How much should we budget for marketing?

Video Transcription

Hi friends. It’s budgeting season and one of the most common questions we field at Authentic® is “how much should I budget for marketing?” This is a tricky question to answer because there is no one size fits all solution. But there are some good best practices, standards and philosophies to use as you approach marketing budgeting. So I want to share a few of those with you today. 

Hi, I’m Jennifer Zick. I’m the founder and CEO of Authentic. We are a company of fractional chief marketing officers that works with growing businesses across industries and all across the United States to help them Overcome Random

Acts of Marketing® and confidently take the next right step toward healthy growth. 

Budgeting is a very important process to help overcome random acts so that you’re not just reacting to opportunities as they come along, but you’re thoughtfully investing in the right fit places that put you in front of the right fit audience. So I’m encouraging you as you think about budgeting for marketing for the coming year, not to treat your marketing spend like a casino, but like an investment account with a real strategy and good leadership behind it, thoughtfully moving the pieces of your budget. But first you need to think about what makes sense for a budget. And some of those things come down to how you are currently structured for sales and marketing in your organization, what is your leadership’s appetite for investment and the pace at which you want to grow. 

All of those things matter in terms of the cultural decisions for how you invest in marketing. And a lot of the businesses we work with have been founder led, sales driven. They may be scattershot, approaching marketing reactively, but they’ve never really had a philosophy about budgeting for that. And right now they’re more heavily weighted towards sales. It doesn’t make sense to pull the rug out and take a bunch of resources out of sales to start a marketing program. You need to keep sales humming along while you build toward marketing. So in terms of benchmarking and general best practices, we see most businesses invest anywhere from 10% to 20% of annual revenue into their combined sales and marketing programs. Now, if you’re B2C and you don’t have a sales team, then a lot more of that investment is going to be on the marketing side. 

But if you’re B2B, you’ve probably grown up first as a sales organization with a little bit of marketing scattershot activity going on. And now you need to start investing in strategic marketing for sales. And to do that, you need to think of the whole pie. So I would encourage you to think about what percent of annual revenue makes sense as an investment to support your leadership and ownership philosophy on investment strategy as well as the pace of growth your business needs. At Authentic, for example, I run my company with an annual investment of 14% of annual revenue into sales and marketing and that split pretty evenly. About 7% of that investment goes into my sales team, my staff, sales programs, incentives and commissions, and the other half goes into our marketing program. 

At my company, we have a marketing team of two and a half people internally and then we have four or five agency and consulting partners that we rely on a part time, ongoing augmented basis. And that requires an activation budget. So again, as you think about marketing budgeting, if you’ve never strategically invested, start thinking about what number you need to set aside to bring not only the activation power to start leveraging agency or making key hires internally, but to bring the leadership to your table that will guide the investment of those dollars with wisdom. I don’t want to see you spending money in marketing like you’re at a casino. I want to see you investing those dollars like you’re working with a strategic financial long term estate planning investment strategy. 

So please bring wisdom to the table to help you direct those dollars, to help you think about your budgeting strategy as you move forward to layer things on appropriately and to help demonstrate what the return on that investment will be until you reach that ideal balance of investment in sales and in marketing and you understand how those efforts are working together to strategically grow your business. 

I hope this has been helpful here to answer any other questions that you might have as you’re starting your budgeting for the season and we’re cheering you on in overcoming random acts of marketing.