How to Create a Marketing Budget (for 2024)

  • Brandon Boushy by Brandon Boushy
  • 3 months ago
  • Blog
  • 0
Businessman walking with a bag of money

Are you struggling to find the right balance for your marketing budget? Maybe you don’t know which marketing strategy to use. We have the information you need to improve your overall marketing performance.

We surveyed business owners to understand how small businesses approach marketing. More than 1,800 people responded, and we’ve used their insights, as well as data gathered for our average marketing budget report to provide a guide for creating marketing budgets.

We’ll explain what a marketing budget is, how much experts suggest spending, and how much marketing teams spend, then we’ll discuss how to create a marketing plan. We’ll even show you how to promote a company on a tight budget so you can become a marketing leader without spending thousands on ads.

What is a marketing budget?

A marketing budget outlines the costs a company spends on marketing its products or services. Your marketing budget should cover a specific duration, usually a quarter or a year. Your budget may also have periods for particular marketing campaigns.

Your marketing budget should include all expenses related to spreading the word about your business. Your marketing budget allocation will estimate costs for various line items, including:

  1. Marketing team
  2. Paid advertisements
  3. Marketing software
  4. Outsourced marketing services

Expect your company marketing spending to be approximately equal in all four categories.

What is the average marketing budget for a small business?

Responses to UpFlip survey question "How much have you spent on marketing in the last year?"

We asked how much business owners spend on marketing strategies. We found that two-thirds spend less than $1,000 per year marketing their small business, while 15% spend over $10K and another 19% spend between $1K and $10K.

Meanwhile, the Small Business Administration suggests a marketing budget allocation of 8% of company revenue. That means two-thirds of businesses are only marketing enough to make $12,500 in revenue annually.

To make $100K in revenue, you should be spending around $8,000. Meanwhile, if you want $100K in after-tax profit, you’ll want to spend $32K to $400K on marketing each year, based on 2% to 25% profit margins.

How does having a budget help you avoid the traps of digital marketing?

A digital marketing budget makes tracking performance against goals and industry benchmarks easier when comparing marketing channels. The budgets for each channel can also be set in most advertisers’ software, preventing marketing from running rampant.

You can also limit wasted expenses on Google Ads by narrowing your spending to only high-performing keywords.

You can also use the high-performing keywords to guide other marketing team efforts by focusing social media ads, video marketing, and search engine optimization on subjects that actually contribute to your company’s success.

Author’s No-Nonsense Note About Marketing Budgets

Concept showing a men’s fashion website loaded on a laptop next to a miniature shopping cart loaded with and surrounded by brightly colored shopping bags

There are two ways to go about marketing: Spending time or spending money. Every hour you spend marketing is one you can’t spend providing services or creating custom products. Of course, eCommerce stores, content creators, and marketing agencies are marketing during all work hours.

If you have virtually no marketing budget or want to do it all yourself, I suggest assuming you will spend 20 hours per week promoting your business and 20 billable hours per week serving customers. You’ll need to calculate your service rates (or product prices) based on these reduced weekly hours.

How to create a marketing budget

Man standing in front of a chalkboard with an upward trending arrow holding a laptop in one hand and cash in the other with a question mark overhead as he wonders how to create a marketing budget

Creating a marketing budget involves careful planning, analysis, and allocation of resources to ensure that marketing activities align with business goals. Here’s a step-by-step guide to help you create a marketing budget:

  1. Understand customer needs.
  2. Examine your business goals.
  3. Review past marketing budget management.
  4. Measure the average cost per lead.
  5. Calculate the average conversion rate.
  6. Establish how many leads you need.
  7. Define your marketing objectives.
  8. Create your marketing budget.
  9. Regularly monitor and adjust your marketing spend.

Understand customer needs

Your marketing strategies should focus on showing you understand your target customers. To succeed, you’ll want to use research and marketing analytics data to gain deeper insights into what existing and potential customers want and need.

Without market research, marketing teams may have a difficult time identifying the marketing channels to reach their target audience best.

Explore demographic and psychographic factors like age, gender, income level, location, and brand loyalty to learn more about what your target audience cares about.

Examine your business goals

You’ll want to consider the overlying business strategy and goals before you create a marketing plan and budget. You might need to talk to executives, investors, and other team members to establish what the business goals are, then create a marketing plan that helps you achieve those goals.

Your business strategy will also impact the marketing team’s goals because the marketing budget needs to be high enough to accomplish the business goals.

Throughout this piece, we’ll assume you are trying to make $250K across 1,000 customers. We’ll use these numbers to help illustrate some of the concepts you’ll use to avoid common marketing budget mistakes.

