It’s that time of year again – no, not company parties, visits to grandma’s house or holiday movies. It’s budget-setting time, the time of year when someone asks, "How much money are you going to need next year?"
Unfortunately, not enough company leaders know how to set their marketing budgets at this time of year, so when they get into the middle of next year, they’re left with no budget or not enough budget to deliver on the company’s marketing expectations.
Let’s work a little bit harder this year to make sure you set the right budget now, so that in the middle of 2022, someone is asking you how much MORE money you need because you’re doing such a great job generating leads, creating sales opportunities and driving new revenue.Here are some budget-setting methodologies to consider.
This is what most companies do. They look at what they spent this year as a measure for what they might spend next year. However, there’s rarely a conversation around whether this year’s budget produced the desired results.
If that conversation were to take place, most of the time the answer would be no. If you didn’t hit your goals, you need to talk about an increased budget in the upcoming year.
The next method for setting the marketing budget is to start looking at the upcoming year and add up everything you plan on doing in the new year.
Going to events? Estimate the cost. Running paid ads? Estimate the cost. Hiring new people? Estimate the cost. Buying any technology? Estimate the cost.
Add up all the expected costs and you have a new budget for 2022.
Again, there is no connection to any expected results, so it’s hard to know if this is the right amount of money for the budget.
Because there’s no connection to results, it’s easy for the CEO to then say the marketing budget is too high and to ask that it arbitrarily get cut, leading to an underfunded program in 2022.
There’s another methodology that is wildly arbitrary and generally not very useful, but since it’s out there, we should at least discuss it briefly.
Some people use a percent of revenue as a measure of what their marketing budget should be. Some say 1% of revenue is reasonable. If you’re a growing company, some say between 2% and 5% of revenue is reasonable.
I’ve found this approach to be highly subjective and not too effective. For a $10 million company, 1% of revenue would give you a $100,000 marketing budget.
Is that enough? Is that too much? Who knows? It’s so random that I don’t think this is a reasonable way to set your budget in 2022.
Here’s a much better approach and one that I advocate every company considers using going into 2022.
Start with your goals. What do you want to accomplish in 2022? Is it lead generation? Is it creating sales opportunities? Are you trying to create demand or build your brand?
If your goals are quantitative (and they should be), what are they exactly? How many leads do you need in 2022? How many sales opportunities? How many new customers? How much revenue is required to hit your goals? What percent of that revenue will come from new customers? What percent will come from current customers?
Now use these numbers to back into your plan.
Whether you need 100 new customers at an average revenue of $100,000 for the year, or $10 million and an additional $2 million from 40 current customers (the current customers only spend $50,000 a year on top of what they’re already spending), you need campaigns to generate this amount of activity.
To get the 100 new customers, you probably need at least 200 sales opportunities as well as roughly 400 sales-qualified leads (SQLs) and 4,000 marketing-qualified leads (MQLs). I’m just applying some rough estimates here.
Over the course of the year, 4,000 MQLs equals around 340 a month, which means roughly 34,000 visits to your website a month.
If these are your goals, compare them to your current performance and then map out the programs, campaigns and tactics required to make up the gaps between today’s performance and your desired performance.
If you need a lot more visitors, you’ll need SEO work, paid search and paid social campaigns. You’ll need content marketing, website upgrades, pillar pages and email campaigns to bring contacts back to the site.
To drive customer revenue, you’ll need customer campaigns, and you’ll need customer advocacy to provide social proof for your prospecting efforts.
Add up everything you’ll need, put an investment amount next to it and then include any internal hires or outside agency support.
For example, if you have paid social campaigns in mind but you’ve never run any paid social campaigns, it might make sense to bring in an agency with expertise. You’ll get going faster and produce results earlier than trying to figure it out on your own.
By adding up all the planned investments, you’ll have a budget number for 2022 that is perfectly aligned with your desired goals and key metrics.
Of course, there should be some room for mistakes. Everyone makes mistakes, and not all your investments in campaigns will perform as desired. Add in 20% more for pivots, adjustments and experiments.
Congratulations, and welcome to your 2022 marketing budget number!
But budgets are working documents. Often, items are missed or not properly accounted for. Here are some of the more commonly missed items when people plan their marketing budgets.
