Marketing needs its own budget framework

Finance focuses on cost centers and cash flow. Marketing needs a structure for growth metrics and campaign management. Build your framework to track spending by marketing-relevant properties. Use categories like business goals, channel types, and initiative status.

Control your real-time spending data

Don't wait for monthly finance reports. Set up automated cost tracking from ad platforms. Use budget tools with Slack notifications for expense updates. Analyze variance analysis, YTD and remaining budgets by categories.

Consider setting up automated alerts for when spending reaches certain thresholds of your allocated budget to stay proactive with your tracking.

Define your budget structure first

Choose how you'll analyze the budget before planning expenses. Common breakdowns: marketing goals, expense categories, initiative types. Pick 3-8 main categories to keep analysis manageable. Avoid an "Other" category that becomes a dumping ground.

Run pre-approval analysis

Most CMOs skip analyzing their budget before submission. This leads to multiple revision rounds. Check metrics like quarter-over-quarter growth and budget-to-conversion ratios. Create charts showing these metrics. Stakeholders will require them during approval anyway.

Skipping pre-approval analysis often results in multiple revision cycles and delays in getting your budget approved. Invest time upfront to save time later.

Clarify your planning autonomy upfront

Ask direct questions. Should you propose target numbers or work within given ones? Can you suggest budget ranges? Will you need multiple versions? Understanding these expectations prevents creating misaligned plans.

You have freedom to move budgets

Your CEO and board care about hitting targets within the total approved budget. The exact original plan matters less. Move money between channels freely during the year. Keep total spending within limits. Shift funds from underperforming to successful campaigns as needed.

Learn finance team language

Master key finance terms to be treated as a business partner, not the biggest cost center. Know cost centers vs marketing categories. Understand fiscal year structure. Learn how finance calculates KPIs like ARR. This expertise speeds up approvals and builds CFO credibility.

Building a strong relationship with your finance team and speaking their language can significantly smooth the budget approval process.

Focus on fixed vs variable cost ratio

Finance teams scrutinize fixed costs like headcount. These are hardest to reduce if needed. Keep most spending in variable costs tied to performance. Think channel media spend vs salaries. This shows you can adjust quickly if conditions change.

Make growth investments visible

Separate existing programs from new growth initiatives. Show timeline and success metrics for each new investment. This clarifies both maintenance costs and growth opportunities.

Start with historical performance

Base planning on last year's actual results, not the original budget. Look for patterns in channel performance and seasonal variations. Use this data to justify continuing successful programs or reallocating resources.

Get last year performance and budgets

Last year's performance is your starting point for planning. Focus first on understanding the key growth and spending patterns. Review your budget versus actual spend data, both total and by category. Pay special attention to your budget growth rate year over year and how it correlates with the company's revenue growth. Check also your key conversion growth to see if spending translated into results.

Two key metrics to understand your budget scale:

• Total marketing budget as % of revenue
• % of revenue from new customers

Check last year planning process

Understanding last year's process will help you plan better this time. Check how many budget versions you had to prepare and what types (conservative vs aggressive). Review the feedback cycles - how many correction rounds happened and what took most time. This will help you plan your timeline better.

Before you start planning, understand what is expected from you. This includes both your company's appetite for growth and risk, and your level of freedom in budget decisions. Have an early conversation with your CEO or direct manager to understand these boundaries clearly.

Know your company's growth & risk approach

Companies typically align with one of these approaches - identify yours through these signals:

• Exploratory Approach: Companies need to learn things, experiment, and want to invest in many bets, less risk-averse, but also more hungry for growth. (e.g. YoY growth at 50%, budgets growth at 100%)
• Balanced Approach: The company is well-established and adopts a cautious yet strategic stance. It focuses on moderate risks while safeguarding stability. Company well established, more risk-averse. (e.g. YoY growth at 25%, budgets growth at 30%)
• Conservative Approach: The company avoids risk, planning only initiatives that guarantee linear returns at a defined cost-to-revenue ratio (e.g. YoY growth at 10%, budget growth at <10%)

Starting questions for your CEO:

• Do we have set revenue targets and budgets, or should I propose them? If set, can I suggest adjustments?
• How do you define success for new marketing initiatives? (Example: If we tried five new initiatives and one succeeded dramatically, would that be a success?)
• Are targets seen as minimum requirements (must hit 100%) or ambitious goals (80% is good)?
• What's an acceptable payback period for customer acquisition?
• Once budgets are approved, how much flexibility do I have in moving dollars around?

Know your budgeting freedom

Before planning, clarify your role: are you the strategy owner or just executing the CEO's vision? Avoid wasting hours on plans that won't align with what's expected. Knowing how much autonomy you really have, helps focus your efforts where they matter most.

Your autonomy in budget planning varies between four levels:

• Full Autonomy: You are expected to propose the budget plan and expected outcomes
• Guided Autonomy: You work within set ranges (e.g., marketing budget must be 15-20% of revenue)
• Allocation Only: Fixed budget, you decide how to split it
• Strict Control: Fixed budget and targets, you execute CEO's vision with minimal adjustments

Your finance team has specific requirements, systems and frameworks for budget planning and expense management. Marketing budget management should differ from how finance needs to see it.

