As the year quickly winds down, you need to start thinking about your budget for next year. But, where do you begin?
It can seem overwhelming, but there are a few simple steps you can take to make building your budget much easier.
6 Steps to Building Your Marketing Budget
1. Categorizing Your Expenses
The first step to building your marketing budget involves categorizing your expenses. By grouping how you’re going to spend money into different categories, you can track everything more effectively. It will also keep you organized and on task as you allocate your budget.
Here are some examples of the types of expenses that most marketing companies will encounter:
- Software: You should put any software-related expenses in their own category. For instance, here at New Breed, we use the HubSpot marketing hub to manage our marketing efforts. Any money we spend on subscriptions for that platform should be added in the software category. Additionally, you can include expenses like website hosting.
- People: People are responsible for email marketing, content marketing, inbound marketing and other projects that occur within your organization. You purchase these activities by paying salaries and wages. However, it’s important to note that only staffing expenses should be accounted for under this category. For instance, if you paid for equipment to produce a video, that expense falls under a different category.
- Advertising: If your company does digital marketing, the advertising category consists primarily of paid search, paid social and account-based marketing (ABM) campaigns. If you’re focusing on traditional marketing activities, the category primarily consists of billboard ads, print ads and TV commercials. Of course, both digital and traditional aspects could be included under your advertising expenses.
If you allocate money towards trying to attain awards, that could also be included under this category. For instance at New Breed, we allocated funds to reach our goal of becoming part of the 2019 Inc. 5000 list of the most successful companies in America.
- Events: If you allocate budget to go to events, you should have a separate category for that. Attending events can often involve a large spend, so it’s vital you only go to those that will help you advance your company if you don’t want to waste your budget.
- Travel: In addition to an events category, we use a travel category to account for our transportation budget. We use this to classify expenses involved with going to events and meeting with clients.
- Branded Giveaways: If you produce any branded items or swag to give away either externally to contacts or internally to employees, you should put it under the branded giveaways category. This includes items like t-shirts, hats, sweatshirts and backpacks, but can also cover pens, notebooks and other types of giveaways.
- Sales Collateral: The sales collateral category is for any sales enablement content you produce to hand out to contacts or supply to the sales team. It includes expenses related to the production of booklets, business cards and flyers among other materials.
- Digital Media: As we mentioned above, if you pay for production equipment, that expense should not be included under the people category. Alternatively, any expenses related to photography, video and audio production that are performed in-house or through an external vendor should be accounted for in the digital media category.
2. Building in flexibility
After considering the segments above, you may be wondering about other expenses that may arise and how to categorize them. You might also be curious about how unexpected expenses should be allocated for within your budget. Both of these issues are resolved with a single solution: building flexibility into your budget.
When creating your budget, you need to plan for the unexpected. There will be unforeseen expenses that come up throughout the year. If you understand that random projects will pop up at some point, account for them ahead of time and give yourself some breathing room in your budget. In short, expect the unexpected and be proactive versus reactive in your approach.
Ideally, when an expense does come up, you will know which category to place it in. Since you’ve built breathing room into each category, you can select which one best captures the spend and include it there.
3. Analyzing Previous Periods
When I put together my first marketing budget here at New Breed, I looked back at the previous couple of years to understand where we spent money as a marketing team. I identified which budget categories applied to New Breed and how much we spent in each of them.
Once I organized our expenses and put them into those categories, I was able to compare how our spending had changed from one year to the next. It allowed me to identify trends in the data, areas of growth and decline, where we needed to invest that we hadn’t in the past and where we had invested that we no longer needed to. Overall, without analyzing previous periods, I wouldn’t have been able to craft an accurate picture of the present.
4. Refining the Categories
Originally, when I looked back at previous years, some of the information I uncovered was somewhat confusing. For example, we had used an ABM software that had two different types of expenses associated with it. One of the expenses was a subscription for the software, and it was based on a fixed yearly cost. The other was a charge to actually post each ad through the tool, which was variable based on how many ads you posted.
This presents an important issue. Even though the expenses were both related to the same program, they actually needed to be categorized under different parts of the budget. Since the fixed yearly cost was associated with software, that portion of our spend was categorized under software. Meanwhile, the expense that varied based on the number of ads we posted on the platform was placed under paid advertising.
A similar issue occurs with events. For example, we attend HubSpot’s INBOUND conference every year. When we do so, we accrue a variety of expenses. For instance, we pay to sponsor the event, travel to the conference, create swag to give away while we’re there and spend time helping at the booth. These parts of the project are all categorized differently. Sponsoring the event falls under the event category. Traveling to the conference is included in the travel category. Creating swag factors into the branded giveaways category. Finally, helping at the booth adds to our people category.
Basically, each category is a top-level item, but there are many more specific subcategories that fall under their umbrella. Breaking each expense down onto a more granular level allows for easier budget building now and better budget analysis later.
Consider a scenario in which we were evaluating going to a different marketing conference in a given year. Since we’ve been to INBOUND and it’s proven successful, we could compare the expenses associated with INBOUND to the new event we are evaluating. In refining your categories, you can better track your current spending and make more informed decisions when similar expenses arise.
5. Solidifying Your Budget
Once you’ve analyzed your expenses, it’s time for you to lock in your budget for the upcoming year. You should go in with an understanding of what you’ve accomplished in previous periods, what you spent in those periods and what you hope to achieve moving forward.
Maybe you’re coming into the end of the year, and you know you want to reach a certain level of growth. If that’s the case, you should calculate how much more budget you need to allocate to realize that performance.
You should also consider which tactics you need to invest in. Ask yourself, “How are we going to reach our marketing revenue goal?” You might say, “If we continue to see consistent growth in organic and social and the contacts we generate from those channels close at the same rate, we’re going to miss our goal by this much. So, where are we going to invest to make up the difference?”
Here, it’s important to keep in mind that not all leads should be treated equally. The leads you get from one source may be better and close at a higher rate than leads from other sources. While certain channels may be efficient at generating leads, those leads may not be of the highest quality and vice versa.
When choosing where to invest, factor in the quality of the leads, their close rate and their average deal size. Ultimately, you need to consider which channels will generate customers, revenue and the most success for your company.
6. Monitoring Your Results
Once you’ve put your budget together, you need to monitor how you are tracking towards it. Here at New Breed, we evaluate our results every quarter, investigating if anything is throwing us off track.
Ask yourself questions like:
- Are we under or over budget?
- Are we hitting our goals?
- Are our channels underperforming or outperforming our expectations?
- Are there any unforeseen projects that need funding?
- Do we need to add budget on top of what we’ve already planned or can we reallocate?
There are plenty of situations that will be unforeseen throughout the year. These situations can vary greatly. They could be problems or opportunities, internal or external and condensed projects or extended ordeals.
No matter the circumstances, though, issues will arise. So, you should monitor your spending and conservatively craft your budget.
If you’re in charge of building your budget, it’s in your best interest to give yourself room to work with. Of course, it would be ridiculous to ask for money for the sake of it, but if you are calculated about how that money will go to good use, there’s no reason you shouldn’t ask for it.
However, bear in mind that the more you ask for, the more results you will be expected to produce.
In this way, you should think about your budget as a means to build a business case for getting more budget next year. If you ask for so much money that you can’t effectively use it or that you end up misspending it, you won’t be able to justify why you need it in the future. If you fail to utilize your budget constructively, leadership will probably opt to allocate the budget to a less risky area.
However, if you can analyze where your budget has gone, understand how it’s performed and predict where you need to invest to generate results moving forward, you will mitigate the risk of asking for more and position yourself for success.