It’s fall and that only means one thing in the world of a marketer: planning and budgeting! Did you think I was going to say pumpkin spice and football? While those things also make fall a fun time of year, nothing gets me more excited than planning our marketing for the following year (insert eye roll). No matter if you love it or hate, AEC marketing budgeting is necessary.
Budgeting, specifically how much to allocate for marketing, is a common question. Unfortunately, there is no one-size-fits-all answer to this question. Below I attempt to provide you with some framework that you can apply to your firm as you put together your marketing plans for next year.
Budget Considerations – Read Before You Begin
Every firm is different and because of that, you will need to consider the following things before you start calculating your budget. Use the following questions below to help you. There are no right or wrong answers, but you will want to make sure you have a clear understanding of each before you begin.
- Does your marketing budget include both marketing and business development/sales activities? Marketing often includes the marketing staff, conferences, advertising, etc. while business development often includes networking events, golf outings, travel to see clients, etc. Pursuits and proposals could be argued to in either bucket. More on those below.
- How do you track your marketing time? Are there separate project/charge numbers for activities and/or separate pursuit efforts? Who can charge time and expenses to these numbers? This is important to know so you know how detailed to make your budget and how to track it.
- What percentage of your pursuits do you pursue as a prime, subconsultant and design-build? Each of these require a different level of effort, and hence bigger budget. If 60-75% of your pursuits are design-build, your pursuit budget is going to be significantly higher than if you are predominantly a design subconsultant. However, other marketing and relationship building activities may be higher.
- Do your technical staff charge time to specific pursuit numbers? If so, does their fully loaded hourly rate (salary+overhead+profit multiplier) get charged against the budget? Or, is it a rate that is closer to their raw hourly rate (salary+overhead) or a blend? Your comptroller or CFO can help you with this answer.
- Do your principals charge their time to marketing efforts?
- Is it expected or company culture that marketing is an off-the-clock function for the technical staff in your firm?
- 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?
- Is your marketing staff hourly or salary? Are they compensated for overtime hours? If so, this can greatly affect budgets depending on workload.
AEC Marketing Budgeting Approaches
Below are some of the options commonly used to come up with your marketing budget.
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. For example, if you estimated revenue for next year is $50 million and use say you want to spend 4% on marketing, your marketing budget would be $2 million ($50M * 4%).
Now you might be asking where I got 4%. That is a great question. While there is no industry standard as to what percentage to use, my experience has been somewhere between 3-8%. Many factors go into these percentages. Those include:
- Expansion into new market or geographic area
- A merger or acquisition
- A rebrand for any reason
- Pursuit types – public vs. private, design/build, sub vs. prime, etc.
- Markets you pursue
For example, if your main market is the Federal government your pursuit costs are going to be a lot more than if your primary market is high repeat private client work.
Marketing Budget History
This approach uses the current year’s marketing budget and compares those to the accomplishments and goals. Depending if you and your management are happy with these outcomes, this can be a great start for the next year.
Obviously, this assumes that you have a pretty detailed budget this year and great tracking to see what is working and what isn’t. It also doesn’t take into account any strategic initiatives that you want to undertake next year that are not in this year’s budget.
With this approach, you start by recording all of the marketing activities you plan to do in the next year. Then you add them up to total the amount for the marketing budget next year.
While this may seem like a dream come true for a marketer, be prepared to have this initial number cut. Also, you are may be estimating what activities cost based on outdated information or just your gut or experience at another firm. This may lead to under or over budgeting.
Matching what your competitors spend is another way to develop a marketing budget. The assumption with this approach is that to stay competitive you spend as much as they do. In my dozen years in this industry I haven’t personally approached budgeting this way, but have started to experience more competitive intelligence gathering. I wouldn’t be surprised if this is a method that some firms are already using.
This approach is probably the second most frequently used method. I wouldn’t be surprised if it wasn’t being used in your firm before now.
This method follows no plan and requires no justification. It is when the management team (or firm owner) randomly picks a number they are comfortable with. It doesn’t need any strategic thinking or planning. Obviously, you want to recommend against using this method at all costs!
Probably my most used, is the hybrid method. It takes many of the principles outlined above to come up with a realistic budget.
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.
Components that Go into a Marketing Budget
So you have settled on an approach, so now you need to decide what goes into the budget. I have outlined some suggestions below. This is not an all-inclusive list, but rather some ideas to get you started. I have also grouped them into marketing and business development/sales activities in case you need to separate them as well.
I consider any activity a marketing activity if it broadcasts our firm’s brand to many people or the masses. Your firm may classify these differently and that is okay. It just important to identify and organize them in a way that makes sense for your firm (and accounting department!).
- Marketing staff
- Website development and maintain
- Promotional activities
- Content development
- Organization membership dues
- Networking and organization events
- Market research
Business development activities are those that advance the relationship and win the work. These are more focused on a specific client or project rather than to the masses.
- Business development staff
- Client relationship activities
- Project, client and competitor research
- Client-specific fundraisers and sponsorships
- Pursuits – time and expenses to win the work. I include proposals in this.
None of This 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 have performed compared to the budget. You won’t be able to show if there was any return on your work.
The real purpose of setting is a budget is to provide your team with guidance and set priorities. The activities that have the higher priorities should have the higher budgets. Then, as you move throughout the year you can calculate your ROI on those efforts and change course as needed.
If you have one marketing number for the entire firm, you won’t have the information you need to properly calculate budget adherence let alone ROI.
You might not be able to set a budget this year, but try to fight to get some tracking in place for next year. Then a year from now, you will least have some historical data to from.
How you do set a marketing budget? Which approach do you use? What do you like or dislike about that approach?