Creating a marketing budget breakdown for your company can feel daunting. To do it right, your company will need to take an in-depth, honest look at its expenses and its profits. This will give you the necessary data to put together a marketing budget that can abide by the financial parameters you need to stick to.
To succeed in your market, you not only have to develop a gameplan to direct your marketing efforts; you’ll also need a marketing budget breakdown.
Your company’s marketing strategy and budget should be two sides of the same coin. They’re distinct from one another but intrinsically connected to the efforts of each other. Your strategy gives your brand the direction it needs to reach the right people at the right time. And your budget helps you reach those people in the most effective and sustainable ways.
Outlining an inbound marketing budget breakdown is a multi-step process, though. To do it right, you’re going to need to perform an analysis of your business’ expenses and profits. Then, you can use that data to determine what percentage of your overall budget can be committed to your inbound marketing efforts.
Before we dive into topics like “how to prepare a marketing budget” and “what does a marketing budget look like,” however, let’s establish a baseline:
Marketing Budget Definition
Your marketing budget is an outline of all the money your company spends on any of its internal marketing projects. These budgets usually cover a whole year but are broken up into quarters so they can be better implemented and adjusted as needed. Ideally, your marketing budget breakdown will illustrate how much you've spent, or are going to spend, on marketing materials like:
- Paid advertising
- Sponsored web content
- Internal hiring
- Your blog domain
- Automation software
- Staff training
- Content creation
According to Meaghan Keaney Anderson, HubSpot's VP of Marketing, “When people allocate budget for product marketing, they tend to think in terms of product launches and promotional activities.” While Anderson acknowledges “product launches” and “promotional activities” are essential parts of your marketing budget, they’re far from the only parts.
When you’re mapping out a budget, she says you need to be “setting aside resources to conduct research and message testing long before the product ever goes to market.” This will ensure all of your marketing efforts reach the right people at the right time without requiring you to overexert your team’s capabilities or budget.
How to Prepare a Marketing Budget For Your Company
The first question you need to ask yourself is also the most important: what percentage of your company’s overall budget will be set aside for marketing?
Answers to this will vary, of course, as different companies of varying sizes and industries will each require a unique kind of budget breakdown. However, an article on Chron does give us a rough approximation to start with:
“The U.S. Small Business Administration recommends spending 7 to 8 percent of your gross revenue for marketing and advertising if you're doing less than $5 million a year in sales and your net profit margin – after all expenses – is in the 10 percent to 12 percent range.”
Depending on the particulars of your company, those percentages could be higher or lower. Ultimately, though, there’s no universal answer to how much of your budget should be set aside for marketing. What is universal, however, is the reality that you do need a marketing budget.
If you’re in a competitive market, then spending more on marketing may yield the results you need to grow. If you occupy a niche market, however, then you may be able to expand your brand and grow your profits with a lower marketing budget. The trick is knowing your company’s expenditures inside and out and operating within those.
When considering exactly how much you should be spending on your company’s marketing budget, consider the following four factors Small Business Trends outlines:
- Past Experience: What sorts of strategies and budgets have worked (or not) for your company in the past?
- Your Marketing Objectives: What kinds of marketing collateral do you need to produce and advertise to meet your objectives? How much will it cost to create content and drive traffic to it?
- Size and Stage of Your Business: Is your business a start-up with limited revenue? Or have you been in the industry for a while and are looking for a new strategy?
- The Competitive Landscape: Who are your competitors? Where do they focus their marketing efforts? How much do they spend on those efforts? How much will you have to pay to compete with them?
While you could feasibly develop a marketing budget breakdown without these questions, you would likely run into hidden expenses. And hidden costs will result in your company overpaying for ultimately ineffective strategies.
Once you have an idea of what factors are informing your budget, you’ll need to start getting into the numbers themselves. Here’s a solid starting point for what a budget breakdown could look like, as exampled by Inc.com:
Sales = Total Cost of Operation + Total Profits
Total Sales - Total Cost of Operation = Profit
From here, you would divide the “Total Cost of Operation” up into various elements, including salaries, office space, utilities, materials, and of course, marketing.
Let’s use a (very) basic example. If your “Total Cost of Operation” is $10,000, then your budget might look like this:
- $5,000 for salaries
- $2,000 for office space and utilities
- $1,000 for various materials and equipment
This leaves you with $2,000 leftover to distribute to your marketing efforts as needed. The way you use your marketing budget breakdown can vary as often as month-to-month, So always be sure to keep a finger on the pulse of your company to pinpoint what areas need attention.
Inbound Marketing Budget Examples and Best Practices
If you’re still struggling to visualize what an inbound marketing budget looks like, then this example from HubSpot should help. This template was created using HubSpot’s Master Budget Template and illustrates a company that’s trending over budget during the first quarter of the year:
With this marketing budget breakdown in mind, let's take a moment to consider what HubSpot says are the most critical components of any good inbound marketing budget:
- Software costs
- Content production
- Testing, iteration, and optimization
Your budget breakdown doesn’t have to include every expense imaginable, but it should come pretty close. A budget also doesn’t need to be an ironclad predictor of your company’s future spending. What a marketing budget breakdown should do, however, is equip your brand with thoughtful, educated assumptions about your company’s expenditures.
Harvard Business Review explains it like this: “At its simplest, a budget creates projections by adding assumptions to current data.” Your data is accurate—that’s the beauty of good data—but even accurate data can’t flawlessly predict the future. What it can do, when paired with assumptions back by research, is give you a broad view of your company’s expected future and how you can best prepare for it.
Why Is an Inbound Marketing Budget Breakdown Important?
Far too many companies go about their day-to-day routine without a breakdown to guide them. While it's not impossible to succeed without a breakdown, creating one will provide your brand with a destination to strive toward and a roadmap to help it reach that destination successfully.
Having a marketing budget without a breakdown also isn’t ideal, as it’s the breakdown that outlines how a budget should be distributed to produce the highest ROI.
Marketing budget breakdowns ensure your company is in alignment with itself. Like HBR says, if you want to see your marketing budget meet your company goals, then you’ll have to explain what you’re basing your predictions on “and show a clear connection to at least one strategic goal.”
“As long as you ground your strategies in sound fundamentals,” Forbes says, “you should be able to maximize the effectiveness of practically any budget handed to you.” Building and enacting a marketing budget breakdown can feel daunting, but the long-term benefits of doing so far outweigh any potential costs.