Chapter 32: What is My (Ideal) Marketing Budget?
In the last chapter, we asked what your marketing budget was. As you prepare to decide whether or not to keep marketing in-house or to outsource it to a B2C or B2B digital marketing agency, we need to look at what your marketing budget should be.
An ethical B2C or B2B marketing agency makes its fees directly (as opposed to the old school, Don Draper method where they got a percentage of how much a company spent on ads), so they won’t try to sell you on things you don’t need and can’t afford. Instead, they find the balance between cheap enough to be sustainable but aggressive enough to yield real results.
Each company has its own small differences and individual goals, needs and capacity. That said, at Nuanced Media we’ve figured out a simple method for planning a marketing budget. It works for 95% of the businesses we’ve spoken with.
And we’re giving it to you here.
Step One: Calculate Revenue
Reach out to your CFO, financial department, bookkeeper or accountant and gather both your gross revenue for recent quarters and estimated earnings for the upcoming quarter or two. If they’re substantively different, use the lower value in most cases.
We’ll use the examples of Hector and Sascha in this chapter. Hector runs a multistate courier company with a quarterly gross revenue of $120,000. Sascha’s vector graphics services firm grosses $50,000 per quarter.
Step Two: Assess Company Size
How old is your company, and how big is your team? This matters because new, small companies have the greatest need for aggressive marketing, and can gain the greatest benefit from an increased marketing spend. More established companies have some brand inertia. Though they still need to market, they can afford to spend less on direct marketing efforts.
Hector’s courier company has been in business for 6 years and has 20 employees. Sascha opened doors a year and a half ago, and it’s just her and two contractors.
Step Three: Determine Ideal Marketing Budget Range
This one falls into two categories, based on Step Two:
Newer, smaller companies, like Sascha’s should allocate 12 to 20 percent of gross revenue to marketing. This may seem like a lot, but growth is the imperative for any company less than five years old. It won’t happen without aggressive marketing. Sascha should put $6,000 to $10,000 per quarter toward marketing her services.
Older companies with a more established brand can cut that roughly in half, earmarking 6 to 12 percent of gross revenue for marketing. Hector should dedicate between $7,200 and $14,400 toward marketing each quarter.
Of course, this is a general range and not a magic success button. Your business may come in high or low of that figure based on a variety of circumstances…but an ethical marketing consultant or agency will feed you a big somewhere in this range. Too high means they’re probably trying to milk you, or to push you into a package that fits their structure better than your needs. Too low often indicates an inexperienced company or one that cuts corners to qualify for the lowest bidder.
Neither one indicates a company you should seriously consider. Nuanced Media is a premier Phoenix marketing agency, and our experts are always willing to answer your questions about calculating your ideal marketing budget.