Marketers Take Flight

145: How to Build Your Marketing Budget

• Lindsay Diven • Episode 145

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Hey there, savvy marketers! It’s time to roll up our sleeves and get real about marketing budgets in the AEC industry. In this latest episode of "AEC Marketing Strategies," I’m taking you through a deep dive into crafting a business development and marketing plan that’s not just a document, but a dynamic tool for your firm’s success in 2024.

This episode is a gem from our AEC Annual Planning Empowerment series, where I peel back the curtain on how to tailor a marketing budget that actually makes sense for your firm. Forget the one-size-fits-all approach; I’m here to guide you through the maze of budgeting with methods that include everything from revenue percentages to competitive analysis.

 

I’ll walk you through key questions that will shape your understanding of your firm’s financials and set the stage for a budget that aligns with your strategic vision. To sweeten the deal, I’ve got a downloadable Marketing Budget template ready for you to make your own—just head on over to marketerstakeflight.com/145.

 

We’re not just talking theory here; we’re about actionable insights. From defining the mix of marketing and business development expenses to tracking and adjusting your spending for the best ROI, I’ve got you covered. It’s all about empowering you to lead your firm’s marketing charge with confidence and clarity.

 

So, are you ready to dive in and start building a budget that serves your firm’s growth? Tune in now and don’t forget to hit subscribe—you won’t want to miss out on the wealth of knowledge coming your way in this series.

 

I can’t wait to see you in the comments section at marketerstakeflight.com/145, where you can share your budgeting triumphs and challenges. Together, let’s make 2024 a standout year for your firm’s marketing success. Catch you in the next episode—until then, keep making your marketing meaningful!


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Speaker 1:

Hey there, I'm Lindsay Diven and I'm passionate about everything marketing, productivity and career growth. With over 17 years of experience in the architecture, engineering and construction industry, I know firsthand the ins and outs of this exciting field, from my early days as a marketing coordinator to becoming an award-winning marketing professional. In firm principle. I've learned the ropes through countless late nights and challenging deadlines. Now I'm thrilled to bring you the AEC Marketing Strategies Podcast. Here I'll be sharing simple yet powerful, step-by-step marketing strategies that you can implement to achieve the same level of success. Consider me your go-to marketing mentor, someone who truly gets the unique challenges you face in the AEC industry. Whether you're an AEC Marketing Pro or industry newbie, this podcast is your personal coffee date with your marketing bestie. Together, we'll navigate the ever-changing landscape of online marketing and digital trends, ensuring you stay ahead of the curve. If you're ready to unlock the marketing secrets they never taught you in college and tailor them specifically to the AEC industry, then you're in the right place. Now let's get started. Well, hey there. Marketers, welcome back to another episode of the Marketers Take Flight Podcast, and over the past several episodes, we've been talking all about planning, specifically as it relates to your firm's business development and marketing plans. You can find the links to all of the series episode and today's freebie, a marketing budget template, over on the show notes page over at marketerstakeflightcom, forward slash 2424. And if you're really ready to dive deep into business development planning and facilitate this process at your firm, you can sign up for my business development planning mini workshop. In this mini workshop, I teach you my proven approach to writing a business development plan, including how to develop the right mix of strategy, meetings and research. Then I walk you through how to execute that plan so it doesn't just get written and sit on the shelf. You'll walk away with the knowledge and the tools to lead the business development planning for your firm. Best of all, it's all on demand so you can access at the right time for you and your firm. Learn more about that mini workshop and register over at marketerstakeflightcom forward slash BD plan.

Speaker 1:

Okay, so let's dive into today's topic. Today I'm going to be talking all about budgets, specifically marketing budgets. Budgeting, specifically how to allocate for marketing, is a common question I get. Unfortunately, there is not a one size fits all approach or answer to this question, so in today's episode I'm going to be going to attempt to provide you with a framework that you can apply to your firm as you put together your marketing plans for the next year. But before we begin, I want to caution you. Are you ready? Here's what you need to know. Every firm is different and because of that, you will need to consider a few things before you start developing and calculating your budget. I'm going to go through a series of questions and these are going to help you. Really, there's no right or wrong answers, but they're going to help you learn a little bit more about your firm and the financial aspects at your firm. So you'll want to make sure that you have a clear understanding of each of these questions that I'm going to go through in a minute, and if you need help finding those, accounting is your friend, and so once you have good clarity around these questions, then that'll really help you develop your budget and then later on, track your budget as well.

