Are you planning to create a marketing budget for your professional service firm? Wondering why is it important and how to create one efficiently?
Let me be blunt here – Shooting in the dark with money is not something you should be doing when building a sustainable business.
But how do you know if you’re allocating the marketing budget properly?
Keep on reading to find out. Below, I am going to lay down a step-by-step process for you on how to create a marketing budget.
Let’s dive in!
What is the Purpose of a Marketing Budget?
Before I get into the nitty-gritty of how to prepare a marketing budget, we need to understand its underlying purpose so we can take on the process with clear objectives.
And so, a marketing budget helps you:
Gain clarity on the current status of your business and it’s needs
Would you spend money stocking up your pantry without taking note of what you need?
Likewise, before you spend money on marketing, you need to understand your current business needs and where it stands. For example:
- You spent X amount on SEO, but you have no idea whether it worked or not. Maybe before you spend on it again, you need to get a better grip on SEO ROI.
- You are a law firm and there is a visible increase in your inbound traffic post your SEO spend. But a lot of these visitors never reach out to you. Maybe you need a retargeting strategy in place.
Understand the industry
As a professional service firm, marketing is not the only department you are budgeting for. There is administration, accounting and finance, human resources, and maybe a research and development department you are budgeting for.
So before you even start to create a marketing budget for your professional service, you must allocate a percentage of your annual budget to marketing.
Resorting to industry benchmarks and your local market can be of great help here. For example, according to the 2018 CMO Survey released by Deloitte, the average marketing spend of professional service firms is 7.5% of the annual revenue.
By having an industry standard and doing some research on local businesses, you can make a fair approximation of your own budget. Not only that, by preparing a marketing budget in tandem with the market trends, you remain an up-to-date business.
Avoid surprises regarding expenditure in a financial year
Preparing a marketing budget can save you from any unforeseen last-minute spending on marketing itself.
For example, you are an architect firm and you decide to start video marketing. If this is a last-minute decision, you are about to burn a hole in your annual budget.
But if you made a marketing budget, you have already budgeted for things like lighting equipment, a good camera, a microphone, etc. You might even need to hire or outsource a professional videographer to make high-quality videos, and you budgeted for that too.
Surprise marketing expenditures are not good for the health of any business, and a marketing budget saves you from that.
Execute long-term planning
In today’s competitive business environment, everything is about instant results. But some of the most effective marketing strategies work best in the long-term, for example, search engine optimization.
So if you are looking to increase your inbound sales leads by a certain percentage, it may not happen overnight or even in one financial year. Therefore, ignoring long-term marketing is not an option.
Short-term marketing goals are important and have their own place in your marketing plan, but it is crucial to budget for your long-term plans.
For example, you may decide to hire a content marketing agency for 3 years to execute a long-term content marketing plan. You can even write off the entire 3-year cost in one healthy-looking financial year if you make a marketing budget way ahead of time.
Now let’s move on to the exact process of how to create a marketing budget.
How to Create a Marketing Budget for Your Professional Services Firm
#1. Start with identifying your marketing goals
To make the maximum impact with your marketing efforts, you must hit the right goals. And the best way to identify them is by understanding your buyer’s journey.
The buyer’s journey makes you aware of how, when, and where your potential consumers are interacting with your product.
For example:
- Where are they discovering your product, your website? app?
- What’s your buyer’s goal when he first starts interacting? Information? Experience?
- Where is the consumer engaging most with your product, e.g., email marketing?
- What information does your buyer need to compare solutions, e.g., pricing, functionality, etc?
- What is a deal-breaker for the buyer? For example, an absence of testimonials
- What are the most important pointers for your buyer’s decision-making process? For example, authority? social proof?
These are some sample questions, but once you ask yourself as many questions as possible at every stage of the buyer’s journey – you will have a fair idea of where to invest your marketing dollars.
Tie it closely with your buyer personas and you have got a winner to start with.
#2. Analyze market conditions and competition
Digital marketing changes fast. By the time you develop your marketing strategy, there may be a new fad in the digital world.
For example, video marketing makes the most serious services like a law firm more human and approachable. Here’s an example:
So no wonder, today any robust digital marketing strategy may seem incomplete without video marketing. I am not saying that there may not be niches that can do without it, but for most professional service businesses, it can prove effective.
Plus if your competitor is using it and you are not, that cannot be the ideal marketing situation.
However, always keep your market conditions to keep things in perspective. Do you have a monopoly? Are you facing stiff competition and must stand out?
Accordingly, take account of the situation with a broader view of the market and the competition.
#3. Prepare a marketing budget breakdown
There is no exact science to creating this breakdown.
For example, as per Marketo the marketing spend allocation for B2B companies looks something like this:
- 40-50% of the marketing budget goes to campaign planning and content creation
- 20-30% goes into paid advertising
- 10% of the marketing budget goes to workforce marketing
- 10% goes into software and tools
- 5-10% in events.
