount that a company allocates toward marketing and advertising is highly dependent on its unique financial situation and overall health.
Small businesses which are experiencing financial difficulties or operating on a tight budget, understandably, can’t afford to invest a substantial amount in marketing initiatives. In contrast, financially stable businesses that have surplus funds can allocate more toward marketing campaigns to generate greater awareness and, in turn, higher profits.
A general rule of thumb across most industries is that businesses spend between 5% to 10% of their revenue on marketing activities, which can include everything from social media advertising to hiring a dedicated marketing team. For example, a small business that grosses $500,000 annually could consider spending approximately $50,000 on marketing efforts to improve their outreach.
However, this figure isn’t set in stone and varies depending on the industry, target audience, and overall campaign goals. For instance, highly competitive industries such as the insurance sector or real estate may need to invest more in marketing to attract and retain customers.
It’s also worth considering that effective marketing strategies should generate a positive ROI (return on investment). Therefore, small business owners should weigh up the cost of marketing activities against the potential benefits to their company before signing on the dotted line.
In conclusion, while determining a precise budget for marketing isn’t straightforward, small businesses should strive to allocate as much as their financial situation allows. Rather than being tempted to cut costs and allocate minimal resources, increasing investment in marketing can help companies increase their brand value, gain more loyal customers, and ultimately, improve their bottom line.
Create Your Marketing Budget in 7 Steps
At the very minimum, your company should always have one overarching annual budget to keep your marketing expenses on the right track. Though marketing teams often create budgets throughout the year—breaking down the necessary expenses for specific campaigns, product launches, and more—this annual document will serve as your primary financial guide.
To help you get started, we’ve broken down the marketing budget planning process into four steps:
1. Set Your Financial Limits
Setting limits for your marketing spend shouldn’t limit what you can do. Instead, it can help you plan smarter, filling your year with only the best marketing campaigns—those that help your ROI rise the fastest. If you want to build an even stronger strategy, create budgets for every project your team works on.
If you find that you’re tight on funds as you’re filling in your marketing budget template, get our cost-effective ideas to grow your business. No matter how much money your company has to run on, you’ll find that growth is absolutely possible.
Complement your marketing budget template with a free downloadable marketing plan template.
2. Calculate Your Total Marketing Budget
The first number you can expect to fill in on any given annual marketing budget template is the total amount you can spend.
There are many different approaches that business owners use to calculate this dollar amount, but most commonly, companies will allocate a designated percentage toward their marketing departments. Some marketing experts suggest setting your marketing spend based on your company’s age, as follows:
- First year in business: Over 20% of your gross revenue
- Year 1-5: 12-20% of your gross revenue
- Year 6 and beyond: 6-12% of your gross revenue
The exact percentage you select for your budget may vary from year to year, depending on your company’s current marketing goals.
Some established companies will take a leads-driven approach to setting their annual marketing budget instead. To get a solid total budget from this approach, all you need to do is:
- Calculate your average cost per lead. Take a look at how much you spent on marketing in the previous year and divide that by the number of leads you gained. For example, if you spent $150,000 to generate 1,000 leads, your average cost per lead is $150.
- Then, set a goal for how many leads you want to gain. Make sure it’s feasible, based on your history of lead generation.
- Last, multiply your goal by your average cost per lead. If your goal is to generate 1,100 leads and your average cost was $150 per lead, you know you need to budget at least $165,000 for marketing. Of course, you should always aim to up your conversion rate from year to year to make your marketing spend more efficient.
3. Prioritize Your Top Marketing Goals
You may have already considered your marketing goals when setting your budget, but for this second step, you’ll need to examine them a little closer and decide which are the most important to you. Rank your goals in order of priority for every quarter.
There’s no specific strategy you need to use to select the goals that matter most. Simply prioritize the marketing goals that make the most sense for your company’s long-term growth and overall business goals.
4. Allocate Your Budget
Just having a massive number as your total marketing budget won’t do your business much good. In order to truly spend wisely, you need to divide up your annual funds into quarters, then into specific categories of marketing fit.
You don’t need to—and usually shouldn’t—allocate your budget evenly. Instead, you need to figure out what combination of marketing strategies and tactics will be most effective in helping you reach your quarterly marketing goals, then divide the money accordingly.
Because every company uses a different assortment of tactics to reach their goals, your marketing budget template will likely end up being unique to your team. However, there are some categories (and subcategories) that businesses commonly use, including the categories in this non-exhaustive list:
Marketing Operations Budget
When you’re building your marketing budget, it’s important to set the costs behind running your marketing team in the first place. Your operations budget will primarily include recurring expenses like:
- Market research
- Professional development
- Travel (for internal needs)
- Customer relationship management (CRM) software
This is also a great category for any miscellaneous expenses that don’t quite fit into any specific marketing buckets, but rather serve your marketing department as a whole.
Content Marketing Budget
This part of your budget should include any required content creation costs. Because salaries are already taken into account in your operations budget, this will primarily include outsourcing costs. Think about what your team can feasibly get done in-house, then set a budget for freelancers like photographers, videographers, writers, editors, and designers.
For in-house projects, this may also include content licensing fees and creative software subscriptions.
