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.
Recommended Line Item Properties:
Property | Values | Description/Tip |
---|---|---|
Cost Center & ID | Specific company cost center | Must align with your company's financial structure |
Owner | Team member name | Person responsible for managing and tracking the expense |
Currency | USD, EUR, etc. | Critical if you're located outside the USD or Eurozone and have expenses in other currencies |
Expense Type | Variable or Fixed | Variable: Based on performance metrics (e.g., Google Ads based on CPA) Fixed: Set costs (e.g., salaries, annual subscriptions) |
Item Continuity | New or Existing | Marks if expense existed in previous year's budget |
Business Goal | Acquisition, Conversion, Brand, Retention, Operational | Helps analyze budget allocation across different business objectives |
Recurring Frequency | Monthly or Yearly | Important for tools/software category to track subscription periods |
Status | Draft, Pending Approval, Approved | Enables collaboration on your marketing budget with your team members and internal marketing approval |
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.