Preparing an Accurate Marketing Budget

Although every department is expected to prepare an annual budget, most do not understand the intrinsic value of effectively leveraging this management process. Take a step back from the budget and evaluate what your department will be expected to deliver this year. Next, identify which budget model will provide the most value to your department. Use Demand Metric's downloadable Department Budget Template to help you prepare your annual budget.

Budgeting Models:

• Zero-based Budgeting - this model assumes that you are building your budget from scratch this year. Working backwards from your department's strategic plan, estimate costs for each planned program, determine staffing & resource requirements, and project expenses for any other expenditures.
• Priority-based Budgeting - some organizations do not have formalized budgeting procedures in place for the Marketing department. Instead, funds are allocated on an as-needed basis, depending on the priorities of the organization at that time. Use Demand Metric's Priority Index Tool to help you justify spending in your department based on Feasibility, Fit, & Risk.
• % Change from Last Year - perhaps the most common model for budgeting, the % change model assumes you will spend roughly the same amount of money on Marketing activities, plus or minus a few percentage points. The standard in the industry is to allocate 3-10% of gross revenue to the Marketing department. Start-ups usually require a higher percentage.

Action Plan:

1. Select a Budget Model - before you commence your budgeting process, work with Finance to determine which model will best suit your department. If you have been using a % Change model for the past few years, but find that your projected expenses are nowhere close to actual, consider moving to a zero-based budgeting model for this year.
2. Review your Strategic Plan - analyze the proposed projects that you have identified in your strategic plan. Break down the costs and required resources, in terms of staffing, for each program. Decide whether your current headcount will be adequate, or if you will need to hire more staff and/or use contactors.
3. Set a % Revenue Benchmark - discuss the budgeting process with senior management to determine how they are planning to allocate funds to Marketing. If they are using a simple heuristic, such as % Revenue, discover what percentage they are using and why. If you are expected to increase demand and sales this year, you may need to increase the proportion accordingly.
4. Develop your Budget - once you have outlined what you will be doing next year, or have set amount of money to spend, work to distribute your funds across each of the following expense categories: department, branding, promotion, public relations, website, office supplies, and software. Use Demand Metric's downloadable Department Budget Template as a guide.

1. Submit your Budget - if you have a Sales & Marketing Steering Committee, hold a meeting to discuss your proposed allocation. Once you have agreement on the budget, submit to senior management for final approval.

Bottom-Line:

Budgeting doesn't have to be an extremely difficult or complex task. Leverage solid strategic planning processes to determine what you will be doing for the next 12-18 months, and get an accurate view of the resources you will require.