A Budget Meeting

When a company’s balance sheet looks like the Browns’ win-loss ratio, marketing often doesn’t figure in the budget.

But the marketing budget should be one of the first things to re-up before you have to start auctioning the furniture. In this brief introduction to my company’s philosophy, I will explain our approach to the often garbled pseudo-science of budgeting your marketing spend and how to get the most out of a marketing budget.

Taking it seriously #

For many companies, the marketing budget is cash the CEO feels he can pitch to an outside agency after the other “essentials” have been paid for, up to and including a hefty spend on a sales team. I’ve been offered the accounts of companies with 100 sales reps and three people in marketing.

Often when a company owner takes this approach, he gets to the point where no amount of marketing can save him. I’m not joking when I say the attitude to marketing in some companies is to use the leftover cash from the staff’s annual Christmas drinks to have some coffee mugs printed with the company’s logo.

Then there are company owners that use leftovers from the sales budget to take out a few cursory newspaper ads, or to throw a few bucks at Google AdWords. This is not a serious marketing strategy for growing your business any more than going to the gym every now and then is a serious workout regime.

Businesses need care and attention if they’re going to stay in shape and grow. Allocating serious time and resources, and sticking to it, is essential.

Marketing vs Sales is a false distinction #

In business literature there is sometimes a “debate” between marketing and sales people over which is more important. Each side fights its corner, of course. But in the best companies, marketing and sales are two halves of the same walnut. They work in unison.

We know that marketing has the potential to bring in more per dollar spend than any other area of expenditure. Good marketing can reach more people in an hour than a phone bank can call in a month or a salesman can visit in a year.

I was just on the phone yesterday with a sales rep who said, “I love my inbound marketing team. In my old job I had to cold-call to get clients, which sucked. Now I get warm leads. People already know a lot about the company.”

He knows marketing helps him with his leads.

Think of it this way: marketing is effectively warming up a cold call, since it’s making the first impression that a salesmen would otherwise have to make. Often, the phone has been slammed before he can even finish.

If people already know the product, the introduction has already been made. With the right marketing, it will have left a good impression, and a salesman’s job will be a hell of a lot easier.

Marketing is a sales issue #

As I said before — but it’s important to reiterate: marketing and advertising aren’t decorative add-ons or vanity projects, like putting the company name on your son’s Little League shirt.

Marketing’s sole purpose is to drive sales. If it isn’t selling, your marketing isn’t working.

This is why your marketing budget should ideally be integrated into your sales strategy, and preferably your whole company’s operations. Take it as seriously as your sales budget and the right agency should be able to help you sell more effectively than the same spend on more salesmen.

How to calculate #

There are a roughly two ways to calculate a marketing budget: matching the competition and percentage of sales. If your budget is copied from your rivals, how do you hope to run an original or effective campaign? What if your competitors aren’t as smart as you?

That’s why I always advise percentage of sales.

You can go for percentage of past sales or percentage of future sales. Go for percentage of future sales. Then the marketing campaign will become a catalyst for growing your business. Rather than just simply ladling it out there like yesterday’s soup and expecting consumers to mop it up, it will give the whole campaign a definite sales drive.

5% of sales a good start for a small or medium company’s marketing budget. I recommend 10% of sales, which is what I spend on my own company’s marketing. It’s an investment to grow my business by reaching more potential clients, and — crucially — using marketing funnels to build on the first point of contact.

Ultimately, people go to personal trainers to achieve results. I’ve never heard of a personal trainer telling a client to work out when they have the time or energy. Those guys set out strict regimes of push-ups and jogging distances for a reason. They know the results can only be achieved with a regular commitment.

To grow your business with effective marketing, this means laying out a clear percentage at the beginning. Then we can start to grow.