Developing a marketing budget is no easy task, especially if you’ve never invested in marketing before. In this episode, Tami and Joe talk about what factors you need to consider to develop a successful marketing budget for your business.
Episode 4 Transcript:
Tami: Welcome to High Energy Marketing, a podcast with us, the digital marketing agency Ajax Union, where we interview our CEO Joe Apfelbaum on key marketing topics and we share everything you need to know to properly grow your business online.
This is a Q&A podcast where I will ask Joe questions about different topics and trends in marketing. And based on his book, High Energy Marketing, he will give us his expert answers, you can get this book at ajaxunion.com/book to follow along with us.
This is the fourth official episode of our podcast High Energy Marketing. And today we are going to discuss how to develop a marketing budget for your business. First, a little housekeeping if you are on Apple podcasts, please give us a five-star rating and leave us a review, that would really help us out. And now let’s jump into our inspiration of the day.
Joe, do you want to hit us with a quick inspiration minute before we get started?
Joe: I would love to. I would love to. A lot of people, they look at other people for success. But success is personal. I want you to realize that where you are right now is exactly where you need to be in order for you to take your life to the next level.
So stop comparing your level of success to everybody else. When we think of our goals, in terms of our own success, instead of the success for other people, then we can become fulfilled, then we could start living the life we were meant to live instead of living that recipe for disaster because your purpose is different than everybody else’s purpose.
I want you to identify what success means to you in your role in every aspect of your life. And then go live that and stop worrying about what other people think because other people’s opinions are none of your business and success is personal.
Tami: That’s amazing. Thank you so much.
We have a couple of questions for you, Joe. So the first one is, I have never had a marketing budget. Where do I start? So if someone is thinking that right now, they’ve never had a marketing budget—Where should they start?
Joe: When I ask marketing directors, business owners, and just in general, people, I say, “Hey, what’s your marketing budget?” They say, “why don’t you tell me what it costs? I don’t have a marketing budget. I don’t even know what I should spend”.
Or “I can just find my marketing budget once I know what the issue is”. And what I tell people is marketing budget is essentially just the resources. What are the resources that you have both internally and externally?
What is the budget that you have internally and externally? So when you’re thinking about your marketing budget, I first want you to take a step back and ask yourself before I go, and I’ve tried to find what resources I have and how much cash I have and what I want to invest, where do I want to take my business?
I want you to think of a marketing budget as something that will support you to get your business to the next level. So if your business is doing a million in revenue, you want to get to 2 million, then you need the appropriate resources, the appropriate budget in order for you to get from a million to 2 million in revenue.
So don’t base your marketing budget off a random idea or something that you want to try. But instead, set it up based on your ROI. What type of return do you want to get in your investment?
And if you want to get to, let’s say 100 million in revenue, you may want to invest a percentage of that revenue in order for you to attempt to get there. It also is based on your margins.
If your gross margin costs you 50% to buy the product that you’re going to sell, you can have your marketing take up more than whatever profit you’re going to be making. So you really want to think about limiting your budget to fit within the profitability of where your business needs to be.
And there are many elements to a marketing budget. So if you’ve never had a marketing budget, we’re going to discuss some of those elements. But first, I want you to think about how much money, how many resources, how many things do I have that I can kind of surround myself with and put together so that I can leverage that to help me get to my goal.
Most people don’t even have their business goals and even know how much money they want to make. So I want you to think about your marketing budget. To be more effective, you need to think of it as investing in your business.
So when you’re going to invest in real estate, you first want to know what your cap rate is. You first want to know what your expenses are going to be. There are no expenses in business, only investments.
It’s a mindset shift that you would go from how you can see saving money to how you can make money and realize that marketing is about testing. So if you’ve never had a marketing budget before, set a marketing test budget, and then you can say, if I get a result from this test, then I’m going to keep investing in this level.
So for example, if you’re going to spend money on let’s say, LinkedIn ads, the recommended budget for a LinkedIn ad campaign to determine whether it’s going to work or not, is $5,000.
So I would invest $5,000, on LinkedIn over the course of, say, a month, and then at the end of the month, I’ll say, Should I double down and invest 10,000 The following month?
Or should I minimize what I’m spending and spend less because I didn’t get a good return on ad spend? So I want you to think about it from that perspective, a test marketing budget for a period of time, I recommend thinking of tests in terms of like 90 days, in terms of a quarter.
So if you’ve never set a marketing budget, say okay, in the next 90 days, how much would I like to invest in order for me to get a certain result? And if you get the result, great, keep investing? And if not try to learn from what you invested? Because that was an investment.
Tami: Okay, that’s amazing. So how do I know what I’m spending my money on? After all of that, right? We’re we have you kind of told us how to start a marketing budget.
But do I need to come up with a marketing plan before I create a marketing budget? And then once you start spending? How do you know what, where that money’s going?
Joe: So there are five elements where your money is going to go when it comes to marketing. But think about it like this: let’s say you have a business that generates 10 million in annual sales and you want to grow by another 2 million—what percentage of your growth would you be willing to invest in a test? Because we said marketing is about testing.
So you might say, “Well, I’m willing to invest 20%.” Or if 20% of the growth would be $400,000, I would suggest first investing in your strategy, which is what you said, ‘Do I need a marketing plan?”
