Many people look at a marketing budget as an expense, but you’re actually making an investment when you use marketing methods properly.
We ask every business owner we talk to about their best marketing strategies. Most of them agree that you need a good mix of word of mouth, traditional advertising, social media marketing, and content marketing.
We’ll define a marketing budget, explain how to create a marketing budget, and discuss the importance of tracking your marketing expenses. Then we’ll provide you with a free marketing budget template.
Along the way, we’ll highlight tips and common marketing budget mistakes to help you get the most from your marketing initiatives.
Keep reading or click on any of the links below to jump to the section that interests you:
What is a marketing budget?
A marketing budget outlines the costs a company spends on advertising its products or services. Your marketing budget should cover a specific duration like a quarter or a year. Your budget may also have defined periods for specific marketing campaigns.
Your marketing budget allocation will estimate costs for various line items, including:
- Marketing team
- Paid advertisements
- Marketing software
- Outsourced marketing services
Expect your company’s marketing spend to be approximately equal in all four categories.
How to Create a Marketing Budget
Creating a marketing budget requires careful planning and analysis. You’ll want to follow this process to make sure you’re allocating resources the right way:
- Evaluate your current marketing efforts.
- Research marketing strategy benchmarks
- Define your marketing goals.
- Plan marketing campaigns.
- Choose marketing channels.
- Estimate marketing costs
- Create your marketing budget.
Step #1. Evaluate Your Current Marketing Efforts
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, click-through rate, and conversion rate compare to industry averages?
This data will help you make more informed decisions for the upcoming year’s budget.
Ultimately, 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.
Step #2. Research Marketing Strategy Benchmarks
Industry benchmarks help you identify where you are underperforming or outperforming against competitors.
Wordstream is a good source for cost per click, cost per lead, click-through rate, and conversion rate metrics if you don’t have information from previous marketing campaigns. It will provide you with a good benchmark to compare your performance to other businesses.
Step #3. Define Your Marketing Goals
You should define your marketing goals based on business goals. Usually, $250K in revenue is enough to provide a small business owner with a nice living, assuming they’re doing most of the labor.
Joshua Brown, the founder of Brown’s Pressure Washing, told us:
Once you’ve established how many clients you need, you can start using the previous year’s data to establish what it will take to get to those numbers.
Step #4. Plan Marketing Campaigns
Next, you’ll want to plan your campaigns, which may be focused on building awareness, interest, desire, and action (AIDA framework). Let’s take a quick look at each type of campaign:
- Awareness: The goal of these campaigns is to get eyes on your brand or products so that people are aware of your company. They’re usually measured in cost per 1000 impressions (CPM).
- Interest: These campaigns help people learn about solutions to their problems. During this stage, you focus more on educating.
- Desire: During this stage, a customer is considering a specific solution and might request a consultation. Your goal is to understand what the customer wants and help them see how you can help. You can use remarketing campaigns to target customers who have researched your product but not requested a consultation.
- Action: These campaigns are focused on a specific action like buying a product. You might offer discounts or a perk to help close the deal.
Jyll Saskin is an advertising expert who consults with businesses about their marketing campaigns. She explained:
Learn her strategies in our Google Ads for Beginners course.
Step #5. Choose Marketing Channels
The next step is to choose which marketing channels you’ll use to reach your target customers. Most businesses will use a combination of traditional and digital marketing channels. Learn more about each below.
Traditional Marketing Channels
Traditional marketing channels are things like business cards, flyers, TV commercials, radio advertisements, and billboards. These work phenomenally well for service businesses.
Multiple business owners have mentioned what they call three-rounds or five-rounds.
Digital Marketing Channels
Digital marketing includes social media, email marketing, and search engine optimization. When you create content that people search for, it’s a form of inbound marketing, while ads are part of outbound marketing.
