5 Steps for Building your B2B Marketing Budget

Now that budgeting season is upon us, it’s time to begin thinking about how marketing will contribute to next year’s operating plan, to assess what worked this year and figure out what you’ll need to do differently next year.

Depending on company size, the budgeting process typically begins in the fall, often in October and November, in order to present to the Board of Directors for approval by the end of the year. While a small startup might wait until December, larger tech companies might begin the process as early as September to allow time for revisions to the plan if the Board has different priorities.

While some budgets are handed down by your CFO with little input from marketing, the best way to build support for your marketing plan is to compile a comprehensive set of numbers that look at the budget from all sides.

1. Review Last Year's Budget

The first place to start is by reviewing last year’s budget. It’s good practice to establish a baseline of what marketing investments have already been made. But resist the temptation to simply adjust previous line items up or down. If you’re preparing to launch several new products, significantly improve brand awareness or greatly expand distribution channels, last year’s budget probably won’t be sufficient.

2. Take a "Top Down" Approach

Next, you'll want to see what your budget might look like in relation to the size of your company. The most common “top down” formula for creating a marketing budget is percentage of revenue. While established tech companies in mature markets typically spend 5-10% or less on marketing, according to IDC, smaller, fast-growing companies might budget 10-20% of revenue or more, depending on industry, competition, amount of capital raised and how aggressive their growth plans are.

3. Build a "Bottom Up" Business Case

You’ll also want to build a “bottom up” business case to support your marketing plan and budget allocations. Whether the financial operating plan calls for 30% or 300% growth, you’ll need to demonstrate how each marketing investment translates into more leads and pipeline opportunities, based on incremental revenue targets, average deal size and lead-to-close rates.

4. Channel Your Inner Goldilocks

But it’s not enough to put together one set of numbers. Few early-stage tech companies hit their revenue targets or budget estimates, so you’ll want to set expectations carefully for your management team by planning for a variety of outcomes. Just like Goldilocks came across things that were "too big, too small and just right," be prepared to create “best case,” “worst case,” and “expected” budget scenarios so you’re ready to take action if – and most likely when – your plans change.

5. Show Your Work

Without demonstrating how your budget is built to support your company’s growth objectives under a variety of scenarios, your core marketing investments could be seen as unnecessary expenses when it comes time for budget review and approval. So be prepared to put in the legwork behind your calculations, test how your assumptions affect your anticipated outcome and compare which variables need to be adjusted up or down to get to something conservative and reasonable. Better to under sell and over deliver than over sell and under deliver, any day of the week, but especially while budgeting.

For more information on where to allocate your budget, Download the B2B Marketing Budget Playbook, our free 16-page guide to help marketing executives consider all aspects of planning and implementing an effective marketing budget.

G. Scott Shaw

About G. Scott Shaw

G. Scott Shaw, President and Founder of Everclear Marketing, is a results-driven marketing executive with 20 years of experience re-positioning venture-backed technology companies, developing breakthrough brand strategies and consistently executing high-growth sales and marketing programs for entrepreneurs, investors and their portfolio companies.