Startup marketing budget: how to allocate and manage your expenses
Modern marketing teams have a long list of expenses. Even if you’re a bootstrapped startup, you’ll need tools and services to manage many of the tasks that you can’t do on your own.
But have you thought much about how you’ll pay for all this? Not where will the money come from? But rather, what’s the process for making these payments?
Expense management is a pain for everyone. And you didn’t get into marketing to fill out expense reports.
Let’s take a look at how most startups allocate marketing budget, and how most of these payments are executed. Then, we’ll look at the far more efficient and effective way to pay for the things you need to do your job.
How much should a startup spend on marketing?
Well, it depends. You may not personally be worried about the pounds and pence, dollars and cents. Marketers aren’t necessarily budgeting experts, and the final say is going to come down to the CEO - or someone with “C-” in their job title.
But you are going to be somewhat responsible for how the money is spent. So it’s important that you’re given a fair budget.
According to Wordstream, there are two main factors in determining your marketing budget:
Know your (estimated or gross) annual revenue. They suggest you make your marketing budget a percentage of revenue, so you need to know what you’re working with.
Factor in your company’s age. Newer companies should allocate more to marketing, to help speed up growth.
The authors say that younger companies (1-5 years old) should spend 12-20% of gross revenue on marketing. Older companies (assuming you’ve established some level of market share) should commit 6-12%.
Marketing agency WebStrategies puts the average at 11.4%, although it has B2C budgets considerably higher than for B2B businesses.
Of course, you’ll then have to figure out where to allocate all that spending. That depends on the strategies you’re using, the market you’re in, and how much your executives want to spend.
It’s also going to depend on the software and subscriptions you need to do the job. Let’s take a look at a few of these now.
How to determine the marketing budget for your startup
If you’re planning to grow quickly (of course you are!), then expenses can’t be avoided. You’ll need people, tools, and strategies, and you’re going to have to pay for at least some of these.
Your marketing budget may fluctuate on a month-to-month basis. A big push leading up to the holidays, or a special one-off campaign, can drastically increase your marketing spend for the quarter.
But generally speaking, marketing expenses will be pretty constant. And even if how much you spend varies a little, what you spend it on will likely fall into a few key categories.
It’s hard to have marketing without marketers. At the very beginning, your marketing team may consist of one or two hearty souls - or possibly just the CEO’s own enthusiasm. But you’re eventually going to add to the team.
We’re not going to tell you how big your team should be. There are too many moving parts: your budget, growth phase, and your marketing strategy overall.
And while salaries are “expenses,” we’ll leave them to the side in this post. We really care about payments made by the marketing team, because these are the things that can get out of hand.
Instead of salaries, you do need to think ahead to other people and services you may have to pay for. You may work with agencies or freelancers for content marketing (blog posts, especially), social media management, PR help, and any number of other small tasks that don’t require full-time staff.
It’s a great idea to outsource much of this, but do you have a process in place to make payments?
SaaS marketing budget: annual & monthly marketing subscriptions
If we’re thinking about outgoing marketing payments, there tend to be a few that really dominate. The big one is marketing automation - the treasured jewel for many marketers. Every lead, every prospect interaction, every page view - all stored so you can easily analyze and assess performance.
Tools like HubSpot and Marketo are so useful that it seems impossible to have lived without them before. And they know it. Which means that, to keep using them, you’re going to have to pay.
And it’s not just these all-in-one tools you have to worry about. Your marketing team may need to pay for:
Social media management tools
A Dropbox subscription
An automation tool (like Zapier)
An online form builder (like Paperform)
And those are just the ongoing subscription payments. We haven’t even looked at the one-off costs that spring up around campaigns.
Typical marketing campaign costs
Aside from your big SaaS payments, there’s another category of expense that marketers deal with often. These are the payments that pop up for specific campaigns - both digital and physical.
For instance, if you need to launch social media or Google AdWords campaigns. You might have a set monthly project budget for this, or perhaps an opportunity arises and you need to strike quickly.
You need to be able to get authorization from a manager and pay before you can start the campaign.
There’s also physical marketing collateral that you rely on from time to time. If you’re going to conference, you’ll need business cards and probably leaflets to hand out to people you meet. You may even be printing thousands of leaflets to hand out on the streets - a real classic.
