How to set a marketing budget

Written for businesses spending their own money. No percentages lifted from an American blog, and no attempt to talk you into a bigger number than you need.

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Start from what a customer is worth, not from what you can spare

Almost every budget conversation starts in the wrong place, with a figure somebody feels comfortable losing. That tells you nothing about whether the spend will work. The useful starting figure is what one new customer is worth to you over the time they stay, minus what it costs you to serve them.

Once you know that, every marketing decision becomes a comparison rather than a gamble. If a customer is worth a certain amount and a channel is bringing them in for a fraction of it, you spend more. If it is bringing them in for most of it, you stop. You do not need a clever model for this, you need the two numbers.

Separate the fixed from the optional

Some marketing costs are the cost of existing: your domain and hosting, your website, your Google Business Profile, your email, the tracking that tells you whether anything works. These are not campaigns. They do not scale up and down and they should not be in the same line of your budget as advertising.

What is left after those is the part you actually get to decide about each month. Most businesses who feel their marketing budget is out of control have simply never separated the two, so the fixed costs look like waste and the optional costs look untouchable.

Spend in the right order

The order matters more than the amount. Fixing the page an enquiry lands on is almost always cheaper than buying more visitors to a page that does not convert, and it improves every channel at once. Setting up tracking properly comes before buying anything, because otherwise you will not be able to tell which half worked.

A reasonable order: make the enquiry path work, make sure you can measure it, make sure you can be found for the searches you already deserve, then buy attention. Businesses who do this backwards tend to spend twice, once on the ads and once on fixing the thing the ads exposed.

Decide what you are buying with each pound

Not all marketing spend does the same job. Some of it buys enquiries this month and stops the day you stop paying. Some of it builds something you keep, like pages that rank or a list you own. Both are legitimate, but they should not be judged on the same timescale.

Write down, for each line of your budget, whether you expect it to pay back this month, this quarter or this year. It is a short exercise and it tends to end arguments, because most disagreements about marketing spend are actually disagreements about the timescale.

Hold some back

Commit most of your budget to the things you already know work, and keep a small part unallocated for testing. The point of the test money is not to find a silver bullet, it is to make sure you are not the last business in your sector to notice a channel moving.

Treat the test money as spent the moment you allocate it. If you need it to work, it is not test money, and you will stop the test too early to learn anything from it.

Review monthly, change quarterly

Look at the numbers every month, because that is how you catch something broken. Change the shape of the budget every quarter, because most marketing needs longer than four weeks to tell you anything true, and reacting monthly means you spend your year starting things.

The exception is anything clearly failing. If a channel is spending and returning nothing measurable after a fair run, turn it off. Patience and stubbornness are not the same thing.

Four ways this usually goes wrong

Budgeting as a percentage of revenue

It is a tidy rule that ignores what a customer is worth to you, what your competitors are spending, and whether your current enquiry path can even handle more traffic.

Counting the website as a campaign

A site that cannot take an enquiry properly makes every other line of the budget worse. It belongs in fixed costs, and it should be fixed before anything is bought.

No money for measurement

Tracking feels like overhead until the first month you have to guess which channel produced your enquiries. It is the cheapest line in the budget and the one that makes the others accountable.

Judging everything monthly

Search and content work on a longer clock than paid ads. Holding them to a thirty day review means cancelling them at roughly the point they would have started working.

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The page above is the short version. The PDF works through three ways to set a budget with the sums shown, the order to spend it in, how long each channel takes to pay back, and a worksheet to fill in.

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