Review past marketing budget management

Before you create a marketing budget plan, review previous years’ marketing budgets and marketing campaigns. Identify what worked well and what didn’t. Look for indicators like:

  • Which marketing channels were under budget or over budget?
  • Which marketing campaigns had a higher or lower return on ad spend?
  • Did you overestimate or underestimate the previous year’s marketing budget?
  • Did you add new products or services that impacted marketing costs?
  • How does your cost per lead, cost per click, clickthrough rate, and conversion rate compare to industry averages?

This data will help you make more informed decisions for the upcoming budget.

Wordstream is a good source for these metrics if you do not have information from previous marketing campaigns. It will provide you with a good benchmark to compare your performance.

This is Wordstream’s data regarding cost per click, cost per lead, click-through rate, and conversion rate for Google Ads.

  Avg. Cost Per Click ($) Avg. Cost Per Lead ($) Avg. Click-Through Rate (%) Avg. Conversion Rate (%)
Animals & Pets $3.13 $23.57 8.12% 13.41%
Apparel / Fashion & Jewelry $2.72 $72.24 6.46% 1.57%
Arts & Entertainment $1.55 $76.71 11.78% 3.03%
Attorneys & Legal Services $9.21 $111.05 4.76% 7.00%
Automotive — For Sale $2.08 $42.52 8.77% 5.72%
Automotive — Repair, Service & Parts $3.06 $21.12 5.91% 12.61%
Beauty & Personal Care $2.89 $36.97 6.87% 8.16%
Business Services $5.47 $87.36 5.11% 4.94%
Career & Employment $3.78 $132.95 6.67% 3.11%
Dentists & Dental Services $6.69 $65.37 5.34% 10.40%
Education & Instruction $4.10 $62.80 6.41% 7.07%
Finance & Insurance $4.01 $90.02 6.18% 4.11%
Furniture $2.77 $108.85 6.19% 2.57%
Health & Fitness $4.18 $51.42 6.44% 8.40%
Home & Home Improvement $6.55 $66.02 4.80% 10.22%
Industrial & Commercial $4.35 $59.74 5.57% 7.91%
Personal Services $3.90 $40.85 7.54% 8.70%
Physicians & Surgeons $3.97 $37.71 6.73% 13.12%
Real Estate $1.55 $66.02 9.09% 2.88%
Restaurants & Food $1.95 $34.81 8.65% 5.06%
Shopping, Collectibles & Gifts $2.44 $31.50 6.39% 3.69%
Sports & Recreation $1.77 $31.82 10.53% 5.69%
Travel $1.63 $62.18 10.03% 3.87%

Measure the average cost per lead

Cost per lead (CPL) is a marketing metric that compares what you spend on lead generation to the actual number of leads you generate. This helps you understand how much it will cost for a marketing campaign.

The CPL formula is:

CPL = Amount spent on leads / Number of leads

Ideally, marketing investments would use your current numbers, but for those just implementing marketing tactics, use the benchmarks in the table above.

Calculate the average conversion rate

Conversion rate (CVR) measures the percentage of leads you turn into paying customers. Use the formula below to calculate the average conversion rate:

CVR = Number of Sales / Number of Leads

Establish how many leads you need

Now that you’re familiar with some of the terms used in a digital marketing strategy, you’ll want to calculate the number of leads you need to hit $250K in gross revenue.

You’ll need to use the formula:

Desired Customers / CVR = Leads to Meet Goal

Let’s assume you’re in the home improvement field, which has a 10.22% CVR. That means you’ll divide:

1,000 Customers / 10.22% = 9,785 leads

Taking it a step further, your marketing plan needs to calculate how much marketing projects cost by multiplying the leads needed by the CPL ($66.02).

9,785 x $66.02 = $646,005.70

As you can see, this is way higher than the $250K revenue you’re hoping to make. That’s because marketing leaders like Google and Facebook tend to charge based on an estimated lifetime customer value. Effectively, you’re paying a percentage of the revenue that you expect to make over the life of the customer relationship.

This is why a marketing budget includes a budget allocated to increasing the earnings from each paying customer through remarketing, loyalty programs, and other strategies that are less costly than paid advertising.

Define your marketing objectives

Next, you’ll want to define your marketing goals and align them with your business goals. Let’s look at some business goals and corresponding goals to include in your marketing budget.