But if you are a small business you can also use something like:
- Allocate the major portion, say 60-70% to strategies that already work in your niche.
- Allocated 20-30% to getting on the bandwagon and increasing your reach with what is new and popular, like video marketing.
- 10% towards experimental strategies like Instagram marketing which is an upcoming strategy for law firms but still behind other popular channels like LinkedIn or Twitter.
#4. Finalize channels and allocate budget
You should have a fair idea of the channels that work for your market (along with the goals) if you followed the buyer’s journey closely. Refine them by adding market perspective to it and you will start to see a list of channels to include in your marketing plan.
The marketing costs for these channels will also play a big role here.
For example, you may want to do video ads on Google, but the keywords in your market are super-expensive. Try others like Bing ads, or Facebook ads, and consider outsourcing your work to a marketing agency that is a pro in your niche. Such an agency can offer you effective alternatives that suit your budget.
Look at the channels that are working best in your niche with your identified goals. Then include or eliminate them from your marketing campaign depending on the cost factor. Some examples are:
- Long-term SEO based content marketing for authority building
- Social media marketing for brand building
- Email marketing automation to engage with qualified leads
- Paid advertising for a new product you are launching, etc.
#5. Investigate the possibility of hidden costs
Avoiding monetary surprises is one of the big goals of the budgeting exercise. So, it is important to mention some things that tend to easily slip the notice of most marketing teams;
- Suppose you decide to tweak a marketing strategy as it is not turning out the way you imagined, it also means that you will be adjusting your marketing budget.
Increasing your FB ad by just a few dollars could make a huge difference. Think of such possibilities and keep a buffer for them.
- Chances are, you will be using more than one marketing software (unless you outsource your whole project). Do not just budget for the basic plan because certain advanced features only come with premium plans. Budget accordingly.
- Do not think only in terms of product promotion, but also things like research and message testing before the product goes to market. Budget for them too.
#6. Keep track of the budget
Efficiency during execution is the key to a successful marketing campaign and as a result to the success of your budgeting efforts. So you need to track your campaigns as well as leads.
Other than certain obvious things that you need to do, like keeping track of the different campaigns along with their time and expenses, here are some must do’s to effectively track your marketing campaigns:
- Website analytics: Google Analytics is the most popular choice for it as it is free and very intuitive with great insights.
- Ad network conversion tracking: Whatever ad network you use, each provides its own tool.
- Phone tracking: Some professional services rely heavily on phone leads, like lawyers. And to know where they are coming from and how did they find about your firm can aid your future marketing efforts. You can do this by assigning a unique number to each campaign.
- CRM tracking or Lead tracking: Keep track of each lead with the date, lead source, campaign, assigned sales rep, notes, status, and revenue generated. CRM (customer relationship management) platforms are great for this purpose. They allow you to create a personalized profile for each prospect/ customer.
It is great to put all the above together in one KPI dashboard report to see the most important business metrics in one easy-to-understand document.
#7. Do not forget to calculate ROI
Last but definitely not least, do not forget to calculate your return on the investment you have made.
A great way to ensure a healthy ROI is to keep the channels with a traditionally high ROI as the priority, for example, email marketing.
But whatever channels and campaigns you run eventually, you must calculate ROI on each of them. A simple formula is:
(Sales growth – marketing cost)/ marketing cost = ROI
So if the sales grew by $100 and the campaign cost was $10, then the ROI is 900%.
If you are hiring a marketing agency, ask for ROI for each campaign. And keep the learnings from each campaign to define your future marketing strategies and budgeting.
How an Agency Will Utilize Your Budget
Let me also show you the flip side of budgeting for marketing, and discuss how your money will be utilized by an agency.
In most cases, an agency will create a customized spending plan to maximize results within your budget.
The company will consider your current situation, goals, and more to develop a strategy that delivers the biggest bang for your buck.
At Envoca, my agency, we mostly do SEO. Because of that, we base our budget on goals for the marketing and gaps between our client and their competitors.
If the client has short term goals, we’ll invest more in paid ads to deliver results faster (although at potentially higher cost.)
We might also look at assets the client has already to understand what we could leverage and retain the budget for other aspects of the campaign.
- For example, if the client has a lot of Google reviews, but is not ranking, we’ll work on local SEO and allocate the budget there.
- If the client has content, but is not ranking, we may optimize the content with onpage and off page SEO to improve performance and utilize the client’s resources this way.
- If the client wants to rank for a new keyword, the budget really depends on the competition. Some keywords are not competitive and can be placed for a couple thousand dollars, others could take years to rank for.
In short, we analyze the client’s current situation, their goals, and assets we have at our disposal already, and create a custom spending plan to deliver the highest possible ROI.