7 factors to consider when forecasting your marketing budget

When I first got started in marketing and was asked to put together a marketing budget for the first time, I didn’t know where to begin. How much should I spend? Where should I spend it? Will I ask for too much or too little?

Putting together a marketing budget doesn't have to be hard. Whether you're a startup owner or a marketer, knowing where to allocate your funds and how much to allocate can significantly impact the growth of your business.

Forecasting your marketing budget isn't just about crunching numbers. It's about aligning your financial resources with your strategic goals to maximize impact.

Today I break down seven tactics for forecasting your marketing budget, offering actionable steps to implement immediately.

1. Setting up your initial marketing budget - If you have no historical data to go off of, start here.

If you're new to budgeting or don’t have historical data to go off of, start here. This would be a common situation for startups or businesses that have not run any paid marketing campaigns. You can still set up an effective budget if you do not have any historical data. Here are a few ways you can go about this. You will ultimately have to figure out which approach works best for you and the resources you have or find a combination of a few:

• Percentage of revenue - Probably one of the most common methods is to allocate a percentage of your projected gross revenue to marketing. For businesses just starting out, it's typical to allocate a higher percentage, often between 12% to 20%, depending on the industry and competitive landscape. For established businesses, this percentage might be lower, around 6% to 12%.
• Cost-per-acquisition (CPA) based budgeting - Determine how much you’re willing to spend to acquire a single customer, then estimate how many customers you want to acquire within a specific period. For example, if your CPA is $50 and you aim to acquire 1000 customers, your marketing budget should be at least $50,000 for that period. (Budget= CPA x number of customers)
• Objective-based budgeting - Start by defining clear objectives for what you want your marketing efforts to achieve (IE: brand awareness, lead generation, customer retention). Break down the strategies and tactics needed to achieve these goals, and then research or estimate the costs associated with each tactic. Sum these costs to get your total marketing budget.
• Available funds - Simply base your budget on what you can afford to spend after covering all other business expenses. This method is less strategic but may be necessary for startups or small businesses with very limited capital. As your revenue grows, you can adjust the marketing budget accordingly.
• Industry standard - Some industries have benchmark percentages that companies allocate towards marketing. For example, B2C product companies often spend more on marketing than B2B service companies. Researching industry-specific data through associations or industry groups can provide a guideline for what is typical.

Implementation:

• Plan for flexibility: Especially in the early stages, monitor the performance of your marketing efforts closely and be prepared to adjust your budget allocation as you learn what works best for your business.
• Focus on ROI: Regardless of the method chosen, aim for strategies with measurable returns, and prioritize those with proven or expected high ROI.
• Review regularly: As your business grows and you collect your own performance data, continually refine your budgeting strategy based on what delivers the best results.

By starting with these approaches, you can create a preliminary budget that aligns with your business size, goals, and market environment, and then refine it as you gain more insights and data.

2. Historical spending analysis

For businesses with past marketing spend, past data can be really helpful. It lets businesses see what worked and what didn't, spot patterns, and make smarter choices for future marketing plans. Therefore, it is crucial for businesses to carefully analyze and utilize this valuable resource.

• implementation: Review your previous budgets, assess the ROI, and identify trends. Use this data to inform smarter budget allocations moving forward.

3. Cyclical trends and calendar alignment - Your marketing spend should fluctuate with your sales cycle.

Your marketing budget should not be the same all the time.

Instead, it should change with your business's ups and downs. For example, when your business is busy and sales are up, you should spend more on marketing to capitalize on higher demand. But when things are slow, you should cut back on your marketing spend. This way, you're making the best use of your resources and getting the most bang for your buck.

HINT: AIM TO HAVE A 4 PEAK MARKETING CALENDAR. For D2C brands, this could be something like - Black Friday/Cyber Monday, Memorial Day, Labor Day, Mother’s Day or Father’s Day. Only you will know which holidays and cultural events align with your business.

• implementation: Map out your typical sales cycle and calendar and plan your budget to amplify efforts during peak seasons and scale back during slower periods.

4. Competitive benchmarking - Knowing how your competitors allocate their budget can provide critical insights although may be tricky to find.

Knowing how your competitors spend their money can give you useful ideas for your own business plan. It can show you what they're good at and where they might be falling short. This can give you helpful information on what's currently popular, where there could be chances for you to grow, and where your business could get ahead of the competition.

• implementation: Use tools like SEMrush and Ahrefs to gather competitive intelligence. For public companies - use earnings calls or other public information. Benchmark your budget against competitors to spot opportunities and threats.

5. Goal alignment - Every dollar should serve a strategic purpose.

In any business, every dollar you spend should have a clear goal. This means your money should be used in ways that boost growth, keep things stable, and ensure long-term success. Every cost, investment, or saving should be planned carefully to make sure you're getting the best possible results.

• implementation: Clearly define your marketing goals. Allocate your budget based on campaigns and initiatives that directly contribute to these objectives.

6. Industry trends and innovations - Staying ahead of industry trends can offer a competitive edge.

Staying up-to-date with industry trends can give you an upper hand. By watching these trends closely, you can see changes coming and adjust your plans in advance. This forward-thinking strategy can lead to new ideas, better position in the market, and a significant advantage over competitors.

• implementation: Allocate a portion of your budget to new tools and platforms that promise to enhance efficiency or effectiveness, keeping a close eye on emerging technologies.

7. Contingency Planning - Unexpected opportunities and challenges are part of business.

In business, it's certain that surprises will pop up. These can be opportunities or challenges that could significantly change the course of your business. Dealing with these surprises requires flexibility and toughness. Even though it can be unpredictable and sometimes scary, it's through handling these unexpected situations that businesses learn and grow.

• implementation: Reserve about 10-20% of your marketing budget for unforeseen needs or to capitalize on sudden market opportunities.

Effective budget forecasting is a dynamic process that requires continuous adjustment and careful consideration of both internal and external factors. Use these seven areas as a guide to develop a robust marketing budget that not only fits your business's current needs but also positions you for future success.

Your next steps Start by implementing one of the above action items in your next budget planning session. Small steps can lead to big changes in how effectively you utilize your marketing budget.

Leave your marketing budget tactics in the comments below!

Interested in more content, consider subscribing to never miss an article.

I also offer:

• Marketing services - https://www.jeremygrinacoff.com/services
• A branding course - https://www.jeremygrinacoff.com/joinus
• 1-1 coaching - https://www.jeremygrinacoff.com/store