Business Goal Marketing Goal
Increase revenue from $100,000 to $200,000 The topline marketing budget should be less than $24,600
Increase sales per transaction by 10% Raise prices, add suggestive selling to the website, and promote higher-value items
Improve profit by 1% Cut underperforming campaigns, raise prices, implement repurposing content

You could tie marketing goals to other business goals, like:

  • Raise brand awareness by X%
  • Limit discounting current customers’ bills to under Y%

These are just a few examples of how your business goals should impact your marketing strategy. Want to know more about tying marketing goals to business goals? Check out this blog.

Create your marketing budget

First, you’ll want to establish the total funds available for marketing. This may be based on a percentage of revenue, a fixed amount set by the company, or other financial considerations.

We suggest using the marketing budget of 12.3% that was mentioned in this CMO study. A startup marketing budget may need to be even higher. MaidThis CEO Neel Parekh told us:

When you first start a business, you may need to spend 20% to get clients faster.

Check out our interview with him below.

YouTube player

Use a marketing budget template

Whether you’re a small business owner or work with them, you can use the information in this report and our marketing budget template to create a balanced small business budget.

The template lets you choose your industry and your revenue goal. Then it suggests a sample marketing budget amount.

Once you know how much your marketing budget should be, you can use the other tabs to set the budgets for specific aspects of your marketing strategy. Then add the actual expenses for an entirely new way of budgeting.

Pro Tip: Seriously, this marketing budget template is probably the tool I am most proud of during my seven years of consulting.

Allocate budget by channel

Decide how much of your budget will be allocated to the marketing channels outlined below.

As you go, you’ll notice that some budget-based initiatives make advertising small business products and services easier than others do. Start limiting your marketing spend on the ineffective channels and transfer it to the ones that are performing better.

Marketing spending as a percentage of revenue ranges from 0% to as high as 38.57%, with an average of 12.3% and a median of 10%. In addition, the average marketing budget dedicates 53.4% of its marketing dollars to its digital marketing budget, while the rest is spent on traditional advertising.

Marketing Budget Distribution
Side by side of two business owners working their marketing plans—one on a laptop taking a call on a cell phone, the other using a tablet and surrounded by social media icons including X, Facebook, and Instagram

Once you’ve decided how much to spend on marketing, you’ll want to break your marketing budget down to the costs for all marketing campaigns. Marketing costs for small businesses will include:

  • Content marketing budget: Expect to spend a minimum of $29 per piece, but some of the best content creators have content marketing budgets that cost up to $1,000 per piece. You may also find content creators that charge $.05 to $1 per word.
  • Paid digital advertising budget: Small businesses should expect to spend $2.59 per click, $3.12 per 1,000 impressions, $.66 to $1.23 on remarketing, $15 to $800 on tools, and a minimum of $350 per month for the monthly ad budget, according to WebFX.
  • Ad monitoring budget: To pay someone to monitor ads for your small business, include a marketing spend of $350 to $5K per month or 12-30% of monthly ad spend—whichever is more.
  • Email marketing budget: Your email marketing budget will vary based on the number of email addresses on your list and the features you need, but you should expect to spend around $18 per month for up to 1,000 people on your email list. As you grow, costs may increase up to $540 per month, plus related labor costs.
  • Social media marketing budget: Social media marketing in 2023 is expected to reach $72.33B in spending, or $2,178.62 per business (calculated by dividing $72.33B by the number of U.S. businesses).
  • Sales funnel automation budget: Automation systems might be included in your email marketing, social media marketing, or other marketing channel budgets.
  • Marketing tools and software: You might include these costs in other categories or put them in a dedicated category. On average, 25.5% of marketing budgets are spent on tech. Depending on the size of your company and the number of customers, necessary tools and software could be free or cost thousands per month.
  • Outsourced marketing expenses: Some companies will outsource all or part of their marketing. As you’ll see in the chart below, approximately 23.5% of marketing costs go to marketing services and agencies.
  • Traditional advertising budget: Traditional marketing budgets are expected to decrease by 2.6%, according to the CMO report. This includes print ads, outdoor advertising, radio spots, and more.

For social media, paid ads, and traditional advertising, you may want to break the promotional budget into specific marketing channels. We recommend utilizing this marketing budget template.

Small Business Allocation: How It’s Different

Professional marketers who responded to the CMO Survey said they spend approximately equal portions of their marketing budgets on marketing labor, paid media, technology, and outsourcing.

Meanwhile, our surveys show that small business owners think about their marketing efforts and spend their marketing budgets differently. The primary form of marketing most small business owners use is social media (60%), followed by Google Ads (17%), SEO (10%), print (7%), and content marketing (6%).

