Your marketing budget is the driving force behind your team. The money that is invested is meant to be funneled into the right projects that allow your team to create the most meaningful results for the company as a whole.

In this chapter, you’ll learn,

• How to calculate your marketing budget (based on four proven frameworks).
• How to align marketing budgets with goals (and prove what you spend drives a return).
• How to understand how much budget you have available (and avoid going over).

What is a Marketing Budget Plan?

Your marketing budget is the planned amount of money you’ll spend to make your marketing goal a reality.

Why Does Your Marketing Budget Matter?

Your team is dealing with multiple projects that need to be prioritized. Having a marketing budget allows your team the clarity they need to funnel your budget into projects that will make the most meaningful impact on for your company.

There are three main reasons that your team needs to care about your marketing budget:

1. Use it or lose it. If you can’t justify the cash flow that your team needs, your organization will spend it somewhere else.

2. Prove your projects are creating growth for your company. Knowing how much you’re spending on marketing as a whole can help paint a clearer picture around how much return on investment you’re generating, too.

3. Provide reasoning for your allotted budget. When your company’s finance department turns to your marketing heads to determine how much investment you’ll be getting for the next year, having a document outlining your needs can help build a case and show where all that money is going.

How Can You Align Your Marketing Budget With Your Business Goals?

Another big step in your marketing budget is trying to invest your budget into the right projects that will create the most 10x growth for your business.

High priority projects would receive more money from your projects than projects that don’t contribute that same amount of growth.

For example, say that one of your overarching business goals for the year was to increase the amount of traffic that is going to your website. It would make more sense to funnel more money from your budget into projects that contribute to that goal than say events.

To do this, first, work with your team to come up with a list of overarching marketing goals that are going to contribute to your bottom line.

Then decide as a team which marketing projects will contribute the most growth to those goals.

Those top projects will be where you contribute a majority of your budget.

4 Ways To Calculate Your Marketing Budget

1. Percent Of Revenue

This method of calculating your marketing budget is anecdotal at best. If you opt for this route, you essentially pick a percentage of revenue to spend on marketing, then choose your marketing projects and tools based on what fits within the budget.

Nevertheless, if you’d like to try this method, here are some recommendations:

• New businesses 1-5 years old should allocate 12-20% of revenue toward marketing.
• Businesses that are older than 5 years should allocate 6-12% of revenue.
• B2B businesses should allocate 7-8% of revenue.
• B2C businesses should allocate 9% of revenue.

Basically, the marketing budget formula for percent of revenue looks like this:

Budget = total revenue × % allocated toward marketing

The problem is that this method doesn’t take into account your marketing strategy—goals, tactics, projects, etc.—whatsoever.

2. Top-Down

Your boss tells you how much money you have to spend. Also… not a very data-driven method based on the goals you’d like to influence and the projects you’re planning to take on to make those goals a reality.

3. Competition-Matching

This method is keeping up with the Joneses, and does not foster a blue ocean marketing strategy. With this method, your budget is determined based on the tactics your competition is executing.

For example, your competitor launches a blog. Therefore, you create a plan based on how much it will cost you to launch a blog.

This method goes against much of the work you’ve already completed throughout this marketing strategy guide.

4. Goal-Driven

This method requires you to set goals first, then plan your budget to make the goals a reality.

Hmmm…. probably sounds familiar. ;)

This is the best method for setting a realistic amount that will help you reach your goals.

The goals-driven formula looks something like this:

Monthly marketing budget = (marketing goal acquisition cost × marketing marketing goal #) + marketing operational costs

How To Set Your Goal-Driven Marketing Budget

Determine Marketing Goal Acquisition Cost

How much money do you spend to get one goal conversion?

Here are a couple ways to calculate your goal acquisition cost (choose one method):

Average Piece Method

For example, you may opt for understanding how much it costs you to create an average piece of content and divide it by the results it produces.

Marketing goal acquisition cost = cost to create an average piece of content / # of goal conversions

For example, let’s assume the CoSchedule marketing team spends the following to create an average piece of content:

• 4 hours writing content at $25 per hour
• 1 hour designing content at $25 per hour
• 1 hour promoting content on social media at $25 per hour
• 30 minutes promoting content via email at $25 per hour
• 30 minutes writing ads promoting the content at $25 per hour
• $100 on paid ads to promote the piece

We use the Google Analytics Custom Report you set up in Chapter 2 of this marketing strategy guide to determine that average piece of content influenced 20 goal conversions.

Following the marketing goal acquisition cost formula, CoSchedule’s example goal acquisition cost is $13.75:

(4 × $25) + (1 × $25) + (1 × $25) + (.5 × $25) + (.5 × $25) + $100) / 20 = $13.75

In other words, it costs CoSchedule $13.75 for one goal conversion in this example.

You can obviously average out the cost of several pieces divided by their goal conversions to calculate an even more precise goal acquisition cost.

Over Time Method

If the average piece method feels a bit daunting, this is the simpler goal conversion cost calculation method:

Marketing goal acquisition cost = cost of marketing / # of goal conversions

Yeah, that looks like the exact same thing as the average piece method, so let’s take a look at another example of how this method actually differs.

