How to Create a Marketing Budget

Stop me if you’ve heard this one before: You’re pouring over facts and figures, trying to get next year’s marketing budget set, and your boss says, “So explain to me again why we need marketing?”

Don’t worry, it happens to the best of us. Marketing is one of those elusive-yet-necessary line items that can often mystify folks who don’t understand its connection to the sales process.

So what’s the best way to justify your budget? By demonstrating its ROI and explaining that marketing-to-sales pipeline with a numbers-based proposal.

This might seem daunting, but by crunching some numbers and setting up a foundation based on your goals, you can pinpoint an effective budget for your marketing efforts. The process will range in complexity for different organizations, but we’ll walk you through the basics that should easily get you jump started.

First, you’ll need some basic information:

• What is your cost-per-lead?
• What is your ideal cost-per-lead?
• How many leads does your sales team need on a regular basis?

Using this information, we’ll take a look at how to reach your stated goal.

As an example, let’s say your company or brand division is trying to pull in $100,000 more per year. Take the annual value of an average customer and divide by your fiscal goal.

According to our calculations, you’ll need to close 10 new customers to meet that $100,000 goal.

Now we’ll determine how many leads it takes to get 10 new customers. This may be more difficult to determine depending on factors like the length of your sales cycle, how consistent your customer value is and how good your internal tracking is.

But for the sake of our example, let’s say you have a 50% conversion rate throughout the sales process.

Working backwards from that 10-customer goal, we can see that you’ll need around 160 sales leads to work with. Keep in mind these will need to be targeted, qualified leads (more on how to generate those later).

Each category within that funnel will vary depending on your market, what you are selling and the fluctuation of your sales conversion rate. Your brand may be well known in your market and have a very high number of people aware of your company or product, which could mean that your sales conversion rate would be closer to 5% than 50%. If that were the case, you’d naturally need to begin with more overall qualified leads.

Now that we know that you’ll need awareness with at least 320 new people within your niche market, the next question would be: How much will you need to invest to reach those people? That depends on your audience, where they are, and how difficult they are to reach.

How much are you willing to invest in reaching your goal of $100,000 of additional revenue per year? That’s a complex question to be sure. To answer it, it may help to think about the lifetime value of those customers as well.

This isn’t a turn-key formula that will magically help you determine your marketing budget by any means. There are many factors that will affect your budget. Beginning with this process, however, should make it much easier to measure the results of your investment. If you’re simply trying to maintain your business so you can generate customers when you need them, the metrics will vary a little, but we recommend this foundation as a starting point.

What are your marketing goals? We’d love to help you find your marketing happy place—we like crunching numbers!