Social Media Marketing Budget
This category encompasses all the expenses required to interact and engage with your audience on social media, as well as expand your reach on social platforms. If desired, you can further break this part of your budget down into subcategories like:
- Facebook ads
- LinkedIn ads
- Scheduling tools
- Analytics software
- Influencer campaigns
This category can also include fixed costs that are specific to social media marketing, like subscriptions for scheduling, analytics, and brand monitoring tools.
Digital Marketing Budget
Social media marketing usually stands out as a category of its own because of how critical it has become, but that doesn’t mean you should forget the costs that go toward other forms of digital marketing. Your digital marketing subcategories may include:
- Website maintenance
- Google AdWords
- Online review management software
- Search engine optimization (SEO) tools
- Marketing automation tools
Print Advertising Budget
This category can include any expenses that go toward non-digital advertising. You may choose to further include these subcategories in your marketing budget template:
- Direct mail
- Newspaper ads
- Magazine ads
Even e-commerce brands may find it useful to set a print advertising budget if any of these strategies will help them achieve their goals.
Public Relations Budget
If your company’s public relations efforts are lumped into your marketing team’s responsibilities, you may also have a PR budget. This can take up a large amount of your overall marketing budget if you’re outsourcing your press release creation, media outreach, and similar needs to an external public relations agency.
Your PR budget may also include the costs associated with promoting your brand at events like trade shows and conferences, including booth fees and swag to give away.
5. Consider Hidden Costs
Hidden costs are expenses that are not immediately apparent. They can include things like opportunity cost, the cost of not taking a certain action, or the cost of time spent creating marketing materials. For example, if you choose to invest heavily in social media advertising, but neglect to consider the time it takes to manage those campaigns, you may be spending more on hidden costs than on actual advertising expenses.
So how do you identify these hidden costs? Start by reviewing your current processes and identifying the areas that may be causing you to spend more time or money than necessary. Evaluate the technology you’re using and consider if it’s the best fit for your business. Once you’ve identified areas for improvement, you can start to allocate resources accordingly.
6. Measure ROI
Measuring return on investment (ROI) is crucial when establishing a marketing budget. ROI is the ratio of the net profit of an investment to the cost of the investment—it tells you whether or not your investment is paying off. By measuring ROI, you’ll have a clear understanding of which marketing efforts are the most effective and which ones may need to be reconsidered.
To calculate ROI, simply subtract the total cost of your marketing efforts from the total revenue generated by those efforts. Then, divide the result by the total cost of the marketing efforts. This will give you a percentage that you can use to compare different marketing tactics.
Once you have calculated your ROI, it’s important to act on it. If a particular marketing strategy isn’t generating a positive ROI, it’s time to re-evaluate and shift your focus to something else. Don’t be afraid to pivot or experiment with new tactics until you find what works best for your business.
7. Reassess Quarterly
Your marketing budget shouldn’t necessarily be flexible—you do need to set strict guidelines for yourself to prevent overspending—but you shouldn’t hold yourself to a strategy that isn’t working. If the marketing tactics you planned to use aren’t effectively helping you achieve your goals, you may decide to change the allocation of your funds the following quarter.
Every quarter, you should also assess where your spending actually went. Take a look at where you didn’t fully use your budget and where you ended up overspending (if applicable), then readjust your marketing plan or budget as needed.
Reassessing quarterly will also show you if you have money leftover from your budget in the past quarter, in case you want to roll over these funds to maximize your marketing efforts in the next.
Marketing Options to Invest In
Small business owners know that marketing is essential for growing their business, but with so many options available, it can be challenging to choose which ones are worth investing in. To help, we’ve compiled a list of seven marketing options that can help small business owners reach new customers, stay in touch with existing ones, and ultimately drive growth.
1. CRM Software
Customer relationship management (CRM) software helps businesses organize and track interactions with customers and leads. With a good CRM, you can manage customer data, automate tasks, and gain insights into your sales process. Investing in CRM software is ideal for businesses that want to improve their customer experience and increase customer loyalty.
2. Text Marketing
Text marketing allows businesses to send text messages to customers who have opted in to receive them. This cost-effective option is perfect for small businesses looking to reach their customers directly and on their mobile devices. Use text marketing to share promotions, event invitations, and reminders.
3. Customer Reviews
Customer reviews are essential for building trust with potential customers. Encouraging customers to leave reviews on websites like Google, Yelp, and Facebook can help your business stand out in search results and provide social proof of your products and services.
4. Local SEO
Local search engine optimization (SEO) helps businesses improve their visibility in local search results. With a focus on location-based keywords and citations, local SEO is an excellent marketing option for brick-and-mortar businesses. By optimizing your website and listings, you can improve your chances of being found by customers in your area.
5. Social Media Ads
Social media ads allow businesses to target specific audiences on popular social media platforms like Facebook, Instagram, and LinkedIn. This option is great for businesses that want to reach potential customers who fit a specific demographic or interest. Social media marketing helps businesses build brand awareness and drive traffic to their website.
6. Content Creation
Content creation encompasses everything from blog posts and infographics to videos and podcasts. Creating high-quality content takes time and effort, but it can be a powerful marketing tool, especially for businesses looking to establish themselves as thought leaders in their industry. Good content can also improve your SEO and social media presence.
7. Email Marketing
Email marketing allows businesses to communicate with customers and leads via email. When done well, email marketing can be an effective way to build relationships with your customers and drive sales. Use this direct marketing method to share newsletters, promotions, and updates.