How To Create A Marketing Budget For Small Business

A marketing budget is the overlooked component of a successful small business plan. As much as having a business plan is important, setting aside a budget for your marketing activities is detrimental to evaluating overall business progress. In a previous blog, I shared the reasons why small businesses must have a marketing budget. In this blog, I’ll walk you through the main steps you will need to create your first marketing budget from scratch.

Where to start

Traditionally a marketing budget is set at 3% to 5% of annual revenue. This approach allows a business to identify a target that fits within the overall business plan. For example, your company makes $1 million in revenue per year, the marketing budget should be $50,000 per year (based on 5% allocation). This amount is used as the base to allocate marketing channels the marketing team can leverage to meet revenue goals. Remember, it is the “base” and may not be sufficient to cover the costs of marketing activities needed to meet revenue goals. Your marketing team may request a budget review and additional dollars to cover the costs of marketing activities.

The 7 elements of a marketing budget

Once you’ve defined the annual marketing amount (example $50,000), the next step is setting up a marketing budget. These 7 elements are required for setting a budget that can help track and measure marketing activities:

• Growth (sales and revenue)
• An annual calendar by week
• Marketing channels
• A list of marketing campaigns
• Cost of each marketing campaigns
• Campaign goals
• Campaign results
• ROI

Growth

The first element in designing an annual marketing budget is identifying annual revenue goals = growth. It is important to communicate this goal with the marketing team or agency, which oversees the development of marketing activities. It provides direction and a foundation for building a strategy that meets revenue goals. Such goals are defined in sales volume and dollars.

Annual Calendar

The annual calendar is a visual presentation that summarizes the marketing plans and displays progress and performance. It is usually divided by quarters, months and weeks. As well, in some cases, it can be as granular as daily. The annual budget should be broken down by quarter based on your quarterly revenue goals. Each quarter will have a set of marketing activities and campaigns with smaller assigned budgets. A campaign budget is usually identified by the costs of channels needed to run a campaign.

Marketing channels

In order to build a marketing plan, a business should identify a list of marketing channels that will help drive results (i.e. sales). Marketing channels are defined as the tools to distribute and advertise products and content. This includes traditional channels like radio & TV; digital channels such as Google ads & SEO, Social media channels like Instagram & Tiktok; and direct channels such as emails & addressed postcards.

Marketing campaigns

Marketing campaigns are the activities a marketing team executes across applicable channels to drive awareness and response. These activities include seasonal campaigns, promotions, new product launches, conferences, and events. Within each campaign, you can list the relevant marketing channels you will utilize to communicate content or messaging.

Costs

Once you have identified and listed the campaigns and channels in the marketing calendar, start calculating the cost of every channel in each campaign. The final desired outcome of this exercise is to establish the cost of each campaign and map out against the “base” marketing budget.

Goals

In addition to adding the annual revenue goals, the marketing budget should include campaign goals including sales volume and revenue. These goals are the foundation of measuring the success of marketing campaigns which, in turn, assist in measuring return on investment and growth.

Results

Now that you have a marketing budget and a calendar in place, you can easily measure the effectiveness of marketing activities, including campaigns and channels. All you have to do is add a section that records campaign results – such as the number of calls, the number of prospects, sales and revenue. By tracking the results against your sales and revenue goals, you are able to calculate the return of investment on your campaigns and marketing channels.

ROI

The last but most important element of a marketing budget and even your business plan is the return-on-investment for your marketing activities. After all, you want to know if the marketing activities, campaigns, and channels are meeting business goals (sales and revenue). ROI is crucial in measuring the health of your marketing activities, and in deciding which campaigns to repeat in future planning.

Summary

Forming a marketing budget, regardless of your business size and revenue, is a great way to document the operational expenses and costs of all marketing activities, campaigns, and channels. It helps a business know if they are on track meeting revenue and sales goals, as well as, making important decisions about future marketing investments in different channels and campaigns.

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Written by: Reena Ceschia, a seasoned corporate professional with 20 years of experience developing successful marketing plans and strategies for small, medium and large size businesses. To reach her for marketing consulting and support services, email reena.ceschia@gmail.com

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