These aren’t ongoing payments like your favorite software, but they may occur often enough that asking for the company card each time becomes a bore. (More on this below).
Clearly, modern startups have no shortage of ways to spend marketing money. Exactly how you’ll allocate funds is always going to be case-by-case.
HubSpot has some nice models to help you figure out what you’re likely to need, and where you’ll spend your budget. You can try their budgeting templates for free.
But we’re not only worried about the money itself. The point of this article is to streamline the way you spend your budget.
Tips to maximize your startup marketing budget
In the next section, we're going to look more at the ways most companies spend, and why these tend to be inefficient. But first, let's look at a few strategies from startup experts about how to get more from the limited money your young company has.
UniTel Voice - Choose marketing costs wisely
Building your business is always going to be expensive, but some costs are more important than others.
"Commit to spending only what you have to, which you can do when you determine what you need, want or can wait to buy. Divide expenses into these three categories to boost your startup capital and cut costs."
It sounds simple, but having a clear line for necessary expenses helps ensure you only spend when appropriate.
TBK Consult - Embrace analytics
To be sure that you optimise your budget, it's always handy to have the help of smart tracking tools. That could be spend tracking software, but more importantly for marketers are the range of traffic, conversion, and lead monitoring tools available. And they don't have to cost an arm a leg:
"Some of the most robust analytical tools are available to you for free, and many others are either affordable or at least offer a free trial period for you to evaluate the software.
"This level of analysis will help you identify areas of your marketing that aren’t performing at all, areas that need to be tweaked slightly to perform better, and areas where you’re already excelling."
Webbiquity - Carefully assess each new marketing strategy
There are so many ways to market a product or service today, that it's tempting to try everything. But if your budget is limited, you can't afford half-measures.
"Honestly evaluate how your business will produce profits before investing any money into your idea. Will your investment in a marketing tactic help you in attracting and serving more customers? If not, don’t spend money on that process, practice, technology, or service."
Make sure that each marketing strategy has some chance of bringing a return before seriously investing time and money.
Lush Marketing - Work hard on your network
Especially when you don't have a lot of money to throw around, your connections can be priceless. The more people and companies you have in your corner to help promote and spread the word, the less you need to spend on advertising.
"It might be worth investing some of your marketing budget each year in networking, especially if your business is B2B. There’s a host of free events and some have a fee attached per event or per annum."
Look out for free and affordable events to attend, digital networks to join, and never miss an opportunity to add a name to your contact list.
Berytech - Keep your marketing budget updated
"Always remember that your budget is just a forecast – it should be regularly updated along the year and whenever the need arises, especially when there are strategic shifts in the business and/or market."
Once you've gone through the effort of creating your marketing budget, the work isn't over. Naturally, you need to revisit it regularly and make updates, especially once you have new information in hand.
Adeptia: Accelerate your Time to Value (TTV)
In marketing parlance, time to value (TTV) is the time it takes for a new customer to benefit from your product or service. Shorter TTVs enable customers to see ROI on their investments faster and thus reduces churn.
One way to achieve this is through data integration. By connecting your application with your Salesforce or Quickbooks accounts, you can automate a large part of your internal workflow that also happens to be the bottleneck that prevents you from serving your customers faster.
For example, an eCommerce business may integrate their front-end with their warehouse and shipping applications so that the product is readied for dispatch as soon as the order is placed - thereby accelerating TTV and improving customer experience.
How most startup marketers allocate budgets
Speaking from experience, startup processes in general can be a little freestyle. Especially when a company is young, there’s no real need to have formal procedures in place.
Then, as you grow and scale, you put off implementing real budgeting processes because everyone’s sprinting from deadline to deadline. Eventually, you end up with each employee doing things their own way, because it makes the most sense to them.
Here’s the classic startup expense management strategy:
Brittany (Alice’s manager) agrees, and tells Alice to ask Claire (the CEO).
Alice tells Claire that Brittany has given the “OK.” Claire rummages through the (unlocked) drawer for the company card, and hands it to Alice.
Alice takes a monthly recurring payment with the card.
Everyone forgets about this until Derek, the office manager and de facto finance person, spots an extra payment on the company card.
