Best practices to smooth the process and win approval
After nearly 15 years of marketing consulting, I am still surprised by the number of sophisticated, established companies that operate without a marketing plan or formal budget.
Whether your organization requires it or not, the budget process is a smart investment.
Good budgets achieve the three Cs
Developing a budget is about more than just numbers; it’s an exercise in consensus, credibility and confidence.
- Consensus comes as the organization agrees to marketing goals and priorities.
- Credibility builds as marketing outlines measurable activities and past results.
- Confidence occurs as stakeholders see a clear link between their priorities and how marketing will support them.
A sound budget:
- Aligns marketing efforts with organizational goals.
- Empowers marketing staff with clear priorities and spending parameters.
- Streamlines the execution of marketing campaigns.
- Enables strategic relationships and volume discounts with key suppliers.
Beware of cookie-cutter methods
There are several approaches to budgeting, and the strongest starts from scratch. Beware of cookie-cutter methods that simply increase or decrease last year’s total by a percentage, or base marketing expenses on a percentage of revenue. Macro changes like these rarely account for fluctuations in sales, one-time expenses like product launches or acquisitions or efficiencies gained by automation and testing. These approaches also undermine connectivity—the critical process of showing how the proposed budget number correlates to a desired outcome.
Ideally, build the marketing budget from the ground up. List proposed activities, identify a cost range for each and group them in meaningful categories, such as by market segment or product line. For measurable elements such as lead generation campaigns or events, show outcomes. Then combine your financial spreadsheet with a short narrative that tells the story of your request.
Link budget requirements to minimum and stretch goals
Leverage these additional steps to ditch the drama and achieve a smooth budget process.
Measure and plan all year long. Budgeting just once a year makes for an arduous workload. Save yourself time by tracking key expenses, campaign results and future ideas as you go. Schedule a day once a quarter to review and organize your information in preparation for your annual planning cycle.
Make finance happy. It goes without saying that if your ultimate approvers have preferred templates or formats, you should use them. Talk to finance early to understand their timing, required information and ideal budgeting process.
Involve stakeholders. While marketing controls the budget, it belongs to the organization. The biggest factor in determining the right numbers and gaining support is involving stakeholders. Allow adequate time to meet with each sales team and product manager to learn their needs for the coming year. Work collaboratively and dig for specifics that will impact the marketing budget, such as product launches, new sales territories, expansion into new markets or emerging competitive threats.
Be sensible about scope. Budgeting contains too many unknowns to predict line items down to the last nickel or request binding proposals from vendors. Instead, use historical costs to develop estimates. For new initiatives or technology purchases, look for industry research. And don’t hesitate to involve agency partners in your planning process—sharing your goals can yield valuable insights on the most cost-effective approach to execution.
Prioritize your requests. Don’t leave it up to others to determine which activities are most important. Clearly show how your requests support sales and revenue targets. Calculate the minimum investment required to reach targets, as well as what it will take to achieve stretch goals. Providing this context makes it harder to eliminate line items and may enable you to request additional funding as you demonstrate results.
Don’t take it personally. Remember that budgeting, like all corporate initiatives, requires both action and diplomacy. Prepare for compromise and be willing to work collaboratively. Expect questions from stakeholders, take time to educate them on the rationale behind your requests and don’t react defensively.
Good communication and adequate planning time make for an efficient and positive budget process. Once your plan is approved, maintain the same transparency with stakeholders by communicating progress and results.