How to Create a Budget for your Digital Marketing Expenses

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There are very few businesses that can thrive, or even survive, without digital marketing. In the modern age, almost everyone functions online, and buying decisions as diverse as which car you buy and where you buy your coffee almost always involve an online search.

How to Create a Budget for your Digital Marketing Expenses To grow your business consistently, it is important that you set up a budget for your digital marketing expenses and work out exactly how much you can afford. Some businesses scale too quickly and find themselves struggling, while others don’t grow at all and the business owner may eventually have to close.

Below, we explore the best methods for creating a budget for digital marketing expenses. There are plenty of places where you can spend your money, and even small budgets might be enough to help your business reach the next level if you target your audience correctly.

Know Your Costs and Revenues

It’s vitally important that you know exactly where your business stands in terms of the money coming in and the money going out. If you are not making a profit, that doesn’t mean you can ignore marketing—it may be your ideal way to grow the business. At the same time, you can’t spend all of your money or take on huge debts for marketing if you don’t see a return.

Costs are the expenses your business has to cover every month, such as rent, hosting fees, and staffing. These tend to be relatively stable and easy to calculate. Some businesses can also forecast their revenue. If you’re in profit, you may be in a good position to increase the marketing budget and continue growing.

All of this remains a little abstract until you apply it to your own business. An outlay of around 10% of your business revenue for marketing activities is considered normal. This is just a ballpark figure—some business models require much less, while others need significantly more.

Align Your Goals with Your Company’s Strategic Growth Objectives

There’s no point in marketing just for the sake of it or using tools that don’t make sense for your business. For instance, if your business is seasonal, there may be little point in advertising during the off-season. Similarly, if you are focusing on one specific geographical location, there’s no benefit in targeting others. Putting your marketing budget toward advertising across an entire state would be unwise when you can focus it on local growth instead.

How to Create a Budget for your Digital Marketing Expenses Virtually all businesses have KPIs relating to growth. What is the strategy? What kind of growth do you want to achieve? For a restaurant, this could be as simple as the number of people walking in and requesting a table. For other types of businesses, the KPIs can be more complex.

Do you want to attract more blog readers who might convert into customers later? Some businesses focus on sign-ups, while others prioritize web traffic or search engine rankings.

Identify Your Marketing Objectives

What do you want to achieve with your marketing? Are you looking to grow a mailing list to send out offers? Are you aiming to build brand awareness? Or are you focused on driving online sales?

All of these goals will shape your digital marketing expenses. Building brand awareness is valuable, but it doesn’t always deliver quick financial returns. This means you should be cautious about investing heavily in this area during the early stages of your business.

How to Create a Budget for your Digital Marketing Expenses By contrast, types of marketing that deliver clear ROI—such as Facebook advertising that converts directly into sales—can be an effective way to build revenue. Whether you adopt a short-term or long-term strategy is a major consideration, along with the location of your advertising and the specific areas of your business you want to grow.

Rather than simply investing a large sum in advertising, it’s essential to develop a clear strategy first.

Audit Your Past Results

This is one of the keys to understanding your business, your customers, and their behavior. Past results are the best indicator of what works. Being able to access and analyze how previous marketing campaigns performed gives you valuable insight into what is likely to succeed in the future.

One of the best ways to do this is through split testing. Even if you don’t have much historical data, you can generate fresh data by testing a couple of methods—or even small variations—and tracking which performs better.

It’s much easier to do this with digital marketing. A clear example is the use of graphics in advertisements. Some visuals naturally perform better, generating more clicks per thousand views or higher conversion rates.

The data you collect while spending on advertising is essential. Make sure you use it to inform your next marketing activities. Auditing past results involves spotting patterns, identifying what worked and what didn’t, and building a plan for future campaigns.

How to Create a Budget for your Digital Marketing Expenses Because every business is unique, what works well for one may not work for another. Even studying case studies or observing what successful businesses are doing isn’t enough to guarantee success for your own. Your most valuable data will always come from your own marketing activities.

In addition to analyzing results yourself, you can work with marketing professionals to identify what is going right and what needs improvement.

Evaluating Your Options

What options are available to your business? It’s time to consider the different types of digital marketing and where you should allocate your spending.

The channels that deliver the best ROI can vary significantly depending on your target market and industry. Before funneling money into advertising, think carefully about where you can reach potential new clients and customers most effectively.

How to Create a Budget for your Digital Marketing Expenses Options for digital marketing include pay-per-click, Facebook advertising, blog content, search engine optimization, email marketing, and sponsored placements on blogs.

For example, a local business may achieve strong results through a local publication or website. For a national campaign, however, broader strategies are usually more effective. Platforms like Facebook divide opinion, but they offer one of the largest audiences available, with highly precise targeting options.

Allocating Your Budget

To decide how and where to allocate your budget, we recommend applying flywheel thinking to your company’s spending. It is usually wise to invest across multiple channels. This means determining what portion of your budget will go to each area.

For instance, if you are trying to drive traffic to a blog, splitting your budget between sponsored posts and other promotional methods won’t help if the content and graphics aren’t compelling. This is why it’s important to divide your budget into separate allocations for different marketing activities.

As mentioned earlier, 10% of revenue is a useful benchmark, but this amount will likely need to be distributed across multiple marketing activities for optimal results.

Marketing Software

Many people don’t realize just how helpful marketing software can be for digital marketing efforts.

There are several options for automating workflow, collecting data, and streamlining tasks to reduce the time employees spend on marketing activities.

How to Create a Budget for your Digital Marketing Expenses Examples include:

Social media management software to automate posts or marketing campaigns.
Email marketing tools to send group emails.
Content creation tools to simplify the production of videos, graphics, and blog posts.
Analytics software to collect and manage data from your digital marketing campaigns.

This software isn’t reserved only for large companies. Many smaller businesses can benefit from straightforward commercial tools.

Creating a Budget For Your Digital Marketing Expenses

The bottom line is that every business has its own unique needs when it comes to digital marketing expenses. This makes it virtually impossible to create a one-size-fits-all solution. However, it also presents an opportunity. For those who analyze their spending and digital marketing activities and approach promotion strategically, there is always room to grow.

Digital marketing expenses are not the same as other fixed costs in your business—they represent an opportunity to continually refine and maximize the impact of your efforts. While many businesses allocate between 8% and 15% of revenue to marketing, there is potential to succeed by spending more or less depending on your specific situation.

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