Derek asks 8 different people if they’ve heard of SEOhYeah!. Many believe it to be a new Google-themed music festival.
Eventually, Brittany hears Derek asking about it, and directs him to Alice.
Alice searches through her mountain of emails but can’t find the original invoice. She’s able to request a new one through the tool itself.
This is all totally normal. In fact, Derek has at least a dozen such payments to chase up each and every month.
And this isn’t only a waste of time for him. There are a few serious issues with this ad hoc approach:
It’s a waste of time for everyone
The office manager or finance team tends to bear most of the burden in this scenario. Every mystery payment or sloppy expense report means they need to follow up. It’s a headache for Dereks everywhere.
But remember that Alice also had to get approval from one manager, then visit another to get the card. Which also meant that CEO Claire had to get involved in this process where there was likely no need.
In a tiny office, it’s probably no big deal. But what if Claire had been travelling or on vacation? Many startups may not even have a process for this.
It’s an inefficient process
Assuming you have a process, you don’t know that everyone will follow it. This payment may have gone completely unnoticed if Derek didn’t have his wits about him.
But to make life easier on Derek, you now have to report every expense that you and your team makes. That’s not too tricky with for online payments - they send an invoice to your inbox. But what if you’re taking prospects out to coffee often, or buying necessary office supplies?
These payments all blend together, and it’s impossible to figure out what was actually bought, and by whom.
It’s not particularly secure
The company card just isn’t great for security. And that’s especially true for online purchases.
Even if you’re confident that every tool you subscribe to is legitimate and professional (not guaranteed), you can’t be sure that they have good data security. Every new subscription is another opportunity for your credit card details to be hacked and stolen.
Assuming you discover a hack, you then have to cancel the card. Which interrupts the dozens (or hundreds) of recurring payments you have running. And your one little marketing subscription has now created a bit hassle for everyone else.
And while your marketing team would never abuse the card, you can’t be sure about the whole company. Unless you track every payment closely, it’s hard to know for sure.
Get your free marketing budget template:
A better way to manage your startup’s marketing costs
Hopefully it’s clear that the company credit card isn’t a great option for modern businesses. And there’s no way you’re going to pay with your own money and be reimbursed - not when some of these tools cost thousands.
[Asking employees to pay expenses in advance is also old fashioned and unfair. Just saying.]
Instead your company should consider either of these excellent payment options:
Virtual credit cards
For marketing, tech, and product teams, these are wonderful. Most of your expenses are going to be online - the kinds of tools we looked at above.
So you’re unlikely to need to pay in-store with a physical card.
Virtual cards work just like normal credit cards for online payments. You simply enter the payment details at checkout. The nice part is that they have unique details for each purchase. So if the card gets hacked or the card hits its limit, only one payment is interrupted.
And remember Alice? To make a subscription payment, she doesn’t have to march over to see the CEO. Instead, she can request authorization once she gets to the checkout without leaving her desk. Claire (or another manager) gets a notification, and can instantly approve or deny the payment.
Prepaid expense cards
This time we’re talking about physical cards. These work a little like the company credit card, except each one is unique. So you could request one for your team, and every payment would be traced back to Marketing.
What makes these different is that each card can have its own limit, and they’re all tracked from your expense management dashboard. Because your monthly marketing budget is different from Sales’ and Product’s, these different limits are helpful.
And the best part is the authorization process. When it’s time to make a payment, your manager (or the CEO) is notified and asked to approve it. Again, they can do this from anywhere.
But they can also set specific budgets-within-the-budget which don’t require approval. So for instance, you could take a few clients out to coffee for under £15 each, and no approval is necessary. But if you reach your weekly allowance for client coffees, you’ll need to seek approval.
This whole approval process is better for the marketer, because there’s less paperwork (and it’s harder to make mistakes). And it’s vastly better for the finance team, because everything is tracked along the way.
The simpler your expense process, the better
You probably don’t spend too much time worrying about your startup’s expense process. Unless you’re a manager with a serious budget, it’s just not on your mind enough.
But it’s there to bother you each time you pay for something. And it’s also there to bother every teammate when they do the same.
And then there’s Derek…
If you’d rather just get rid of this whole frustrating mess and give the whole company an easy payment process, we’ve got you covered: