How Should You Calculate Your Startup Marketing Budget?

Marketing is crucial for building a new business, but what’s the best approach for building and maintaining your startup’s marketing budget?

As a founder, despite understanding the importance of marketing, a long list of marketing expenses might seem overwhelming. 

Marketing in the early stages of the startup is essential for business growth – at this phase, it’s how you get customers. Simply cutting your marketing plans to lower your expenditures isn’t an effective strategy. 

You need a plan to strategically cover your marketing needs without exhausting your limited resources. 

There is only one way to do it: budgeting.

Why You Need a Startup Marketing Budget

Typically, an established business will have an easier time planning a marketing budget than a startup. From experience, you’ll know where to allocate your spending and have expectations for customer impact.

But first, a startup needs to gather that experience.

When launching a new venture, reaching new customers is one of the most critical (but challenging) tasks. It requires expertise, clever effort, and sufficient funds, as startups often need more marketing than an established business.

And of course, most marketing costs money. 

To build a solid business, allocate your marketing funds to high-impact activities that bring favorable results. 

The promise of attracting new customers makes it easy to let your marketing spending get out of hand. That’s why your company needs a startup marketing budget that outlines your expected expenses and serves as a guide for future spending. 

Tracking expenses and measuring their impacts is the best way to keep your marketing effort on track. 

How Much Should You Be Spending on Your Marketing?

In the early stages of a startup, it’s important to be backed by investors to plan a budget. Having liquidity to spend on marketing is critical, and investors might also contribute advice on what works and how to best allocate resources.

There is no hard and fast rule for how much startups should spend on marketing. However, experts suggest marketing expenses average around 10-20% of your total projected revenue, and this is a significant amount that can help generate leads and establish brand awareness.

Moreover, Hubspot says, on average, companies allocate 11% of the company-wide budget to marketing. However, startups may lean closer to 20% marketing costs while you’re establishing your customer base. Once stable, you can start to scale back.

Here are some tips for setting your marketing budget:

• Compare spending with others in the industry
• Choose where you want to spend your money wisely
• Rely on your metrics
• Make sure your marketing strategy is worth the investment
• Update your budget when needed – in fact, this is highly encouraged

What to Include in Your Startup Marketing Budget

Generally, there are no set rules for designing a startup marketing budget. A detailed and easy-to-understand budget will help bring clarity in the long run.

Knowing the current advertising trends for your industry can also help determine which methods best suit your strategy.

Here are some standard marketing expenses you should consider in your budget:

Technology fees

Marketing today uses various tools and software to create beautiful campaigns and effective marketing materials. Although many of these tools are free to individual users, businesses generally need to pay for full access.

Advertising expenses

There are numerous advertising channels you can use for your marketing:

• Print ads
• Radio ads
• TV ads
• Social media ads

When choosing a type of ad, consider your overall marketing strategy and evaluate which will likely have more reach, get you closest to your target customers, and logically fit within your range of spending.

Branding expenses

To create a powerful brand that sticks in people’s minds, you may need expert help to present a consistent face to the customer. Your logo, company designs, mission statement, and themes all affect the perception of your company. 

Content marketing

Generally, this means helpful or entertaining content delivered to your prospects for free. It helps them stay engaged with your brand and can take the form of:

• Blog posts
• Social Media
• Podcasts
• Infographics
• Videos
• Paid Ads

Market research

Knowing what’s happening in your industry and how potential customers perceive your brand (or don’t) is crucial. This information can help you better steer your efforts. 

Unexpected expenses

No matter how hard you try and how much effort you put into building a comprehensive marketing budget, unpredictable expenses will come up. When things don’t go as planned, you’re better off to have some buffer for unexpected spending. 

Need Help Building a Startup Marketing Budget?

Building a robust startup marketing budget can be a complex task. There can be many moving parts inside and outside the company, and startup owners tend to forget necessary marketing costs when setting up a budget.

A well-planned marketing budget is crucial because all companies face resource limitations (especially early-stage startups). Setting expectations for spending and measuring the impacts will help you allocate your limited marketing funds better.

Founder’s CPA provides CFO services to help you establish and better manage your marketing budget.

Contact our startup finance experts to get the most out of your budget to grow your business.