Last month, let’s assume CoSchedule spent the following on marketing:

• $4,400 on salary
• $4,400 on salary
• $4,400 on salary
• $4,400 on salary
• $10,000 on paid ads

In the same month, CoSchedule gained 1,400 goal conversions.

In this example, CoSchedule’s goal acquisition cost is $11.60.

$4,400 + $4,400 + $4,400 + $4,400 + $10,000 / 2,000 = $11.60

You can expand your time frame beyond a month, too, to get an even more precise goal acquisition cost calculation.

Find Your Monthly Marketing Operational Costs

This is the amount of money you spend to “keep the marketing lights on” each month. Add together all of your costs for:

• Marketing tools
• Hosting services
• Domain names
• SSL security certificates
• Team education (course, books, etc.)
• Memberships for professional organizations
• Paid WordPress themes
• Ad expenses
• Salaries
• Etc.

For example, let’s say CoSchedule has the following monthly marketing operational costs:

• $6 for SSL certificate from Network Solutions
• $10 for Name.com domain name
• $15 for Bluehost website hosting
• $60 for CoSchedule marketing calendar
• $99 for Mention social listening
• $399 for AHREFs keyword + SEO
• $50 for employee learning allowance × 4
• $35 for American Marketing Association membership × 4
• $4,400 on salary × 3
• $10,000 on paid ads

In this example, CoSchedule’s monthly marketing operational costs are $28,529.

$6 + $10 + $15 + $60 + $99 + $399 + ($50 × 4) + ($35 × 4) + ($4,400 × 4) + $10,000 = $28,529

We can realistically expect to spend $28,529 every month just to keep CoSchedule’s marketing operational.

Calculate Your Monthly Goal-Driven Marketing Budget

You set and amortized monthly marketing goals in Chapter 1 of this marketing strategy guide.

The Marketing Budget tab in your marketing strategy template automatically pulls the monthly goals from your Goal Tracking tab you set in Chapter 1.

Simply enter your Marketing Goal Acquisition Cost in cell C6 and your Marketing Operations Costs figure in C7 in the Marketing Budget tab.

From here, the spreadsheet will automatically calculate your goal-driven monthly budgets for the entire year with this formula:

Monthly marketing budget = (marketing goal acquisition cost × marketing marketing goal #) + marketing operational costs

A Goal-Driven Marketing Budget Example

Let’s finish CoSchedule’s marketing budget example you’ve learned throughout this chapter so far.

Goal Acquisition Cost:

The amount of money CoSchedule spends to get one goal conversion.

(4 hours × $25 per hour) + (1 hour × $25 per hour) + (1 hour × $25 per hour) + (.5 hours × $25 per hour) + (.5 hours × $25 per hour) + $100 for paid ads) / 20 goal conversions = $13.75 marketing goal acquisition cost

Marketing Operational Costs:

The amount of money CoSchedule spends each month to generate goal conversions.

$6 for SSL certificate + $10 for domain name + $15 for hosting + $60 for CoSchedule + $99 for Mention + $399 for AHREFs + ($50 learning allowance × 4 employees) + ($35 association membership × 4 employees) + ($4,400 salary × 4 employees) + $10,000 for paid ads = $28,529 marketing operational costs

Marketing Goal:

The number of goal conversions CoSchedule wants every month.

(6,000 final goal – 600 start goal) × (1 month number / 12 months to complete goal)^ 2 assumption + 600 start goal = 638 goal conversion goal for January

Goal-Driven Marketing Budget:

The amount of money CoSchedule needs to spend per month to reach our marketing goals.

($13.75 marketing goal acquisition cost × 638 goal conversion goal for January) + $28,529 marketing operational costs = $37,294.63 marketing budget for January

^^^ This example calculated the marketing budget for January. Since the example carries out for an entire year, we’d simply run the same formula for each month within our time-bound goal. In this case, it would be 12 times (January, February, March, April, May, June, July, August, September, October, November, and December).

The Marketing Budget tab in your free marketing strategy template spreadsheet automatically calculates this for you for each month and the year.

So now you can follow the same formula to calculate your marketing budget for every month. If you have 12 months to reach your goal, you can simply add together all of those months to know your annual marketing budget. 

How To Not Go Over Budget

So you have your projects set, your budget is approved, and you’ve started investing your allotted money.

But then you start to realize that one of your projects is about to go over budget.

Yikes, right?

There are ways that you can avoid all of that.

Accurately Estimate How Much Your Project Is Going To Cost

The biggest step your team can take to avoid going over budget is to accurately estimate how much your top projects are going to cost to complete. There are two ways that you can do this:

1. If the project is a repeat of last year, look at how much your team spent to finish the project. Base this year’s estimate off of what you spent last year.
2. If the project is new, calculate every small step of the project that needs to be completed and how much it will cost to complete those steps. Use those step costs to formulate an overall project cost.

Keep Track Of Where Your Money Is Going At All Times

If your team decides to spend 15 dollars on a Facebook ad, record it right away. It could be in your template, or in a separate document, but do not let those small purchases sit unnoticed.

So let’s say that you’re working with your social team and they get a series of receipts from boosted posts on Facebook that total up to 256 dollars.

Keep Your Spending On Track

Congrats! You’ve set your marketing budget! Now that you know your monthly budgets, it’s time to break down your highest priority projects into realistic timelines your team will execute.