color-banner-32

 

Channel Blog

 

MSP Marketing How-To #7. Marketing Budget for MSPs

Posted by Galina Marcus on Aug 24, 2018

There’s no standard recipe for how to budget your marketing. Each company has its own internal rules, and each marketing team has tools that work for them. I have never been formally taught how to budget marketing activities, so I came up with a way that works for me and polished it over the years. Today, I want to share how I do it to help you plan and analyze your marketing expenditures. Additionally, I will share a budget template that I have designed and have been successfully using for the last 10 years.

marketing-budget-850

Marketing Budget Essential Components

Although there’s no standard way to budget your marketing, there’s no need to reinvent the wheel either. There is a common sense that applies to any budgeting process and it’s no different for marketing. To make your budget efficient and easy to analyze, you need to segment it just as much as makes sense without overcomplicating it. I’ve found the following segments work the most effectively for me:

  • Allocation broken down to channels and activities
  • Month-to-month calendar

Sometimes, additional geographical segmentation makes sense if you use different funds for different locations. For example, we at LANtelligence run marketing in the United States and Canada. Therefore, we are using separate funds and obviously different currencies for each country.

Come up with segmentations that work for your business model. For example, you may want to budget your marketing by product/service or by sales channels (direct/indirect). At LANtelligence, we run channel facing marketing to bring our message over to the potential MSP partners and end-user facing marketing to generate new leads for our MSP partners. These categories are budgeted separately in order to correctly calculate the ROI.

It Works like a Matrix

Here’s how I organize my budget categories. I create a matrix that lists the marketing activities vertically and the months of the fiscal or calendar year horizontally. I then post the expenditures at the intersection of the given activity and the month it was paid. This helps me visualize how expenditures are spread out and what months are being “loaded” more heavily than the others. It’s also helpful for managing monthly payments and subscriptions.

For the sake of better visualization, I also break down the allocation column into bigger categories and the activities within them. For example, my digital marketing category contains items like SEO, pay-per-click campaigns, social media campaigns, and website maintenance, while my events category contains the names of all events we attend or sponsor during the year.

Planned vs. Actual Expenses

To analyze and improve your budget year after year, you must compare your planned expenditure to how much you actually spend. To do that, I have “plan” and “act” columns underneath each month in my matrix. The “plan” column contains the amounts we plan to spend for each activity for the year ahead. The “act” column is filled as we go and may differ from the planned numbers due to change of plans, budget re-allocation, add-ons that haven’t been planned in advance, or discounts we’ve negotiated with the vendors/contractors after the budget was planned.

By summarizing and comparing these two numbers at the end of your fiscal period, you will have a clear picture of how you’ve managed your budget and where you need improvements. I use the method of “horizontal” and “vertical” comparisons when doing this. This is how it works.

  • Horizontal Comparison - Summarizing the “plan” and “act” numbers by allocation gives you an idea of overspends and underspends for each category, so you can plan accordingly for the next year.
  • Vertical Comparison - Summarizing the “plan” and “act” numbers for each month helps you identify the quiet and overloaded periods during the year. With this information, you can balance your activities to create an even workload for your team and avoid financial burden.

A Framework to Create Your Own Budget

Hopefully, this article gave you some tips and tools to help you organize your own marketing budget. With this outline and the template that you can download below, you can scale and customize your framework to make it work for your business and your marketing activities.

Please, note that the names of activities and the amounts in this template are for demonstration purposes only and shouldn’t be used as a reference for the actual budget. However, there is a rule of thumb for how much you should spend for marketing every year. The empirical rule shows that you get the most return when your marketing budget is equal 8-10% of your annual revenue.

Download Marketing Budget Template

Topics: How-to, Marketing, Insider