Speaker 1:

Okay, so those questions are number one does your marketing budget include both marketing and business development or sales activities? Marketing often includes the marketing staff, maybe conferences or advertising, while business development often includes maybe networking events or golf outings or when we can travel to see clients. And then there are pursuits and proposals. Those are tracked differently at each firm and they could be argued that they go into either marketing or business development buckets, but I'll get to a little bit more on that later in this episode. So that was question number one. Does your marketing budget include both marketing and business development activities or just one or the other? Question number two how do you track your marketing time? Do you have separate project or charge numbers for each activity or separate numbers for each pursuit or proposal? And then who can charge time and expenses to those numbers? I've worked at both different firms where only marketing can charge time to the marketing number and operations charge to different numbers. So it's important to know so you know how detailed to make your budget and how to track it. If you only have one number for your entire firm, that's just general marketing, it's gonna be very hard to track your marketing budget. So question two was how do you track your marketing time? Question number three what percentage of your pursuits do you pursue as a prime, a sub-consultant, and or do you have design build pursuits? Each of these will require a different level of effort and hence bigger budgets. If 60 to 75% of your pursuits are design build, your pursuit budget is going to be significantly higher than if you're predominantly a design sub-consultant. However, other marketing and or relationship building activities might be higher as a design sub-consultant than for maybe a design build pursuits.

Speaker 1:

Next up is question number four do your technical staff charge time to specific pursuit numbers or specific proposal numbers? And if they do, what gets charged to those numbers? Is it their fully loaded hourly rate? It's kind of like their billable rate that they would build to projects. It includes their salary, their overhead and a profit multiplier. Is that number that fully loaded hourly rate, that being charged against your marketing budget? When they charge put time to that marketing number? Or is it a rate that is closer to maybe their raw hourly rate, which just includes salary and overhead, or is it a blend of both? This is great information to have because, especially if you're allocating proposal hours and a project manager on the technical side is going to be charging 20 hours to a proposal, his fully loaded rate is gonna look a lot differently than his closer to a raw hourly rate. So your controller or CFO or accounting lead can help you answer these questions on how those what rates get charged towards your marketing or overhead numbers. So question number five do your principals charge their time to marketing efforts? Again, I've worked at firms where principals never charge their time to any proposal or marketing number and I've worked at other firms where they do. So kind of get a good gauge on how your principals or your CEO or your firm leadership are charging, if they are charging time to marketing or BD efforts.

Speaker 1:

Question number six is it expected or company culture that marketing time or BD time is an off the clock function for the technical staff in your firm? And we all like to say we put all of our honest time on our time sheets. But there are a lot of firms that do their just their best 40 hours and it's kind of an unwritten rule or an unsaid rule that if you're working on a proposal or a marketing effort it's not part of your best 40 those hours. So that is really gonna skew your budget because you don't really know who's charging or who's really spending time on marketing if they're not putting it on their time sheet. And then question number seven do you allow or require your staff to charge for their time for marketing and business development events outside of normal working hours, such as evening or weekend networking events. Again, this kind of goes back to the previous question about kind of best 40 and the written or unwritten rules around charging time. And then last, is your marketing staff hourly or salary and specifically, are they compensated for overtime hours? And, if so, this can greatly affect your budgets depending on your firm's workload, specifically around proposals and this is gonna change state to state because there's a lot of different labor laws around each state that I have found and I have seen marketing coordinators and marketing assistants be hourly employees and then I've seen them be salary and then I've even seen some where they're salary but they also get time and a half if they work beyond their 40. So those are all questions if you're developing a marketing budget that you're gonna want to at least know the answers to and I hope you are starting to sense a theme here Before you can even start putting together a budget, you need to know all the people and the hours that could be charging to that budget and how your future budgets can be tracked. So if you're unsure of any of these answers or I'm just talking about something that's like way over your head please go talk to your accounting or finance manager. He or she will be able to give you a wealth of knowledge. Enchances are, you'll need their help to set up and report on the budget as well. So it's again it's always good to be friends with accounting. Okay, so now that we went through some considerations of how time and expenses might be charged to your budget, let's talk about the different approaches to developing a budget.