Now that you have a number, let’s make sure it’s all-inclusive. The last thing I want you to do is have to go back and ask for more money because you forgot to include a few more obscure budget line items.
Most people are pretty good at handling budgets for events, paid search and paid social. Even more comprehensive campaigns, like account-based marketing (ABM) and content marketing creation, are not too challenging to budget for.
But every now and then there are some costs that might be more challenging.
How many videos do you need? How much are they going to cost? Who’s going to do the video capture?
Today, it’s not too hard to get a video with an iPhone, so let’s not worry too much about the video capture side of the project. But video editing can be more challenging.
Video post-production includes adding music, editing out mistakes, piecing together the raw footage into a compelling story and getting the final files ready to use on your website and in social campaigns.
Those costs should come in around $1,000 per video, assuming the videos are under three minutes and relatively straightforward. If you want to do a 20-minute mini-documentary or a 15-minute client testimonial reel, the costs might be more. But this should be a decent guideline across the board.
Plan on doing five to six of these videos during the year, so budget around $6,000 for production costs.
Today, almost everyone has a podcast, and the podcast post-production work can be time-intensive. If you’re doing a weekly podcast, post-production might take you half a day or more.
Someone who specializes in podcast post-production could be doing this work much more efficiently than you. They can get it done in a couple of hours. This typically includes adding music, intros and outros as well as getting the files ready for YouTube and podcast-hosting platforms like iTunes or Stitcher.
They should also be cutting the podcast content up into snippets that you can use to promote the podcast on social media.
All-in, podcast post-production should run you around $300 to $350 per episode. If you’re planning on doing a weekly episode, that’s about $1,200 a month, and this is a highly efficient use of funds when you consider what you get from a one-hour podcast episode when compared to an e-book or whitepaper.
Podcast post-production support might be tricky to find since it’s a relatively new practice. If you’re looking for a podcast production company, you should consider our partner, 34 Motion Media.
You might have the high levels covered here, especially if you’re using HubSpot and you have a Professional-level subscription to the Marketing Hub, Sales Hub and Service Hub. But you might want to consider whether you’re planning on moving your website to the HubSpot CMS, which would require additional investment.
If you need the Operations Hub to help with data, integrations and complex workflows, you may need to put some budget aside for that as well.
You might need some tools in addition to HubSpot. If you’re doing a lot of videos, you may need Vidyard or Wistia to support those video projects.
If you’re using different systems, like HubSpot for marketing and Salesforce for CRM, you might need a data visualization tool like Databox, which could be an additional monthly subscription.
If you need advanced search engine optimization (SEO) support, Semrush might help with keyword selection and organic search marketing performance. I highly recommend this in addition to HubSpot.
Having a technology budget that is well thought out prevents the need for mid-year discussions around technology. It’s better to go into the year with a plan and then pivot or adjust accordingly.
You might need some additional lists besides what you’ve already curated inside your database. It might not be obvious to you at budget planning time that your lists are outdated, poor quality and not producing the desired results.
Midway through the year, you decide to purchase some lists or use a list database service like ZoomInfo or Seamless.AI. Consider putting something in the budget now to support your list requirements later.
To be conservative, $10,000 to $20,000 over the course of the year for lists, access to lists or list subscriptions should cover you. The more aggressive your goals and the more campaigns you have planned, the more you should budget.
Also, the smaller your current database, the more you should budget. If you have a database with hundreds of thousands of names, you might need fewer new names. If you have a database with only 900 names, you might need more help and a bigger budget.
Data Cleansing Services
Finally, this item pertains to companies with bigger prospect databases. These typically degrade around 10% a month, meaning one out of 10 records will become outdated every single month. It could be an address change or a title change. It might involve someone moving jobs or new people getting hired. The bottom line is your data gets old.
In 2022, consider some budget for more proactively keeping your data clean. Data cleaning services are available to check all the records in your database, add data where it’s missing and fix data that is inaccurate.
For a database of 10,000 records, you should budget between $5,000 and $10,000 to have it cleaned as described above.
Now that you have a solid budget based on goals and you’ve considered some of those often-overlooked items, you’re ready to go to work with the CFO to lock it down and get it finalized.
As long as you have the connection to goals, expectations and business outcomes, you’ll be good to go for 2022.