What Should My Marketing Budget Be?




What should I invest in marketing to reach my goals? And what should my budget be? These are both common questions that I get asked. And today, I'm going to dive deep into this topic so that you can unlock the secrets of allocating your money for maximum impact.

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What Should My Marketing Budget Be?

What should I invest in marketing to reach my goals? And what should my budget be? These are both common questions that I get asked. And today, I'm going to dive deep into this topic so that you can unlock the secrets of allocating your money for maximum impact.

I am Tim Fitzpatrick with Rialto Marketing, where we believe you must remove your revenue roadblocks to accelerate growth. And marketing shouldn't be difficult. It is for a lot of us, but it shouldn't be. I want to dig into this marketing budget topic today.

I get asked this all the time. It is a very common question. I'm going to cover five different things today relating to marketing budget. One, are factors that influence your marketing budget. Two, I want to talk a little bit about fixed versus variable costs. Three, I want to talk about the importance of return on investment and metrics. I want to talk about common pitfalls, and then I'm going to end it by talking about tips for setting an effective marketing budget. Let's jump in.

Factors Influencing Your Marketing Budget

Factors influencing your marketing budget. Most good marketers, if you ask them what your budget should be, they're going to tell you it depends. That is an answer that none of us want to hear. It sucks to have to say that, but that is the reality of the situation because everybody's business is different and we have to account for those differences because they impact what your marketing budget should be. What are those factors? One, what are your business goals? Somebody that wants to 10X their business in five years versus somebody that wants to two X their business in 10, totally different. The business that wants to 10X in five years has much loftier goals. In order to get there that quickly, they're going to have to invest a pretty significant amount of money in marketing. Your goals is going to be a huge determining factor on how much you need to invest in marketing. Two, profitability. How profitable is your company? The reality is if you're in a business that tends to be lower on the profitability scale compared to something that's really high, you may not be able to have the funds to actually invest as much in marketing as other types of companies. We've got to look at that. More profitable companies are going to have more leeway to make decisions to actually choose to invest more heavily in marketing than ones that are not as profitable. We've got to look at that. Your competitive landscape is another thing that will determine your budget. If you're in a hyper competitive market and a lot of your competitors are investing heavily in marketing, if you don't, you are going to fall behind the curve. Then the fourth thing that I like to look at is the size of your business and the stage. How big is your company? Where are you on your business journey? Are you just starting out or are you more established? You've been in business 5-10 years or more. All four of those things we need to look at because they will influence your marketing budget. That's why when you ask somebody what your budget should be, they're most likely going to tell you it depends.


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Fixed Versus Variable Costs

Let's talk about fixed versus variable costs. When you look at your budget, you are going to have fixed versus variable costs. Fixed costs are things like your team member salaries. If you've got freelancers that you're paying a set fee monthly to, who are doing implementation and execution work for you with your marketing, those are fixed costs. We can plug those in as a line item. We know that they are not going to vary. With your variable cost, they're going to fluctuate. They may fluctuate based on the types of campaigns you're running. Are you running a lot of paid ads where your ad spend might fluctuate? Outsourced help, if you're paying somebody hourly compared to a fixed set monthly recurring fee, that's going to vary. We need to account for that in your budget and with variable cost, we're going to have to estimate what we expect them to be, and then we're going to need to monitor. But we've got to look at fixed versus variable cost and take those into consideration as you put your budget together and look at how much it's actually going to cost you.

The Importance of Return on Investment and Metrics

Third thing I want to talk about is the importance of return on investment and metrics. It is going to be very difficult to know whether you're getting a return on investment and to calculate your return on investment if you do not first outline the metrics that you are going to track. As you're putting your strategy and your plan together, it's super important to outline the metrics that are going to be tracked, that are going to give you the data you need so that you can make data-driven decisions and you can make strong decisions that are going to help guide what course corrections you're going to make as you implement and execute your marketing. We've got to identify really strong metrics so that you can effectively measure your success. Just know that as you track metrics, as you implement and execute on your marketing plan, it's really important to stay flexible and know that, hey, based on what the numbers are telling you, we need to be flexible and be willing to make adjustments in our budget, either cut back or increase based on what the metrics and the data are actually telling us.

