Create Budget Structure

How to structure the marketing budget? A short guide on how to set up categories for marketing spend and required line item properties.

Before creating any line items, establish a clear structure for your budget. This will allow you to analyze the budget later on by owner, goal, category, or any other line item property.

Set Up the Basics

Pick your primary budget currency and establish exchange rates upfront - align with your finance team's rates to ensure consistent company reporting.

Define your planning period in months, typically covering a 12-month span.

If you want to create multiple scenarios, choose the primary budget version to work with (if it's e.g. "optimal", "aggressive", "conservative"). While stakeholders might request multiple scenarios later, focus first on creating your working version that aligns with current company goals.

Categories

You need clear categories to track different types of spending. While these often relate to company cost centers, keep them separate. Categories should reflect marketing operations and your strategy.

Essential Rules for Categorization

  • Keep categories between 3-8. Additional breakdowns create unnecessary complexity and make analysis impossible.
  • Combine small categories. When a category represents less than 5% of total budget, merge it with a related larger category. For example, combine "Marketing Events" into "Promotion" if events are a small portion of spending.
  • Avoid using an "Other" category. It's impossible to analyze a bucket of random expenses.

Must-Have Categories

  • Headcount - full-time employee salaries, including bonuses and benefits that fall under CMO planning
  • Contractors - all agency and freelancer costs supporting your growth initiatives
  • Paid Media (PPC) - keep this separate from other promotional activities. Usually, it's the largest cost allocation in most marketing departments. It needs dedicated tracking and typically has a specific owner from your team.
  • Promotion - Includes all non-PPC activities driving conversions: event marketing, PR, and influencer marketing. Still, most expenses here should be variable (meaning that you are able to tell how many conversions you expect of such campaigns).
  • Tools - monthly or yearly subscriptions

Additional Categories to Consider

Consider these categories if relevant for your strategy:

  • Creative Production - Covers asset creation costs like studio rentals, video production, and event materials
  • Detailed 'Promotion' breakdown - split promotion into PR & Events, Content Marketing, and Influencers & Sponsorships
  • Travel & Entertainment - separate tracking if these costs significantly impact your budget

Line Item Properties

Each line item in your budget needs specific properties assigned to track and analyze spending effectively. These properties will help you manage approvals, track spending patterns, and analyze budget allocation.

During the budget plan analysis process, you probably will want to see your total budget broke down by goals (acquisition vs retention), or item's continuity (new vs existing items). Think ahead what how you would like to analyze your budget later on, and this will help you to create the line item properties at this stage.

Recommended Line Item Properties:

PropertyValuesDescription/Tip
Cost Center & IDSpecific company cost centerMust align with your company's financial structure
OwnerTeam member namePerson responsible for managing and tracking the expense
CurrencyUSD, EUR, etc.Critical if you're located outside the USD or Eurozone and have expenses in other currencies
Expense TypeVariable or FixedVariable: Based on performance metrics (e.g., Google Ads based on CPA)
Fixed: Set costs (e.g., salaries, annual subscriptions)
Item ContinuityNew or ExistingMarks if expense existed in previous year's budget
Business GoalAcquisition, Conversion, Brand, Retention, OperationalHelps analyze budget allocation across different business objectives
Recurring FrequencyMonthly or YearlyImportant for tools/software category to track subscription periods
StatusDraft, Pending Approval, ApprovedEnables collaboration on your marketing budget with your team members and internal marketing approval
Don't use a "Priority" property (like must-have/should-have/nice-to-have). During budget cuts, items marked as "nice-to-have" will be the first to go, regardless of their potential impact. Instead, ensure each line item directly connects to reaching your targets.

Setting The Budget Growth Target

Before diving into specific line items, establish your overall budget target. Your approach here depends heavily on your company's growth plans and your autonomy in budget planning.

Three key considerations for setting your budget targeted amount:

  • Calculate your base target using Year-over-Year (YoY) growth compared to last year's budget. This gives you a rough framework for planning. Make sure it's aligned with your KPI target growth.
  • Put your target budget sum into tools like Etropo. When adding line items, you'll directly see how much budget you have left to allocate. This prevents over-allocation and helps prioritize remaining expenses.
Your board or executive team may have already set specific budget numbers aligned with company goals. Focus then on optimal allocation within these constraints.
If you have flexibility in planning, start with your balanced version. You can create more aggressive or conservative versions later if really needed.