To achieve successful (a.k.a. profitable) marketing, you have to approach it with a comprehensive and well-thought-out budget.
How else are you supposed to know exactly how much you’ll be allocating toward marketing—and how you’ll use it—if you don’t do your due diligence and build that budget?
The tricky part: How do you know how big your budget should be to begin with?
Obviously, your marketing budget is largely dependent on…well, your overall budget. Of course, TwoTone Creative can’t tell you what your overall budget should be, but we sure can give you some insight into figuring out your marketing budget.
4 things you need to know:
1. Your short- and long-term goals
This one might seem obvious, but we cannot stress it enough—you need to have your goals set and in mind before you do anything in your business, including building a budget.
Think of your goals as the destination input into your GPS; there’s no logical way to map out a route and receive directions from your GPS if you don’t have a destination. To get there, you need to know where you’re going.
In determining your marketing budget, you must first consider your goals for revenue, number of new customers, ROI, and more.
2. Your typical cost per lead
Let’s say you want to get X amount of revenue and X number of new customers out of your marketing.
One of the best ways to figure out how much of your budget you need to allocate toward getting new customers is by first calculating your cost per lead, or CPL.
This is essentially how much money you spend generating potential customers. How do you calculate it? Easy—you simply divide the total you’ve spent on marketing by the total of new leads generated.
3. Your typical conversion rate
So how many of those leads result in real customers? Is your current marketing spend producing results?
The conversion rate will tell you—it’s the total sales divided by the total leads.
A low conversion rate may be a sign that you need more funds focused on marketing to target your potential customers and make them paying customers.
4. Your total sales needed
Here’s the final straw—how many leads are you getting? How many leads do you need? And to push it further, how many sales are happening? How many sales do you need?
If there’s a difference between the two (big or small), it is a huge indicator that you need to adjust your marketing budget.
Remember that GPS destination we talked about earlier? Consider your required (minimum) number of sales to be that destination.
Determine your budget by factoring in the money you spend on leads, the number of leads that actually result in sales, and how much in sales you need to succeed as a company.
Need some guidance on your marketing budget?
Book a free 15-minute Discovery Call with TwoTone and together we’ll determine your marketing budget to optimize your sales.