Budget for the founding marketer

A guide for determining how much and where to allocate resources

DEAR STAGE 2: My executive search firm places a lot of marketing leaders (Head of and VP) at early-stage B2B tech companies — mostly Series A. Sure, they've allocated budget to hire a strong marketer, but they haven't thought about the budget that marketer will need to do his/her job. Any guiding principles to help early-stage founders think through what a budget could/should look like for a founding marketing leader? ~RESOURCEFUL RECRUITER

DEAR RESOURCEFUL RECRUITER: Timely question! This week we hosted a Portfolio Roundtable with Stage 2 LP, Aileen Allen. Not only has Aileen led marketing teams at Atlassian, Gremlin and Vanta, but she’s spent the last few years advising early-stage startups as a fractional marketing leader. And… this exact question came up as we talked through prepping for 2024! 

Ultimately, we believe the new marketer coming onboard should have a say in setting the budget. They should also contribute to the planning process, instead being handed a budget and told “go.” With that in mind, this advice is written to the founding marketer, but certainly applies to the founder/CEO, as well. 

Context Setting

You’re joining a new company and you want to move fast, but you need to start with some context setting. Go on a learning journey with the CEO, founders, and current team before proposing a budget.

Start with getting a lay of the land:

• What are the goals of the business? 

• What are you trying to achieve this year/next year/in the period? 

• Has a growth target already been set? 

• What assumptions were made in that plan? 

• And what contribution is expected from marketing?

Next, understand historical performance. 

• How much revenue has marketing contributed in the past year? 

• What channels drove this contribution?

• What are current conversion rates by channel?

• What was spent to drive these outcomes?

NOTE: If you don’t have a ton of data to work with (yet), Aileen suggests, “Tracking what you can, but don't get fixated on analysis paralysis  — directional indications are good for now. Marketing attribution is hard, and we're not trying to solve that here.”

Planning 

Now you can start planning! Most companies operate on an annual plan, but we’ve found that setting an annual marketing budget at this stage of a company can be both challenging and detrimental to progress — things change quickly in startup land! Instead, we recommend mapping out a year in broad strokes (for example, if there is an industry event that has been effective in the past, assume you’ll attend again this year) and refining a budget on quarterly or 6 month periods.

Work backwards from the information you gathered above. Let’s say the goal is to add $2M in ARR and 70% of it is expected to come from marketing. If you know the historical contribution and conversion rate by channel, you can back into the expected number of leads needed. With this baseline in place, you can start mapping out new programs and build a business case to shift spend between categories. 

If you don't yet know, apply some best guess estimates (looking at other channel performance, or standard benchmark data) as a starting point.

Last but not least, consider what percentage of your budget should be allocated to events, performance/digital acquisition, software, contractors, etc. These numbers will vary depending on which program investments take priority.

Experimentation

You’re joining an early stage company and as a founding marketer you’re not inheriting a baked marketing playbook that has worked for years. You have to be scrappy, test constantly, and iterate quickly. 

With this in mind, we recommend setting aside an experimentation budget — this will range from 15-20% of the total spend, but potentially more depending on where you are in your journey. This budget can then be allocated to experiments over the course of the quarter.

With each experiment, you want to have a strong hypothesis on the potential return. This is critical to begin justifying your spend — define the potential impact and set up the right monitoring to track progress so you can decide whether to ratchet spend up over time. 

Some final words of wisdom…there is no quick hit “your marketing budget should be X% of ARR.” BUT, if you find a channel that’s working, you can scale it up in line with unit economics. Track CAC, track payback, and give yourself room to experiment!

Until next week!