Why? There are multiple simple differences:

• Marketing uses different categorization (example: while finance focuses on cost centers, marketing needs channel-based for effective budget management)
• Marketing uses different terminology and calculates revenue differently (example: MRR calculation)

But, still, you need to be able to export your revenue plans and marketing budget in a format that can be easily understood by the Finance Team and imported into their systems.

Cost Centers Structure

Every line item in your marketing budget must be assigned to a cost center.

Cost centers act as financial labels that help organize spending into specific buckets for accounting purposes. Here's an example structure:

• MKTG-STAFF-EU (103-1001): Employee costs
• MKTG-ACQ-DIG (103-2001): Digital advertising
• MKTG-ACQ-EVT (103-2002): Events and conferences
• MKTG-TOOLS (103-2003): Marketing software and tools
• MKTG-BRAND (103-2004): Brand and creative production

Get your current cost center list and check if they're self-explanatory. If not, ask finance for definitions and examples.

Review the cost center structure. A new marketing strategy might require consolidation of old cost centers and addition of new ones. For example, you might have separate cost centers for "Social Media Ads", "Search Ads", and "Display Ads" from years ago that could be consolidated into a single "Digital Ads" cost center.

When planning such changes or adding new cost centers, clarify with finance:

• Can you propose cost center updates? (usually it's possible once a year in Q4)
• What's the proposal process and who needs to approve the changes

Planning Horizon

While you're focused on next year's budget, check if your company requires multi-year projections:

• Some companies need 3-year plans for strategic planning
• Others require 5-year projections for board or investor relations
• You might need different detail levels (detailed Year 1, high-level Years 2-3)

Currency handling

Your marketing budget needs a clear approach to handling multiple currencies, especially if you're working with international campaigns or contractors.

First, confirm your reporting currency with finance. This is your company's primary currency where all business metrics are recorded - both revenue and costs. Even if specific line items (e.g. software or contractors) are being paid in a different currency, they will be converted to the primary reporting currency at a given exchange rate.

Companies typically follow one of two approaches for handling exchange rates:

• Company-Wide Fixed Rates - Finance sets standard exchange rates for the entire fiscal year, and all departments must use these rates for budget planning. You don't take the risk of exchange rate fluctuations - it's managed at the company level by the finance team. Your job is simply to assign the correct original currency to each line item.
• Market-Based Flexible Rates - Departments use current market rates and manage currency risk independently. In this case, add at least a 3-5% buffer to your budgeted amounts to protect against rate fluctuations.

Output requirements

Most finance teams require a specific spreadsheet structure for budget submissions. Get their template early and confirm required columns (e.g. cost center, description, amount, currency, payment terms, vendor details).

Understand their preferred level of detail. Some finance teams want every campaign broken out separately, while others accept higher-level groupings. Get this clarity early as it affects how you structure your line items.

Regional Tax Requirements

When adding line items, you might need additional properties related to tax management, such as:

• VAT? (yes/no)
• Vendor's tax registration region (EU/US/Canada/Other)
• Certificate of residence needed? (yes/no)

Team Compensation Planning

Team salaries and bonuses often represent a significant portion of your marketing budget. Check with your HR and finance teams how to handle:

• Your salary - should it be a separated line item in the marketing budget (or is it covered in the Board/Leadership budget)
• Annual salary increases - whether to plan as one bulk line item for the whole team or individually per role. Is there any extra approval process you should follow?
• Performance bonuses - if marketing budget can include them or if they're managed centrally by HR
• Sales provisions - especially for roles like Partner Marketing that might have revenue-based compensation

As CMO, you need to understand your budget and targets approval process to prepare the right materials and manage your time effectively.

Key questions to ask:

• Are growth targets and budget approved separately, or is it one combined process?
• What's your approval path - who are all stakeholders that need to review it?
• Will you have an opportunity to present your budget, or just submit the file?
• Are you expected to prepare different budget versions (like optimal and aggressive), or just one?
• What was the typical process length and number of revision rounds in previous years?

Push for a Strategy Meeting First

Always try to secure a 30-minute meeting with key stakeholders before submitting your budget file. Use this time to present your strategy, growth targets, and required marketing budgets. Show them which channels are proven to work and what bets you are making. Explaining the connection between growth targets and budget needs in person will likely speed up your approval process. It's also your chance to address concerns early.

Start by creating a visual timeline. Most companies follow a standard budget cycle: Department Planning → HR/Finance/Board Review → Revisions → Final Signoff.
Your finance team likely provides these high-level deadlines. However, you need to break down that first "Department Planning" phase into actionable steps.

Your Internal Marketing Planning Timeline

Let's breakdown the "marketing planning" into phases. Your timeline should include:

• Clear outcomes after each phase
• Deadlines for each phase
• Where you need team members to add their input (in case you have a bigger team with some marketing leads owning some areas)

A structured internal planning process ensures your budget aligns with business targets and is backed by data. Each step builds on the previous one.

1. Baseline Proposal

Start by projecting your current performance forward, assuming no changes to strategy or resources. This means diving deep into your channel metrics, understanding seasonal patterns, and accounting for known cost increases.

