"How much should I budget for marketing?" - 3 Options (and a bonus) for calculating a marketing budget

Had a great conversation with a client recently about calculating marketing budgets.

It's a question that comes up quite regularly, so I wanted to share some insight in the video below.

Here are some options for you to consider, and decide which of these models works best for you.

Also, I recommend a few popular books you can check out that cover marketing budgets in more depth in the "Some recommended reading" section below.

Here are some Marketing Budget Formulas?for you try out

Based on cost per acquisition

(CPA x N) / CAC

where:

CPA is the cost of acquiring a new customer through marketing, such as the cost of clicks, leads, conversions, or sales.

N is the number of new customers the company wants to acquire through marketing.

CAC is the estimated cost of acquiring a new customer over their entire relationship with the company, including marketing, sales, support, and retention costs.

Based on client lifetime value

CLV x (CR x AR) x N

where:

CLV is the estimated net profit a customer will bring to the company over their entire relationship with the company.

CR is the conversion rate, or the percentage of potential customers who respond to the marketing messages and become customers.

AR is the average revenue per customer, or the average amount of revenue a customer generates per transaction or per year.

N is the number of potential customers the company wants to target with its marketing campaigns.

If you have any questions, want more details, or want to talk through what might work best for you, shoot me a message. Happy to jump on a call and walk you through it.

Based on revenue goal

(Revenue Goal - Existing Revenue) x (Marketing % / 100)

where:

Revenue Goal is the total revenue the company wants to generate through its marketing efforts over a certain period, such as a quarter or a year.

Existing Revenue is the revenue the company has already generated without additional marketing efforts during the same period.

Marketing % is the percentage of revenue the company plans to invest in marketing to achieve the revenue goal, such as 5%, 10%, or 20%.

BONUS strategy

As for point #4, here's a good post from HubSpot for percent of revenue for marketing budget...

"Marketing Budget: How Much Should Your Team Spend in 2023? [By Industry]"

https://blog.hubspot.com/marketing/marketing-budget-percentage

Great information there on dozens of industries to give you an idea of benchmarks.

In the absence of metrics and data, a generalized percentage of revenue is a great place to get started.

Some recommended reading

There are many great books available on the topic of building out and managing marketing budgets. Here are a few suggestions ?? ?? ?? ??

1. "The Ultimate Small Business Marketing Book" by Dee Blick - This book provides practical and actionable advice for small businesses looking to create a comprehensive marketing plan on a budget. It covers everything from branding and advertising to digital marketing and customer relationship management.
2. "Marketing for Small Business: An Operational Guide" by Michael LeBoeuf - This book is a practical guide for small business owners who want to create a marketing plan that fits their budget and resources. It covers topics like identifying your target audience, creating a marketing budget, and measuring the effectiveness of your marketing efforts.
3. "Guerrilla Marketing: Easy and Inexpensive Strategies for Making Big Profits from Your Small Business" by Jay Conrad Levinson - This classic marketing book offers unconventional, low-cost marketing strategies for small businesses. It covers topics like how to create a marketing plan, how to use social media and other digital marketing tools, and how to create a strong brand identity.
4. "Small Business Marketing Kit For Dummies" by Barbara Findlay Schenck and John A. Wagner - This book is a comprehensive guide to small business marketing that includes a variety of tools and resources to help you create a successful marketing plan. It covers topics like market research, branding, advertising, social media, and public relations.
5. "The 1-Page Marketing Plan: Get New Customers, Make More Money, And Stand Out From The Crowd" by Allan Dib - This book offers a simple and straightforward approach to creating a marketing plan for small businesses. It covers topics like defining your target market, creating a unique value proposition, and developing a marketing message that resonates with your customers. It also includes practical tips and examples to help you implement your marketing plan effectively.

Does it make sense to talk through this?

Want to know what this could look like for your business?

Tired of wasting money on tactics that never seem to work the way they were promised?

Finally ready to accept that there are no secrets, hacks, or tricks to real growth and success?

Send me a direct message right here on LinkedIn, or email me at?[email protected]?and let's start the conversation!

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