In addition, 44% of small business owners state that print advertising has not worked for their business, while just 24% did not find social media effective. Google Ads and SEO were tied at 13% for perceived ineffectiveness, while content marketing is the channel small business owners find most effective.

Interestingly, small business owners focus least on the strategy that has the most perceived effectiveness. If you’re looking for ways to grow your business, consider creating more content.

Include a contingency

However you think you’ll allocate your marketing dollars, it’s always best to give yourself some wiggle room when creating a marketing budget plan. Most budgets for marketing tend to be approximately 20% higher than companies actually spend.

Make sure you include a contingency in your budget that is up to 10% so you have some extra room if you need it as you manage your small business.

Regularly monitor and adjust your marketing spend

Business person using Google’s Marketing Platform on their laptop

Continuously monitor the performance of your marketing activities against your budget. Make adjustments as needed to optimize performance and maximize return on investment (ROI).

The most commonly used marketing analytics software is Google Analytics. The most common metrics to measure marketing performance are:

  • Sales, revenues: 69.9%
  • Digital, web, and mobile performance: 55.6%
  • Content engagement: 43.4%
  • Lead generation: 40.3%
  • Lead conversion: 36.9%
  • Campaign costs, efficiency (e.g., production, content reuse): 34.8%
  • Campaign effectiveness (e.g., gross rating points, reach, frequency): 34.7%
  • Customer satisfaction: 32.7%
  • Campaign ROI: 30.7%
  • Customer churn, retention rate, loyalty: 28.6%

Why you need an integrated marketing strategy

When a company integrates its marketing strategy, it makes sure every marketing channel pulls from the same playbook.

An integrated marketing strategy is crucial for businesses and organizations for several key reasons:

  • Consistency: An integrated marketing strategy ensures that your brand messaging and visuals are consistent across all channels. This consistency helps you create a cohesive brand identity that earns trust and credibility with your audience.
  • Maximized Reach and Exposure: Different people consume information through different channels. By integrating various marketing channels (such as social media, email, content marketing, traditional advertising, etc.), you can increase your audience and visibility.
  • Improved Customer Experience: An integrated approach allows for a seamless and unified customer experience. When customers encounter a consistent message and experience across different touchpoints, it makes for a smoother and more enjoyable interaction with your brand.
  • Increased Efficiency: Coordinating different marketing efforts can lead to increased efficiency. For example, when your social media efforts align with your content marketing strategy, you can repurpose content for both channels, saving time and resources.
  • Better Data and Analytics: Integrating different channels will help you get a better picture of your audience and their preferences. This allows for better tracking, measurement, and analysis of marketing efforts, leading to better-informed decision-making.
  • Adaptability and Agility: An integrated strategy enables you to pivot when market conditions or consumer preferences change. If one channel isn’t performing as expected, you can adjust your approach across multiple channels more easily.
  • Competitive Advantage: Companies that successfully integrate their marketing efforts often gain a competitive edge. This is because they’re able to deliver a more cohesive and compelling message than competitors with a disjointed or inconsistent approach.
  • Alignment with Business Goals: An integrated strategy ensures that all marketing efforts are aligned with overall business goals and objectives. This means that every campaign and initiative is contributing to the broader mission of the company.
  • Optimized Budget Allocation: Integrated marketing allows for better allocation of resources. By understanding which channels are most effective for your specific audience, you can allocate your budget and staff to maximize return on investment.
  • Long-term Growth and Sustainability: An integrated approach sets the foundation for sustainable growth. By building a strong and consistent brand presence, you’re more likely to retain customers and attract new ones, leading to long-term success.

In today’s highly competitive and fast-paced business environment, having a well-thought-out and unified marketing plan is essential for staying relevant, reaching your target audience, and achieving your business objectives.

How to promote your business on a limited marketing budget

Promoting your business on a limited budget requires creativity, strategic planning, and a focus on cost-effective methods. Here are some practical steps to help you get started:

  1. Define your target audience.
  2. Leverage social media.
  3. Optimize your website.
  4. Invest in content marketing.
  5. Be consistent with email marketing.
  6. Collaborate with influencers or partners.
  7. Utilize free marketing tools.
  8. Network in your industry.
  9. Offer referral incentives.
  10. Leverage user-generated content.
  11. Do your own graphic design.
  12. Perform local SEO.
  13. Run giveaways and contests.
  14. Measure and adjust.

Keep reading to learn more about small business marketing methods on a small budget.

Define your target audience

You need to understand your target market to tailor your marketing efforts toward the people who are most likely to be interested in your products or services. Your target market should be as narrowly defined as is reasonable.