The Common Pitfalls

Number four, let's dig in to the common pitfalls. Okay, there are three common pitfalls I want to touch on. One is overspending. We're investing too much without a clear strategy, a clear plan, and that can lead to a ton of waste. It can lead to lost time, over time, and invested and wasted money. It is so, so important with your marketing to take a strategy first approach, put your strategy in place, create a solid plan, and then jump in to implementing and executing. I see so many businesses just being haphazard with marketing and just chasing what's trending or investing here for a little bit. There are and stop fits. You are bound to overspend if you are in that place. Second thing that I see is people underspending. They're not allocating enough budget, which can lead to missed opportunities. If you have super lofty goals but you're not willing to invest in the marketing to support that and drive those results, it's not going to work. We've got to go into this with eyes wide open and have really realistic expectations. The third thing is neglecting testing. To me, one of the key elements that we focus on on the leadership side of marketing as we oversee the implementation and execution of marketing plans is ongoing optimization. You are never done testing, iterating on your marketing efforts because it's those little incremental improvements over time that are going to make a significant difference in your long term results. We always have to be testing. The importance of A/B testing and trialing different things to determine their effectiveness is super, super important. Frankly, with marketing, there are a lot of times where we can invest a little bit of money to test something to see how it works before we just go all in on it. That's really important, too. We've got to, just when think about marketing, always think about testing, testing, and testing some more. You are never done. Please avoid those three pitfalls. I don't want to see you overspend. I don't want to see you underspend. And do not neglect testing and ongoing optimization. Super important.

Tips for Setting an Effective Marketing Budget

Let's wrap it up. Tips for setting an effective marketing budget. One, start small. If you're unsure, start with a conservative budget and adjust as you implement and start to gather data that are going to help inform the decisions that you make. You want to allocate your fund strategically. Divide your budget across marketing channels based on their past performance, how they're continuing to perform, and what your business goals are. We don't want to be haphazard about this and throw and darts at a board going, Yeah, we're going to spend this much right there. Not a good idea. We need to be strategic about it. Continuously reviewing what is going on. We need to regularly assess our budget and make any necessary adjustments based on the outcomes we're seeing and our changing business needs. Our business is evolving, our marketing should be evolving alongside it.

General Guidelines

Now, people love to get general guidelines. I'm going to give them to you. But again, you've got to take into account... One of the first things that I talked about in the beginning here was factors influencing your marketing budget. You have to take those into account. But I'm going to give you some general guidelines so you at least have a general idea. For new and emerging companies, startups or you are in growth mode, 12-25% of your top line revenue should be invested back into marketing. 12-25% for new and emerging companies and high growth companies. For companies that are more established, maybe not focused on hypergrowth. You've been in business at least 5-10 years, 6-12% of top line should be invested back into marketing. This is going to depend, but for those of you that want some general guidelines, there they are. I gave them to you.


I hope you have found this helpful. I just want to reiterate the importance of having a well-planned marketing strategy and plan in place. What comes with that is your budget. Your budget should be included in that. It is so important to do that. I would highly encourage you just evaluate your business needs, your goals, the resources you have to determine an appropriate budget. I hope what I've talked about today has been helpful for you. If it has, but you've still got some questions, you want some outside eyes on your specific situation, please reach out. You can connect with us over at rialtomarketing.com. It's R-I-A-L-T-O marketing.com. Book a free Discovery call. I'd be happy to chat with you. The other free resource I have for you is over at RevenueRoadblockScorecard.com. We help clients remove their revenue roadblocks so they can accelerate growth. If you want to know which of the nine roadblocks is slowing down your growth, it's less than five minutes, go check it out, RevenueRoadblockScorecard.com. Thank you for watching. Thank you for listening. I appreciate you. Until next time, take care.

About the author, Tim Fitzpatrick

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