Are you struggling to put together a proper marketing budget, or not sure where to start and how to think about budgeting for marketing so you can hit your growth goals?
Then this video is for you.
If you’re watching this video, you probably have the following challenges:
- You’re spending on marketing, but you’re not sure if what you’re paying is worthwhile or even within market norms.
- You’re not hitting your goals through marketing, and you’re trying to figure out what you need to change up.
- You’re not sure how to budget for digital marketing or how to carve off that budget.
The opportunity ahead of you after watching this video is big.
- You’re going to learn how setting your business goals is really what determines your marketing budget, and how to track marketing against those goals to see if you’re achieving what you need.
- You’ll learn my framework, as learned from a book, about carving off budget to use either as test for a new channel or ongoing in keeping with profit goals.
- You’re going to understand typical agency pricing models and what to expect to pay for different types of marketing.
So today let’s talk about the five steps you need to follow to properly budget for digital marketing.
- First, you need to understand your business metrics around acquisition and where your business and traffic currently stand. You should understand your cost of acquisition, your conversion rates, and how much each incremental customer is worth to your business. Without these numbers, you’ll never be able to set reasonable goals nor will you be able to determine, usually alongside a marketing partner, the budget to begin with to learn before you scale up.
- Second, you need to know your profit margin and within what margin you are comfortable operating. I learned a ton this year about budgeting and profitability from the book Simple Numbers, Straight Talk, Big Profits from Greg Crabtree. In that book he talks about keeping a certain number of months of cash in your business account, and then operating monthly within 10-20% profitability. Basically he says that when you get closer to 20%, you can start looking at investing some of those profits back into growth but not to the point of going below 10% profitable. If you have extra cash, then you can spend that but should still keep an eye on that month to month profitability and be ready to cut out spend that isn’t profitable.
- Third, you need to understand benchmark metrics for various channels and what your competitors are likely spending. Combining this and your profit margin with your current conversion metrics will help you begin to benchmark how much you should spend to begin with to see if a marketing channel is viable for you. By tracking your metrics weekly and monthly, you’ll learn pretty quickly if a channel is going to work for you or not.
- Now, either start running these channels yourself or find a marketing partner to help you with it. If you’re just getting started with a channel then find a provider who focuses on taking companies from 0 to 1. If you’re already doing the channel and have some preliminary numbers, then you probably have an idea if the channel will work for you and you need someone to take you to the next level. In this scenario you should note that scaling can be hard and at some point becomes unprofitable. I’d also prefer to spend more upfront to learn faster than to take longer to learn if a channel works.
- Fifth, if you hire a marketing firm then you need to take their fees into account when building your marketing budget. Agencies charge on average $140 per hour, while freelancers can be cheaper and solo consultants are usually more expensive. For SEO pricing is usually a combination of hours plus cost to produce things like content, and for PPC there is usually a base management fee that turns into a percentage of spend over a certain amount. If it’s going to take you $10k in ad spend to hit your goals, you need to be comfortable spending $12,000 per month to account for agency fees.
John is the founder and CEO of Credo. He’s a veteran digital marketing leader and SEO expert with experience at two digital agencies and then in-house with Zillow leading marketing on two of their nationwide rentals brands.
He’s run Credo for 8.5 years and been self-employed for six years.
In his free time he spends a lot of time in the mountains with his wife, daughter, and their dog. His favorite pastimes are skiing, mountain biking, hiking, whiskey, and travel.
Ask him about the two years he spent living in a hippie commune in the Swiss Alps.