Some of the demographics and data points you can use to narrow your target market and reduce your online advertising expenditures include:

  • Age
  • Gender
  • Wealth
  • Location
  • Hobbies
  • Jobs
  • Other demographics

The more narrow your budget, the less cost involved.

Leverage social media

Young woman working on a laptop surrounded by social media icons including YouTube, Instagram, Facebook, and X

Most small businesses that are operating on a small marketing budget will focus on social media posts. You can get a lot of free marketing when you:

  • Choose the Right Platforms: Focus on the social media platforms where your target audience is most active.
  • Join Facebook Groups: There are groups for everything on Facebook. Join your local groups to network and attract customers.
  • Post Regularly: Regular and engaging content can help build a community around your brand.
  • Utilize Hashtags: They can expand the reach of your posts to a wider audience.
  • Engage with Your Audience: Respond to comments, answer questions, and foster a sense of community.

Optimize your website

Try using a free website builder to start. Ensure your site is user-friendly and responsive on mobile. Once you’ve set up your website, use SEO techniques to improve your site’s visibility on search engines.

As you grow, you’ll gain more functionality from a paid website.

Invest in content marketing

As we mentioned earlier, content marketing is one of the least used but most effective types of marketing small businesses can do. Businesses should create valuable, relevant, and informative content that resonates with their target audiences. Blog posts, videos, infographics, and e-books are all great options.

Be consistent with email marketing

Email marketing campaign concept showing a laptop with unopened email icons

Collect email addresses through your website and social media. Then send out regular newsletters with updates, promotions, and valuable content.

Collaborate with influencers or partners

Partnering with influencers in your niche can expose your business to a broader audience. You can also collaborate with complementary businesses for joint promotions or events.

Utilize free marketing tools

Free tools, like Google Analytics, Google Business Profile, and onsite social media analytics, help you monitor performance and make data-driven decisions. There are many other free apps to use as a small business, too.

Network in your industry

Marketing network event being hosted in an open concept space with a speaker standing up in front of the group and an UpFlip slide on the screen

Attend industry seminars, conferences, and other events to make connections and spread the word about your business. These are great places to meet potential customers and people who can refer you to customers.

Offer referral incentives

Encourage your existing customers to refer friends and family by offering discounts or special deals. It doesn’t have to be much—people will appreciate 5% to 10% discounts.

Leverage user-generated content

Encourage customers to share their experiences with your products or services on social media. You can feature their content on your platforms and share them with your followers on social.

Do your own graphic design

Use free or low-cost tools, like Canva, to create eye-catching visuals for your marketing materials. Canva makes it easy to create content and doesn’t require design experience.

Perform local SEO

Young woman working on a laptop to see how business is ranking in local SEO

Optimize your business for local searches so people in your area can easily find you. To do this, you need to:

  1. Make sure your name, phone number, and address are consistent across the internet.
  2. Sign up for Google Business Profile.
  3. Improve your online listings.
  4. Share updates, like new locations or hours, with Google.
  5. Request Google reviews.
  6. Optimize URLs, title tags, headers, meta descriptions, and content on your website.
  7. Add a Google map with your location in your site’s footer.
  8. Create localized content.
  9. Improve your site’s mobile friendliness.
  10. Participate in the community. When people see your company interacting with the local community, it builds trust, and search engines may take notice.

Run contests and giveaways

Engage your audience by offering prizes in exchange for social media engagement or email sign-ups. The point here is to get more followers and more emails to contact. You’ll want to:

  1. Establish your goals.
  2. Choose a contest to run.
  3. Build the contest.
  4. Promote the contest.
  5. Track the results.
  6. Follow up after the contest.
  7. Improve the next contest.

Check out Wishpond’s blog for a more extensive guide on hosting contests.

Measure and adjust

Keep track of what works and what doesn’t. Focus on the strategies that give you the best ROI. This will help you avoid falling into the category of small business owners unsatisfied with their marketing results.

These small business marketing statistics can help you create an informed marketing budget, especially when you remember that online marketing is steadily gaining traction over traditional marketing channels, like print and radio.

What is your experience with marketing budgets?

We’ve discussed the importance of creating a marketing budget, provided you with marketing budget allocation best practices, and shared tips on how to use marketing budget templates whether you have an established business or are just starting one.

Whether you have a marketing department or not, take the time to make a marketing budget. It will help increase sales and reduce wasted spending.

Based on years’ worth of UpFlip interviews, I can tell you that marketing automation software and content marketing have some of the best returns.

Have you ever created a marketing budget? What was the biggest pain point in creating it, and what new marketing strategy will you try next?

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