Building a marketing budget, PART 2!

We're back with a new template you can put into action

DEAR STAGE 2: At the end of last year, you posted an article on establishing a budget for a founding marketer. It was super helpful as I settled into my new company. Now that I've been in my Head of Marketing role for a quarter, I'm looking for more practical advice. Can you point me to any templates or frameworks for setting and tracking a marketing budget for the rest of the year? ~READY TO BUDGET

DEAR READY TO BUDGET: Woohoo! It’s great to hear when a topic has landed and had an impact! 

We asked Stage 2 LP and marketing leader Aileen Allen to join us in December to share her thoughts on setting a budget for a founding marketer. A quick TL;DR in 3 steps to get everyone up to speed:

1. Context setting: Aileen recommended going on a learning journey with the CEO, founders, and current team before proposing a budget. Ask questions and gather historical data to lay a foundation for what comes next:

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? 

• 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?

2. Planning: Aileen suggested starting with a budget set for either quarterly or six-month periods instead of diving straight into an annual budget. This approach involves utilizing the gathered information to shape the budget accordingly. If you know the historical contribution and conversion rate by channel, you can back into the expected number of leads needed (and it’s ok to apply a best guess estimate when you are working with short term budgets — you will have data soon enough!). With this baseline in place, you can start mapping out new programs and building a business case to shift spend between categories. 

3. Experimentation: Aileen reminded us that early stage marketing is all about being scrappy, testing  constantly, and iterating 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. 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!

So now it’s time to actually propose a budget and (eventually) track actuals. While this could be a potentially daunting task, Aileen came through with a template to get you started! You can make a copy of the template here:

Here’s how it works: 

In rows 16-63, you are going to build a budget. Each section has ideas of the categories of spend to get you started, but you can add (or delete) as many new rows as you need. For example, maybe you plan to bring on a contractor to help with SEO for a quarter…add a row! You will enter your planned spend in the white columns month by month and then at the end of each month you will add your actual spend in the gray columns. NOTE: Some teams find it helpful to update the actuals more regularly bi-weekly or even weekly to see how you are trending on spend mid-month:

Once you have entered all of your planned spend, Aileen has it set up so you will see a summary by high-level category at the top (rows 5-14). And the Utilization Total will show you if you are trending above/below plan with your spend each month:

Remember, this is only half the equation. You are managing to a budget, but the output is what really matters! Take the time to reflect on your learnings each month and reallocate budget toward channels/programs that are working most effectively and can scale up with you. 

Until next week!