Speaker 1:

There are a few common methods to develop marketing budgets for AEC firms. First is a percentage of revenue. This is probably the most frequently used method. In this method, you take a percentage of your estimated revenue to obtain the budget. Let me give you an example. If your estimated revenue for the year is $50 million and you say you want to spend 4% of that on marketing, your marketing budget would be $2 million, $50 million times 4%. Now you might be asking where I got 4%, and that's a great question, while I still haven't seen any documented industry standard as what percentage to use, what percentage of marketing expenses you should use for revenue? In my experience, we've used anywhere between 3% and 8% as numbers, and many of factors go into those percentages.

Speaker 1:

You might have a higher percentage number, like maybe the 6, 7 or 8, if you're expanding into a new market or geographic area and that's going to take more marketing expenses. If you have a merger or acquisition, those expenses might go up because you're now acquiring a new firm. It's going to be some more communication, some more brand awareness, a rebrand for any reason, and then it's going to be based also on your pursuit types. So if your pursuit types are predominantly public versus private, they might have different types of more proposal efforts. If you're design build, if you're sub versus prime, and then just in the markets that you pursue, for example, if your main market is the federal government, your pursuit costs are more than likely going to be a lot higher than if your primary market is mostly repeat private client work and you're just putting together a few proposals. So if your primary market is the federal government, your pursuit costs might be up at the higher end of maybe 5%, 6%, 7%, 8%, whereas if you're mostly doing repeat private client work, your proposal and maybe marketing expenses might be a little bit lower than 3%, 4%. That was the percentage of revenue method.

Speaker 1:

Another method is using your marketing budget history and in this method uses your current, yours marketing budget and compares you know this year's budget and how you did right, did you go over or did you go under and, depending on if you and your leadership team are happy with you know where you went over or where you went under, this can be a great start for the next year. But obviously this assumes that you have a pretty detailed budget this year and good tracking to see what is working and what isn't, and it also doesn't use. Using just this method doesn't take into any account any new strategic initiatives that you want to undertake next year that isn't in this year's budget. However, it is a good starting place. If you have, you know, a current budget, it's a good place to start and then adjust. And that's what leads me to a better method, which is the task oriented budget. With this method, you start by recording all of the marketing activities you plan to do in the upcoming year and then you add them all up to get the total amount for your marketing budget. Well, this may seem like a dream come true for a marketer. Be prepared to have this initial number cut. I used this approach at my last firm and listed out all of our marketing initiatives and tasks and pursuits and staffing, and then my initial number always got cut, but at least I used this task oriented budget approach. Another thing that's hard about this task-oriented budget approach is that you may be estimating what activities cost based on outdated information or just your gut or experience at another firm, so it may lead to some under or over budgeting.

Speaker 1:

Another method for developing your budget is competition-oriented and this matches what your competitors spend, and it's another way to develop a marketing budget, and the assumption with this approach is that you want to stay competitive and spend as much as your competitors are spending on marketing and business development. All of my years in this industry I haven't personally approached budgeting this way, but at my last firm we did start to kind of take note on what our competition was doing marketing-wise during our competitive intelligence gathering, and I do know that there's been a push in the industry to kind of get some research on what people are spending on marketing and business development and on pursuits, and so if that research ever happens and is published, then you'll see what your competitors, or at least industry averages, are. Then there is the random allocation method, and this method is probably the second most frequently used method Random allocation and I wouldn't be surprised if it isn't being used in your firm now. And this method follows no plan and requires no justification. It's just when the management team or a firm owner randomly picks a number they feel comfortable with. It doesn't need any strategic thinking or planning. They just say, yep, our marketing budget is $100,000, and that's what it is. I mean, that's the random allocation method, and then you just have to figure out what you can do with that money. Obviously, I would highly recommend using this approach, this random allocation method, at all costs, but if you're trying to at least get a budget, and this is all you have, that's what you start with.

Speaker 1:

Okay, the last method is a hybrid method. Probably the most used is the hybrid method. It takes many of the elements of the different methods I've talked about already and come up with. It uses them together to come up with a realistic budget. And this method takes into account the entire firm and its strategic initiatives, not just the marketing department. It also looks at the competitive landscape and, most importantly, how much you can realistically afford to spend.

