It's hard to make a budget for the first time but once you do it for the first time, it gets easier. Trust us on this.
As a general guideline, your marketing budget should be 1% to 10% of sales. Of course, when you're just starting out your marketing budget should be whatever you can afford. That said, as a new business, expect to spend closer to 10% than 1% on marketing. You may even want to spend more.
CREATING A MARKETING BUDGET
To start, make a list of all of your expenses and resources. For expenses, start with fixed costs. These are costs that don't vary depending on other factors. For example, you might have monthly marketing subscription services or content creators on a retainer.
Then, approximate the costs that fluctuate – your variable expenses. When it comes to marketing, many of your expenses will fall into this second category. If you're running an online ad campaign, for example, you will pay per the number of clicks on your ads which can be difficult to predict in the beginning.
Also make a list of all of the resources you need to secure in order to carry out your marketing plan. These may be tangible tools you need, such as printing of offline promotional materials or software packages for your online marketing, as well as intangible expenses such as outsourcing.
Decide how much should be allocated to each marketing channel or resource. The advantage of online advertising is that it can be less expensive, depending on where you go. These upfront charges might include website design and optimization, pay per click advertising, and advanced tracking software.
Offline, you may need to allocate funds for advertising, listings in classifieds, direct mail campaigns, and attending trade shows or other events.
TRACKING YOUR EXPENSES
The most important part of budgeting is tracking. There's a good chance that your first budget will be inaccurate, but if you keep track of expenses well you can correct for the next budget.
Tracking expenses shows you areas where you need to tighten up and be more efficient. You may find that you're spending a great deal on a particular marketing tactic that is not bringing you much in the way of results. For example, you may be funding a pricey direct mail campaign that's not achieving your marketing objective when it comes to gaining new customers. If that’s the case pay particularly close attention to where your customers are finding you. These are good areas in which to allocate more financial resources.
The marketing budget you come up with will be your minimum budget. It will be increased when you launch new products or expand your business. With your budget clearly laid out in your marketing plan, you'll have the ability to grow when the time comes.
FORECASTING FUTURE REVENUE AND EXPENSES
The budget section of your marketing plan also includes a forecast of future revenue and expenses; based on past financial records along with predictions of market trends and other things that could affect your budget -- refer to the threats section of your SWOT analysis from week two. (If you missed the marketing goals week of this course, here's a link to it!) Once you begin tracking expenses, you can make a more realistic forecast.
For your forecast, it's important to focus on expenses rather than revenue. It's good to overestimate expenses because it reduces the risk that you'll come up short. Double or even triple your projected expenses and you'll protect yourself in case they turn out to be higher. If nothing else, you’ll have some left over. Alternately, estimate revenue conservatively. Imagine that high expenses will stay high in the future.
Base your forecast on trends in the industry and have a backup plan in case your sales drop. For example, designate high cost marketing channels that can be put on hold until sales rise again, or find lower cost alternatives to get you through hard times.
ACTIVITY >>> Download and use this Tackling Your Marketing Plan: Marketing Budget Worksheet to establish a budget for expenses associated with each part of your marketing mix. Make sure your total expenses do not exceed your projected revenue!
CREATE YOUR ANNUAL MARKETING CALENDAR
All the hard work is now done and it’s time to start planning out the actual implementation of your marketing plan. Naturally, you’ll need to go into more details on action steps once this mini course is done, but for now you can lay out your high level plans for the year and how and when they’ll be implemented.
YOUR MARKETING INITIATIVES
Start by planning out your major initiatives for the year, based on what tactics you chose in your marketing mix, what your budget can afford, and which tactics are the most likely to help you achieve your goals. For example, an initiative could be to run a promotional webinar series in order to meet a goal of increasing leads by 50%.
Go back to your budget at this point and specify an amount that will be allocated to each initiative. That way, you can keep your costs under control and track your return on investment for each one as well. Be sure to adjust your budget numbers if you’ve decided you need more for one initiative vs. another.
Yearly and Monthly Planning
Determine when you will implement each initiative during the course of the year, both on a quarterly and monthly basis, so that you can take advantage of any seasonal trends – take care to ensure that you won’t be overtaxing your people and financial resources. Of course, you can always outsource tasks, but be sure that your own involvement isn’t stretched to breaking point.
Goals and Metrics
Set goals for each initiative and determine the metrics you’ll use to measure results. Look back at the section in this course on tracking results (also in the week two marketing goals week) to get ideas of what metrics you can track. An example goal for your webinar series might be to gather at least 200 new leads per webinar. The metrics you track might include webinar registrations, webinar attendance, and any downloads you send to your webinar participants.
Decide on tactics and activities you’ll use to implement each initiative. The tactics you included in your 4Ps work from week three will help here (click here to revisit the marketing mix week of this course). For instance, your webinar series could be free, delivered via Google Hangouts and YouTube, promoted via social media, email, press releases, joint venture relationships, etc.
Be sure to identify the resources you’ll need for each initiative. For example, a webinar series might require guest speakers, content creators, a new delivery platform, etc.
Finally, complete your action plan by breaking down each initiative even further. Include specific tasks, responsibilities and deadlines. To set deadlines, work backwards from the timing you specified in your yearly/monthly calendars. For example, the creation of each webinar’s content will require things like research, slide design, actual content etc. Some of that you may have to do yourself, but many things can be outsourced or delegated.
ACTIVITY >>> Download and use this Tackling Your Marketing Plan: Action Plans Worksheet to plan the quarterly and monthly actions you’ll take to achieve each of your three marketing goals for the year.
MARKETING BUDGET CONCLUSION
You've now come up with a viable marketing mix to help you create a big picture view of your marketing activities for the next year. You’ve drafted a budget and you’ve laid out some of the marketing initiatives you want to implement over the course of the year. Now, it's time to put everything together.
Take each of the activities we’ve covered in this mini course and turn them into a section of your overall marketing plan.
Writing Your Executive Summary
Once you've completed your marketing plan, it’s time to write your executive summary. This is a summary of your entire marketing plan. It spells out the basics and the sections of your plan at a high level. The executive summary should be short and concise without any of the minutiae. It should allow the reader to take in the entire plan at a glance.
Although the executive summary goes at the top, it should be the last thing you write. It's much easier to write a summary of what you've already written than what you're planning to write.
Refining Your Marketing Plan
Once you've written a draft of your marketing plan, get as many eyes on it as possible. Ask your employees and colleagues to read it and get their feedback. Ask them if they feel anything is missing or not clearly explained.
Even after the final draft is finished, you should review your marketing plan on a regular basis. Things will change and you'll need to update it.
That's it. You now have a marketing plan for 2016. Use the comments to give us a high-level overview of your plan. We'd love to help you celebrate your accomplishments!
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