Marketing budget calculator for startups

This blog is part of our spitfire series where we get straight to the point. No intros. No fluffy text. Just straight facts. Let's do this.

Budgeting your marketing efforts is tough

And if anyone says otherwise, they're trying to sell you something. Budgets are important because your Board and investors will look at your marketing spend through a magnifying glass. And the impact of your marketing dollars on your revenue is the first thing they'll ask - it's their job.

**Psst** if you want the calculator right away, scroll directly to Step 3 below.

At HireCMO, we think like VCs (literally) and we know that ensuring a solid return on investment (ROI) is critical. But creating a budget, starts with first understanding what your business offers, who its ideal audience is, what marketing channels your competitors are using, etc.

Step 1: Fully appreciate the many moving parts of your business

If you're the founder, please don't be offended by this. You'd be surprised by how many times the founder will have one "vision" and understanding of the product. But then right down the aisle, the SDRs, BDRs and marketing folks will have completely misaligned understandings of their product offering. They'll answer the "Describe our product in 1-line" question in 20 different ways sometimes. And it won't be a 1:1 match to how'd describe it. This happens especially to founders in the Series A stage.

A few points to explore here are obviously:

• Business Goals: What are you trying to achieve? Are you focused on user acquisition, brand awareness, or customer retention? Your goals will shape your marketing strategy and thus your marketing budget.
• Target Audience: Who are your customers? What are their demographics, interests, and behaviours? Understanding your target audience will help you decide which marketing channels to prioritize.
• Competitive Landscape: Who are your competitors? What marketing strategies are they using? This will help you identify opportunities and gaps in the market.

Some questions here you have to ask yourself is:

• Today, how are we generating sales? What's our most dependable source of leads - direct sales, Google SEO, TikTok ads, etc.
• Based on our user interviews with our paying customers and prospects, do we have a concrete understanding of the problems that they're solving with our product?
• How's our product's retention rate? What's our Net Promoter Score (NPS) from our paying clients?
• Where in our marketing funnel are we struggling the most? Is the top of the funnel with inbound leads who don't even book their first call with us half the time? Or is it that after we show them a demo of the product (middle of the funnel) they refuse to move forward with the sale?

You may think that these questions are more product focussed, but the truth is if you don't fully appreciate and understand how users are interacting with your product and where you're getting the highest traction (e.g., American moms under 25 who click on your TikTok ads and love feature X), it'll be very difficult to create a sound marketing strategy.  and, you'll just spend a lot of money on things that will yield little to no results.

So please do your homework.

Step 2: Define a high-level "strategy"

I hate the word strategy personally. Because it can mean a lot of vague things or just nothing in particular. But if done right, it's exactly what you need to come up with a budgeting plan that doesn't lose money on the wrong marketing initiatives.

Your strategy will help find the marketing channels you want to use (such as social media, content marketing, email marketing, etc.), and the KPIs (Key Performance Indicators) you should set for each.

Be extremely wary of marketing agencies. Because if you tell someone that you need a strategy, it's usually music to her ears and they're ready to quote you $10,000 for a 10 page document you'll never really use.

And the problem with strategy documentation is that they usually don't reflect the reality of what's possible given your other constraints across your business. That's where my team does things differently - we actually care a LOT haha. We take extreme ownership and think through your marketing/growth needs as though we have equity in your startup. Wanna spend $10K on us? Not so fast. We're going to put you through deep-level discovery calls to truly uncover your problems, figure out what kind of marketing help you need to drive revenue and only if we think we can truly bring big impact, do we actually say yes to you. It's fun baby. And we're the best at it.

But I digress.

Step 3: Create your marketing budget calculator

Now that you have a clear idea of your marketing strategy, it's time to set up your marketing budget calculator. You can use Excel or Google Sheets for this. I made one for you here.

Create Your Spreadsheet: Start by setting up a simple spreadsheet with columns for your marketing channels, projected costs, actual costs, and results. You should have four columns to start with. And each row can be a marketing channel e.g., social media, content marketing, email marketing, etc.

Marketing channel | Projected cost | Actual cost | Results

• Projected Costs: Fill in the 'Projected Cost' column with your estimated budget (that fits your appetite) for each marketing channel. I highly, highly recommend doing small tests of $100 - $200 on paid channels before throwing more money at them.
• Actual Costs and Results: As you start implementing your marketing activities, fill in the 'Actual Cost' and 'Results' columns. This allows you to track the effectiveness of each and adjust your budget as you go. The results column refers to the actual amount of revenue that you brought in through success conversions via that channel.

When calculating your marketing budget, you can set aside a percentage of your annual revenue and then identify marketing activities that fit within that plan. For instance, if you want to spend 15% of your gross income on marketing, multiply your income by 0.15 and use the resulting figure as your total marketing budget for the year. You can divide that figure by 12 to determine your monthly budget.

But here's the big caveat. The projected cost for each of your marketing channels will depend a lot on your audience targeting, number of people you're trying to reach, the cost per acquisition of the channel your leveraging (e.g., $5 CAC), the competition for the kind of keywords you're using (Google Ads), etc.

If you want help with figuring this out, my team can certainly step in. Otherwise if you want to DIY yourself for search ads let's say, I would recommend using Google's free keyword tool or free trial tools like SEMrush to help you gauge what your competitors are paying for certain search ads.

In the beginning your cost peracquisition or cost perclick might be ridiculously high if you're new to the realm of marketing. So please do this with caution, and make sure you put the right budgeting limits on the ad platforms that you're using e.g., Meta Ads "spend $ per day". Don't let these platforms drain your bank account!

Step 4: Refine your marketing budget over time

Now that you have your marketing budget calculator set up, you can use it to refine your marketing budget. This includes analyzing your results, optimizing your marketing channels, and making data-driven decisions about your marketing budget.

• Analyze Your Results: Use your KPIs to evaluate the performance of each marketing channel. Which ones are giving you the best return on investment? Which ones are underperforming?
• Optimize Your Channels: Based on your analysis, adjust your budget allocation. You may want to invest more in the channels that are performing well and cut back on the ones that aren't.
• Data-Driven Decisions: Finally, use your marketing budget calculator to make data-driven decisions about your marketing budget. Remember, your budget should be flexible and adaptable to the needs of your business.

Some extra things to keep in mind:

• Plan to spend between 12% and 20% of your gross revenue on marketing if you're launching a new company. Less capital can be invested by established businesses, typically between 6% and 12% of gross revenue.
• Be mindful of the usual marketing expenses, including marketing research, SEO/SEM, public relations, email marketing platform subscriptions, blog post development, social media marketing, and software subscriptions.

Really hope this helped. My team at HireCMO is always ready to jump in and help. If you want a free 45-min session with one of our chief marketing officers, just book it directly with us here. Thank you for spending time reading this article! Take care now! :)