Marketing is essential for business success. Whether you run a large enterprise or a growing small to medium enterprise, marketing is equally important to reach new audiences and increase sales.
However, far too often, businesses fail to strike the perfect balance in marketing, which translates to a loss of resources and subpar results due to either overspending or underspending the budget. After all, a trial-and-error approach to budgeting is nothing more than a disaster for your business finances as it is both cost-intensive and ineffective.
The marketing budget is the backbone of the marketing strategy. If you have a clear strategy, you can better control how your marketing budget is spent. An all-encompassing marketing strategy that outlines the marketing plan is a foolproof method to ensure that the marketing expenses are being put to good use.
How To Create A Competitive Budget?
Businesses must figure out how to make the most of the resources available to them to create a compelling marketing budget. For small businesses without a dedicated marketing team, our responsibility as the owner is to gain insights into business processes and expenses to allocate a sustainable marketing budget. You need to know the ins and outs of your business to make decisions that enhance business growth, and one of the best ways is to earn an MBA.
Juggling business with an MBA can be challenging, but many fully online MBA programs allow managing your studies at your own pace. With an MBA, you’ll have the experience and expertise to make informed decisions that can fuel growth.
Five Ways To Create A Compelling Marketing Budget
Below we have outlined five steps to creating a marketing budget that supports your marketing strategy. Keep scrolling to learn more.
Understand your business sales funnel
The sales funnel represents the buyer journey, i.e., the path your prospects take to purchase your business offerings. The sales funnel you understand the following:
- Where did your prospects learn about your business?
- What convinces them to make a purchase?
- The factors that influence their decision.
An in-depth understanding of your sales funnels with a focus on tracking revenue cycle outcomes from generating leads to purchase is essential for creating a successful marketing budget. You can use customer relationship management or marketing automation tools to extract critical insights from your marketing data, as they can help you better understand your sales funnel.
If you’re already open for business, you should map out and analyze the many paths your existing customers take before they make a purchase. Keep track of your metrics to find out what’s working and not. Compare your investment and the results the marketing tactics bring in. doing so will help you realize where to make the cuts.
Breakdown your operational expenses
Outlining all your operational expenses is one of the simplest approaches to creating a marketing budget. It involves making a list of all your operating expenses, both present and future. These expenses include sales tax, legal and accounting fees, outsourcing fees, and other relevant expenses. Understanding the operational expenses will put things into perspective about how you should create the budget.
To devise a marketing budget that you can stick to, you need to have a precise understanding of the expenditures, i.e., the amount spent, and the revenue, i.e., the income/profits generated.
Define your business goals
Once you have identified the present and prospective sales funnels and operational expenses, the next step is to define your business goals to ensure that the marketing budget aligns with them.
Consider the following questions to see how your business goals and marketing budget can work together:
- How much revenue do you need to break even?
- What are your goals for this quarter? What about the year or three years from now?
- How many leads must be generated and closed by the sales team to have a meaningful impact on the revenue?
- What is the average conversion rate of your leads?
It’s standard for SMEs with less than $5 million in revenues to spend 7 or 8 percent of their revenue on marketing. This includes allocating and dividing the budget between various marketing activities, from branding expenses such as websites or blogs to more traditional marketing efforts like ads and promotional events.
Marketing budget should be your priority; you should never allocate what’s left over after everything else has been paid for.
Conduct market research
Once you have defined the goals, you’ll need a strategy to work towards achieving them. Always consider your ROIs before investing anything into a strategy. Research your competition to learn what strategies provide the highest return on investment. Get down to the fundamentals that your competitors are leveraging and see what sticks. Once you test their strategies, you’ll find out what works best for your business. And with these insights, you’ll be able to create a budget grounded on tried and tested strategies that deliver promised results.
Conducting market research is the best way to outpace your competition by observing their tactics. Moreover, you would also be able to identify the similarities among your competition, giving you an upper hand over them.
Develop your marketing strategy
Now, it’s time to get creative and put together everything you learned into action by developing a marketing strategy. The above steps should have helped you form a clear understanding of your business operations. Use the new-found business understanding to outline:
- The finances required to achieve your business goals.
- The tools for launching a successful campaign.
- How you can reach your target audience according to their marketing preferences.
Once you have a strategy, it’ll be a breeze to allocate a marketing budget for things like custom keychains and other specialized marketing products/tools.
Creating a marketing budget can feel daunting, especially if you own a small business just starting. Moreover, limited resources shouldn’t stop you from leveraging the full potential of marketing. Think of marketing as an investment rather than a cost. And by developing a detailed marketing strategy, you can create a budget that makes the most of your business resources.
Knowing how to leverage business insights and how you can align them with your business goals can help you create a compelling budget. Learning how to create a marketing budget is a skill that will serve you well in the long run. Follow the formula outlined above to maximize your marketing potential and create a successful marketing budget.