This is article #26 out of 50 in The Startup Marketing Playbook.
As you are developing marketing in a startup, you typically start with a budget of $0. It involves a small team, with people doing multiple jobs and stretching resources thin. As the team grows and you want to accelerate growth, you need to determine how you can invest in marketing and earn that money back with new customers. To do that, you need to craft a marketing budget: typically a spreadsheet of what items you intend to spend marketing dollars on monthly. To start, the budget should consist of the following items:
- Demand Generation
Let’s break down each of these items and how you should think about allocating money to each:
Similar to other functions in a startup, headcount (i.e. team salaries) is often the most expensive item in the budget, and also the most important. If you have world-class marketers, designers, and content producers on the team, you will be positioned to succeed. When you are budgeting for headcount, you need to make a timeline to hire each function. Typically the order is as follows:
- Team Lead
- Demand Generation Manager
- Content producer
In the beginning, the team lead does everything, usually with the aid of a designer to create inbound content. As the team picks up speed, you need to bring on a growth marketer who can build up the day-to-day of an inbound machine. At this stage, the Demand Gen Manager and Team Lead are writing all of the content.
It’s important that you plan accordingly and estimate what month you need to bring in each team member to accelerate growth. Be sure to plan for 6-8 weeks of recruiting time before you expect to hire a new team member.
Depending on the location of the city you are hiring in, this can be a $10,000 – $60,000 per month expenditure in the budget when everyone’s salaries are totaled.
Marketers use many tools to be efficient and drive growth. These are typically monthly software subscriptions and are a rather small part of the budget. However, you need to add up which tools you are using and the monthly cost of each. These might include:
- Marketing automation (e.g. Hubspot)
- SEO (e.g. Moz)
- Web analytics (e.g. CrazyEgg)
I suggest budgeting $1,500 per month for all of these services to begin with. The largest item in the budget is the marketing automation system.
While the previous two expenses (headcount and tools) are used to operate the marketing team, the demand gen budget is money that applies to actual marketing tactics, like Google Adwords, retargeting or print advertisements. These typically breakdown into the following:
- Social media
- Pay-per-click and Adwords
- Display ads (Google Display Network)
- Print ads
- Direct mail
- Paid email campaigns
- Digital experimentation
Each of these channels can be used to acquire leads by driving traffic to your website and content. Each industry and target persona will respond differently to different channels. While in some cases direct mail can be esspecially effective, other industries may find it useless. You need to research and experiment with these channels to identify the optimal allocation of your effort and budget. Your goal is to always optimize for lower CPA (cost per acquisition)
Expenses for these items vary, so target approximately $10,000 – $20,000 per month as a startup. You can dial this up or down depending on performance. Some items, like direct mail, can easily cost $15,000, so keep in mind that some months might spike higher and others lower.
Although a lot can be done digitally, you may still want to attend trade shows and other events where there is an opportunity to sell. Events can be incredibly expensive and need to be monitored closely to ensure the team is getting a true return-on-investment (ROI) from attending. Within events, you need to make estimates for:
- Registration fees to attend
- Materials needed to setup a booth
- Travel, lodging and food for staff
Many events have a registration fee of $1,000 – $10,000. So you need to choose wisely which events to attend. If you are exhibiting at a large trade show with a booth that includes more than table and backdrop, the expenses can easily add up to $100,000.
Since marketing is so multifaceted, you often have a need for skills that cannot be filled by anyone on the team. This cost could be $2,000 for an SEO expert to review your website, $5,000 for a video production company to make a sleek explainer-video for a new product or $3,000 for a web developer to build a special landing page. It’s important that you allocate a budget to hire experts as needed, and that you remain flexible, since the marketing needs of a startup change monthly.
This post gives a simple overview of the categories you need to budget for and rough estimates for each one. Each team is different and the amounts could fluctuate greatly. The next step is to make a list of each of the expenses, put them into these categories, and break it down monthly in a spreadsheet. This simple exercise will give you a picture of how much marketing will cost for a startup.