How to craft the perfect marketing budget for your firm

3rd, Dec 2024

Deciding how much to spend on marketing can feel overwhelming, especially if you have a small firm. Your resources are limited so every dollar counts. Yet, if your budget is too small, you won’t be able to grow your business. While there’s no one-size-fits-all answer, here are some factors to help you make informed decisions about your marketing budget.

1. Start with your business goals. Your marketing budget should directly support your business goals. Are you looking to increase brand awareness? Grow revenue? Launch a new service? Expand your client base? Be specific about your objectives and how quickly you want to achieve them. It’s usually less expensive to pursue steady, incremental growth in your existing business than to seek aggressive revenue targets or reach out to new markets.

2. Translate business goals into a marketing plan. You need to develop more details to figure out your budget. For example, if your goal is to increase revenue by 10%, where will that business come from? Upselling existing clients? Increasing your networking? Other ways? Estimate how many new clients/matters you’ll need to achieve that goal and outline what you’ll do to generate those leads. Who will you target with your marketing? What types of marketing and strategies will you use? Write it down in a marketing plan. Later you’ll go back to your plan to prioritize your strategies as you develop your budget.

3. Research relevant benchmarks. A common benchmark for small professional service firms is to allocate 5-10% of annual gross revenue to marketing. However, if you’re starting out, looking for high growth, expanding into new territory or services or in a highly competitive industry or geographic area, aim for the higher end of that range or even more. If you’re focused on maintaining revenue or growing slowly, the lower end might suffice.

Also, research norms in your industry and gather competitor information where possible. At a minimum, you can investigate what marketing channels your competitors are using to get a sense of what they may be spending. However, don’t blindly follow others as every firm has different circumstances. Current economic trends may also vary greatly from past conditions. Finally, remember you’re looking at averages across many firms as opposed to those firms that may be the most successful.

4. Review your current marketing spend. If you’ve spent money on marketing previously, assess past expenditures. Where did your marketing dollars go? Do you know what tactics brought in the most leads or clients? If so, that can help you decide where to cut back or increase spending. If you aren’t tracking leads, start now so you’ll be in better shape next year.

Importantly, remember that new business is often the result of multiple marketing efforts continuing over time. For example, you meet a referral source through networking and keep in touch via in-person meetings, email marketing, social media marketing and other means. At some later point, the referral source passes along your name to a prospect who researches you online and goes to your website and social media pages to verify your credentials. All these touchpoints are crucial in getting business. One meeting is rarely enough.

5. Capture all costs. Marketing encompasses a wide array of potential costs, including:

  • Networking (membership dues, event registration fees, travel, entertainment, etc.)
  • Outsourcing (content writers, graphic artists, website designers, videographers, consultants and agencies)
  • Software and tools (purchasing and maintaining CRM systems and marketing tools)
  • Printing (firm brochures, business cards, folders, etc.)
  • Advertising (online, radio, television and print ads; sponsorships; promotional items)
  • Salaries/Internal time (time spent on marketing activities).

Note that you should also account for how you spend your time. Time is money. Avoid doing tasks that could be delegated to another person who can work more cost-effectively than you.

6. Consider the stage of your business. If your firm is new, you’ll need to invest more money to establish and build awareness of your brand. As you grow, you’ll want to expand your marketing efforts and develop relationships to generate leads. Established firms should focus on leveraging existing relationships and closing the gaps in their marketing to ensure they stay competitive.

7. Have some unallocated money set aside. No matter how well you plan, you may want to make changes to your budget throughout the year. Maybe you want to take advantage of some unexpected opportunities, or you need to counteract some negative business developments. Set aside some portion (10%-15%) of your marketing budget for unplanned expenses.

8. Track results and make changes as needed. If you see better returns from some strategies over others, revise and reallocate your budget accordingly during the year. There are tools to measure website traffic, advertising, social media, email, phone calls and other marketing to ensure you base your decisions on real data.

When determining your budget, remember that marketing is an investment in your business rather than just another expense. There is no typical marketing budget for a small firm. Start your year off right with a budget that is tailored to your needs and goals.

If you need assistance with your marketing, contact us for a consultation.

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