Yes, you need to invest in strategy. And then you also need to invest in creating assets to support that strategy. So what is an asset? An asset could be a landing page, an asset could be an email automation campaign, an asset could be a lead magnet, a brochure, a download, case studies, testimonials, something that you need in order to create social proof, or to create a funnel.
So the first step is you need to hire somebody, or a team to create a strategy for you. And then you need to create assets that will help that strategy be successful. Those are the two first elements. And those are two long-term investments that will help you get a better ROI and everything that you’re doing.
Most people say, You know what, let me just do some SEO, and then they go spend money on SEO, but they’re not doing it on strategy. So even if they’re sending traffic to their website, and they’re investing all this money, there’s no way for them to know if they’re going to get an ROI.
So I want you to consider that there are five elements that you’re going to be spending money on: strategy, assets, advertising, execution, and technology. Those are the five areas that you’re going to think about. So write this down. How much am I willing to invest in strategy?
How much am I willing to invest in building out assets? How much am I willing to invest in advertising? How much am I willing to invest in execution? How much am I willing to invest in technology, and often companies that I speak to that are doing several million in revenue, they already have invested in these five elements.
And if you’re investing or spending money on those five elements right now, see which lever do you need to push. Sometimes you gotta push the advertising lever. And if your total budget is, let’s say, $25,000 a month?
Well, now you need to spend another $10,000 on advertising to really move the needle because you put together a really good funnel, and you just got to fill the funnel right now with the right people. Maybe right now you have to push the technology lever, maybe you’re getting enough traffic, but you’re not getting the right conversions.
So I would increase the budget on technology to get technology that helps you understand who’s coming to your website, what are they doing, and to be able to split test and make sure that you’re getting the right conversions.
Sometimes you need to invest in execution and getting the right people to do things. Because the people that are doing whatever needs to get done, they’re not doing it effectively. So you need to increase your budget on execution. The first two elements of your marketing budget are things that you invest in long term. So when you create a strategy, it’s long-term.
When you’re creating assets, often those assets are for the long term of your campaign or multiple campaigns. But advertising, those are like monthly investments, you make an advertising investment, and that’s it. You don’t get that money-back execution.
You hired someone to write a blog post, you hired them, that’s it, you spent the money. So you have to spend that money on technology on execution on advertising every single month, where a strategy and assets you can invest one time build those assets, and then they could just be reused every month over and over and over to help you grow your business. So that’s where you’re going to be spending your money.
Tami: Okay, so finally, you may have covered all of this, but is there anything else you want to say about what factors someone should consider before setting their marketing budget?
Joe: Yeah, before, before you set your marketing budget, you first want to make sure that you understand what type of return you’re going to be getting, that’s really important. So next time somebody asks you what your marketing budget is, first, identify and say my budget is I want to spend $2 and get $10.
Back, that’s what my budget is. And because I want to get my business from 10 million to 12 million, I’m willing to spend $400,000, if you can take that $400,000 and turn it into $2 million. And in order for me to know if you’re going to do that, I’m going to spend 10% of that 440k over the course of say, 90 days, and my goal is going to try to make 200k from that 40k.
And if I can get there, if I can do that, that means I can 10x my marketing budget, and hopefully 10x my results. And so I want you to really think about that before you set your marketing budget, what type of return you need to get, where do you want your business to go, and which one of the five levers you need to be pushing in order for you to be successful with marketing.
And remember, this marketing is about testing. So don’t set a budget for Live Set a test budget for a 90-day campaign, and from there, you’ll be able to be more successful. And hopefully, this was helpful for you to think about the word budget and not be afraid of telling someone your budget, not be afraid of going to a freelancer or an agency and saying, Hey, this is my budget.
And this is what I’d like to accomplish for my budget. And sometimes people come to us and say, hey, help me figure my budget out. And often it has to do with how much cash they have, how much cash do you actually have to do a test? How much could you afford to invest to test?
And sometimes if you’re a really small business, you’re doing 50k A year, your answer is zero. And then you have to take a course to learn how to do stuff yourself because you have more time than you have money.
But if you have more money than you have time, then you really got to think about okay, well, I have cash, how am I going to invest my cash and sometimes it means, you know, making sure that you’re doing things that will help the long term part of your business while at the same time thinking in the short term near future.
So always think about strategy, before you even set your entire budget, set a budget for strategy, set a budget for assets, set a budget for testing, and then go out and create a robust budget based on the results that you’re getting.
Tami: Thank you so much, Joe, that is amazing information. I hope that everyone got as much out of that as I did. Again, you can actually read along with us in Joe’s book, High Energy Marketing. And you can get that book at ajaxunion.com/book.
And in next week’s episode, we will be talking about understanding direct marketing versus branding. Two very different things. So be sure to subscribe so you can catch that episode. And if you want to connect with Joe, you can find him at JoeLinkedIn.com, which will redirect you to Joe’s LinkedIn profile. You can follow us on Instagram @AjaxUnion. Joe is on all social media platforms @JoeApfelbaum.
If you have any questions you can shoot us an email at firstname.lastname@example.org. Our music is by Michael Suarez. And this podcast is produced by Sarah and Shannon and edited by Sami Mititelu. Thank you so much for listening!