Planning a marketing budget for founders can be a daunting task. Usually it starts with just figuring out where to begin. We’ve broken down the important considerations to make it easy for startups like yours.
WHERE TO START
When thinking about your marketing budget, you will feel overwhelmed with all the considerations, not knowing what things cost or even how much you should be spending. But before you even get to that point, there are four important questions every founder should ask themselves.
1. What is your marketing goal?
Do you have a marketing goal? At fivefoottwo, we don’t do anything without a goal. So before you start to think about what money you are spending, think about what you want to accomplish. And be specific - use SMART goals.
We have a funnel exercise that we recommend using when you are initially thinking about how much you need to spend against the goals you have. The funnel varies depending on your goals but also your type of business. Here’s an example of a B2B Startup funnel, making an assumption on some industry conversion rates.
If your revenue goal is $1M and you need to get 100 customers to meet that goal, then you want to think about a marketing budget that allows you to reach 12,000 people to start. When you build out your marketing plan, you will identify where and how to reach those customers and in turn have a better idea of how much to spend.
QUICK VIEW: Here’s an example of how your goals affect your budget:
If your marketing goal is brand awareness, your budget needs to focus on PR, partnerships
If your marketing goal is drive new sales/customers, you should have already accomplished some level of marketing awareness or require both tactics for awareness as well as growth
2. Are you generating revenue? Have you raised capital?
Next, let’s talk about how much money you have. You need to spend money to make money - we get it. But if you have no money to spend, well, then you should not be spending money. We see many founders reach into their own pockets to pay for marketing and that can be risky for two reasons; one, you may not get that money back and two, you are likely looking at how much you can spend on a short term basis which does not work for marketing.
We recommend thinking about a budget that spans 6-12 months for marketing. It’s going to take that much time to reach your goals, so you should have the budget to pay for that over time. If you are not generating revenue to support those efforts, you might consider holding on spend until you can do so.
We recommend starting with 10-20% of your total revenue ONLY IF your product is ready - more to come on that point.
However, if you have no money, you have no money. Bootstrapping is not fun, but this is where we suggest joining an accelerator or doing some fundraising.
3. Is your product ready to go to market?
This might be the most important question. Yes, marketers and the product teams will always be fighting over budget - but the reality is that at this stage of your business, you should be investing in the product. It’s incredibly difficult to market a product that does not work and worse - you will eventually lose customers from an incomplete user experience.
First figure out what money is needed to make your product awesome. When you can budget properly for that, then extract what is left to build out your marketing budget.
4. What is driving your decision to spend money on marketing?
And our final question is a bit personal. Yes - you have a great idea, product or service. When it comes to spending money, make sure you are not making decisions based on your ego or what you think you need. Listen to your advisors, and keep your marketing dollars focused in the right places - when you need it. We’ve seen founders lose focus and get stuck on spending an entire marketing budget of $50k designing a new brand or website when their current brand or site does the job just fine for the time being. That money would have been better spent growing an audience while finalizing the product.
BUILDING YOUR BUDGET
Now that you know if and when you should be spending money on marketing, let’s talk about what that budget will look like and what you must keep in mind.
This is a fairly complex example of a first year budget. There are three key components:
It’s a full-year budget. As we noted earlier, your marketing budget needs to extend over time to be effective. Figure out what this looks like for you, but in this example, we make sure we have enough budget to build our brand and assets before going to market.
It is sectioned out by areas of spend. This will help you adjust based on your total monthly budget, allowing you to think about each area holistically.
It feeds into an estimated cost per lead (CPL) or customer acquisition cost (CAC) - see next example.
Using the funnel exercise mentioned earlier, we can take our goal and see how our budget is affected by that goal. We recommend in your first year to consider your CPL/CAC when you are effectively in-market, not while you are building assets to ensure you are looking at a direct effect of the marketing spend. You may also want to consider a 50% view if you have a strong sales organization also generating leads.
Get the sample budget HERE.
TIPS & TRICKS
TIP 1: MANAGE YOUR MARKETING ROI
Simply creating an ROI for the spend vs. sales is not going to tell you much about the success of your marketing at this stage. If no one knows who you are, then why are they just up and buying your product? You have work to do, so think about measuring the effort of your marketing foundation. Listen to the Wondery Secret Sauce podcast!
Consider creating success metrics for each stage of the marketing funnel.
TIP 2: MASTER YOUR TACTICS
You need to know what stage of the marketing funnel you are in so that you are focused on the tactics that drive towards those goals. But you do not need to do ALL of them. Prioritize and be selective then master it.
Do you already know what channels work for you? Did you know that if you try them all at once you may never know (this goes slightly against the reality of a media mix, but you have to start somewhere).
Some examples of how you might do this:
Brand building - this requires a lot of a founders time. Do you have time for this? Can you work with what you have for now? Can you do a modified version of your brand or website that is enough to communicate who you are and focus more on building your messaging?
PR - consider what you really have to say and take it to small markets and test it out before spending a ton of money on a national plan
Social - you don’t need to be in every channel when you start. Pick 1-2 and master them. Find what works and then duplicate
TIP 3: DON’T BUILD A BAD BUDGET
Does not allow you to look at categories for flexibility on how you will spend
Does not spread across time to give you the best opportunity of how to spend your money
Has over or under-inflated ideas of costs
AND REMEMBER TO CHECK IN MONTHLY!