Speaker 1:

Okay, so now we've talked about what considerations make up how you calculate your budget in different methods you can use to develop your budget. So let's recap, because hopefully you're taking some notes, but if you're not, let me recap for you. The different budgeting methods that I talked about today were a percent of revenue, somewhere between three and a percent of revenue, using last year's marketing budget number or amount and just starting with that for next year. Task-oriented budgeting, competition-oriented budgeting and the random allocation budgeting and, lastly, a hybrid of several of these methods to develop your budget. So now you might be thinking, well, what goes into my marketing budget? Well, I'm happy you asked, because that's what I'm going to talk about.

Speaker 1:

Next I'm going to list out all many components that I have put into my marketing budgets or have seen in other marketing budgets, and again, this is not an all inclusive list, but I hope it will give you some ideas to help get you started with your marketing budget. And before I get to the list, let me remind you that I put all of this in a template that is free to download. Just head over to marketerstakeflightcom for slash 24 to download the marketing budget template. And also, because we're on audio and I can't like really show you these on screen, I'm going to lump the different budgeting components into marketing budget items and business development budget items. This might help you visualize them as I talk about them. So let's start with marketing activities.

Speaker 1:

I consider any activity a marketing activity if it broadcasts our firm's brand to many people, or the masses really remember marketing is one to many. Your firm may classify these differently and that's okay. It's just important to identify and organize them in a way that makes sense for your firm and your accounting department, because they're going to help you track these. So I lump into marketing. So what I've lumped in the past into my marketing budget items would include your marketing staff, website development and maintenance, promotion, promotional activities, conferences and trade shows, content development, organizational membership, dues specifically for your marketing staff, networking and organizational events, maybe those that you're like sponsoring or advertising and marketing research or market research. So those were the marketing activities.

Speaker 1:

And then business development activities are those that advance the relationship with clients and when the work, and they're typically more focused on a specific client, maybe a list of targeted clients or targeted projects, rather than to the masses. And business development budget items could be your business development staff, if you have dedicated staff, or the time that your seller do or spend on business development, client relationship activities, like those coffees, the lunches, golf outings, whatever we can do now, right, client relationship activities, a project, client and competitor research, if you're paying for any of that research, clients, specific fundraisers and sponsorships. So if we had clients that were putting on golf tournaments for their philanthropies or their foundations, we'd put that under business development. Sometimes they'd straddle both. They could be in marketing or business development. But if they're for a specific client and we're only participating in that golf tournament because of that client and it's that client's foundation, then we'd put it under business development. And then pursuits and proposals, time and expenses to win the work and this does include proposals, presentations, you know anything like that.

Speaker 1:

So no matter what method you use to develop your budget or what components or line items you have in your budget, none of it matters if you don't track it, if you don't have a system in place to properly track marketing and business development expenses, don't worry about doing a detailed budget. There will be no way for you to gauge how you've performed to compare to that budget, or it'll be really, really difficult. You won't be able to show, if there has be able to gauge, where you're over or under on your budget. So you won't know how you're doing to budget. If that makes sense, again, work with accounting and start with bigger buckets to try to start tracking it. You know, develop the budget and maybe have some of the bigger buckets that are numbers so you can start tracking, so you can see how you're doing to your goal.

Speaker 1:

And the real purpose of setting a budget is to provide your team with guidance and set priorities. The activities that have higher priorities should have the higher budgets. Even as you move throughout the year, you can calculate your ROI or, as my friend Jen puts, r-o-o return on opportunity, on those efforts and change course as needed throughout the year. If you have one marketing number for your entire firm, you won't have the information you need to properly calculate your budget adherence, let alone your ROI. So don't even bother setting a budget if you only have one number. So start working with accounting first to get some more numbers or your firm leadership so you can calculate it appropriately. And you might not be able to set a budget this year, but try to get some tracking in place for next year. Then, a year from now, you'll at least have some historical data to start from and to start for your 2022 budget.

Speaker 1:

Okay, now it's time to turn this insight into action. If you've never developed a marketing budget. Go grab my template to help get you started. Find it over at marketerstakeflightcom, forward, slash 24. And if you've done a budget before, answer some of these questions in the comments over on that show notes page. How did you set your marketing budget? What approach did you use? What did you like or dislike about that budgeting approach? Again, let me and the other listeners know over at marketerstakeflightcom forward slash 24. Make sure you're subscribed to this podcast so you don't miss any great episodes from me or the awesome business developers and marketers I have scheduled or have already had on the show. Okay, until next week. Bye for now.

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Lindsay Diven, CPSM

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