Each platform has a different target market, so you’ll want to establish which social media sites target your demographic. It’s important to be aware that governments are cracking down on Google’s monopoly status and TikTok for national security reasons. Both of these could shake up marketing strategies in 2025 and beyond.
Step #6. Estimate Marketing Costs
Once you’ve established which marketing channels to use, you’ll want to estimate how much you’ll spend on marketing for each. Use your previous year’s data or industry benchmarks to estimate how much it will cost to run each of the campaigns.
Don’t forget to include costs like:
- Staffing, office overhead, and supplies
- Software and a website
- Outsourced marketing
Step #7. Create Your Marketing Budget
At this point, you should be ready to create a marketing budget to cover your marketing strategy. Brandon Vaughn warned us:
Your marketing budget 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:
Check out our interview with him below:
Always Track Your Marketing
You’ll want to use Google Search Console, Google Analytics, and customer relationship management software. These resources will help you monitor whether different forms of lead generation are cost effective. It’s best to track metrics like:
- Revenue
- Profits
- Items sold
- Average customer spend
- Impressions
- Clicks
- Click-through rate
- Leads
- Number of customers
- Cost of customer acquisition
- Average ticket price
Download Our Free Marketing Budget Template
We created a marketing budget template we think you’ll love. Just add your desired revenue, select the industry that fits you best, and specify how much of a contingency you want for your marketing strategy.
We’ll suggest a budget to help you get started. Then you can input individual marketing initiatives to create a budget by line item.
We even have spots for you to update it based on your actual spending. The final two tabs provide you a budget plan summary graph and a graph comparing your budget and marketing spend.
Download the marketing budget template for free.
Marketing Budget Example
A marketing budget will normally include the following main expenses.
Advertising
Your budget for paid advertising will vary dramatically based on your goals and the size of your business. Some companies dedicate 50% of their marketing costs to paid advertising, while others don’t use it at all.
Staffing, Office Overhead, and Supplies
The amount you spend on employees, supplies, and the space they work in should be roughly equal to the cost of marketing software. If your marketing budget doesn’t include much software, expect these costs and the advertising budget to be approximately equal.
Software
Most businesses need marketing software to succeed. This software will include tools for:
- Marketing automation
- Social media management
- Customer relationship management
On average, companies spend 25.5% of their marketing budgets 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.
We suggest starting off with HubSpot because they offer free basic features for your marketing needs. They can also grow with you to support some really cool marketing strategies.
Outsourced Marketing
Many small businesses can avoid excess and unnecessary costs by paying external companies to help with their digital marketing strategy. Jyll Saskins warned us:
UpFlip Marketing Resources
We’ve created a number of paid and free marketing resources to help you achieve your goals. You might want to check out some of this additional content:
- Service business marketing: Learn more about winning service business marketing strategies.
- Marketing statistics: We share marketing data from research and business owners surveys.
- Affiliate marketing: Earn revenue from referring customers to other businesses with affiliate marketing.
Marketing Budget FAQ
What is the average marketing budget for a small business?
We asked how much business owners spend on marketing strategies. We found that approximately two thirds of respondents spend less than $1,000 per year, and 19% spend between $1K and $10K. Meanwhile, 15% spend over $10K
Meanwhile, the Small Business Administration suggests allocating 8% of company revenue to your marketing budget. That means two thirds of businesses are only marketing enough to support $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 it easier to track performance against goals and industry benchmarks when comparing marketing channels.
The budgets for each channel can also be set in most advertisers’ software to keep your marketing costs from getting out of control. For instance, you can limit wasted expenses on Google Ads by narrowing your spending to only high-performing keywords.
You can also use high-performing keywords to guide other marketing team efforts. The key is to focus your social media ads, video marketing, and search engine optimization on subjects that actually contribute to your company’s success.
What is your experience with marketing budgets?
We’ve discussed the importance of creating a marketing budget and reviewed marketing budget allocation best practices. We’ve also shared tips on how to use marketing budget templates.
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?