You should end that phase with forecasts for key conversion (e.g. new customers or new business MRR) and budget required to make it happen.

Outcome: Forecasts and budgets for the forecasts
Time required: Up to 1 week

2. Growth initiatives review

Create a shortlist of potential new investments. Use a systematic approach (impact vs effort) to evaluate each initiative based on its impact on customer acquisition versus the resources required.

Outcome: List of initiatives with impact on the KPI and budget needed per initiative
Time required: 1-2 weeks

3. Target Setting

This phase is about choosing the growth initiatives and adding their impact and costs to the forecasts from the baseline.

Outcome: Target growth numbers
Time required: 2-3 days

Remember: This phase is relevant when you have autonomy in setting targets. If you are receiving the target growth number from the CEO or the Finance Team, then just focus on the resources (budgets) needed to make these growth initiatives happen.

4. Resource Mapping

This is where your budget plan gets real. Map out exactly what you need month by month – from hiring plans to tool costs to agency support. Be specific about timing, especially for new hires where you need to factor in recruitment and ramp-up time.

Outcome: Final budget
Time required: 2-3 days

5. Plan analysis

This step is very often skipped by CMOs. It's about going through a short checklist metrics and updating the budget plan if you see some failure points and wrong assumptions. The checklist includes analyzing your budget on charts such as quarter over quarter growth, breakdown by category, goal and correlation with targeted conversions growth.

Outcome: Budget visualization on graphs
Time required: 1-2 days

6. Pitch Preparation

Package your plan into a compelling story. The key goal here is to show the direct connection between spending and results. Use the charts from the plan analysis to show the quarterly budget growth and how it corresponds with the targets realization.

Outcome: Deck that shows strategy and investment reasoning
Time required: 2-3 days

7. Submit for signoff

Send in one file the strategy pitch deck with visual budget analysis and your raw budget file required by the finance team.

Have just one marketing KPI

Every marketing budget needs to optimize for one key conversion metric. Marketing teams often get confused trying to track multiple metrics at the same time. Focusing on one key metric that directly ties to revenue is the only way for your plan to succeed.

Common conversion metrics by business type include:

• B2B Tech: MQLs or SQLs (Sales-led), Signups (PLG)
• B2C Tech: Signups or Purchases
• Enterprise: SALs
• E-commerce: Purchases

Understand your CPA

CPA should always relate to the chosen KPI from the earlier section. Know your target blended CPA for the whole marketing budget and define target CPA for the particular channels.

Blended CPA

Calculate your blended target CPA as: Total marketing spend / Total conversions (in your chosen metric). Assuming that the whole marketing team goals' is working on new customer acquisition, this gives you a realistic benchmark of how much really it costs to acquire a new customer.

Channel-Specific CPAs

Individual channel CPAs are usually much higher than your blended CPA. Also, significant CPA variations between channels are normal and expected.

Example scenario (for conversion MQL in B2B Tech SaaS):

• PPC CPA: $500
• Organic CPA: $50
• Blended CPA: $150

This variation is healthy – expensive channels can still be worth it, if they are included in a healthy channel mix.

LTV and ROI Calculations

Understanding customer Lifetime Value (LTV) is crucial for budget planning and ROI of your actions. Check if there are any major differences between average deal size or LTV across channels. Example: MQLs from PPC might have a lower deal size than industry events.

Target a minimum 4:1 ROI for paid channels. This means for every $1 spent, aim to generate at least $4 in lifetime revenue.

Remember: These metrics aren't static. Review them quarterly and adjust based on market changes and your company's growth stage.

Start by analyzing your existing conversion sources. Use your CRM, BI tools, or Google Analytics to understand your key existing marketing channels.

Your marketing channels might include:

• Paid channels (Search, Social, Display)
• Organic (SEO, Content)
• Offline / Events
• Referral / Partners

Document Channel Performance

For each existing channel, document the following metrics:

• Last year conversion volume
• Channel CPA
• Scalability constraints
• Resources needed

Identify new initiatives and channels

Research potential new channels for next year's investments. Consider:

• Where your target audience spends time
• What competitors are using successfully
• New platforms or ad formats
• Emerging marketing tactics
• Entering new markets with localized marketing

Remember: Focus on channels that can meaningfully impact your key conversion metric. It's better to focus on fewer channels than to spread resources too thin.

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:

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.

Marketing budgets require input from multiple team members. Channel owners know their numbers best - their conversion, CPA projections and cost estimations will be always more accurate than yours.

Get rid of multiple planning spreadsheets

The biggest problem faced by CMOs: running budget planning through multiple spreadsheets. One for headcount costs, another shared with finance, and separate one shared with your marketing team. That makes consolidation a nightmare.

Solution: Use a Single Budgeting Tool

Use a single budgeting tool like Etropo that supports collaboration and category access control. Your team members input their numbers directly, with restricted access to sensitive data like headcount costs. Each line item should have the owner and you might have even owners for the whole category (like PPC), where all line items will be automatically assigned.

Review Existing Expenses First

Start with importing the previous year's budget. Decide which expenses to keep, reduce, or scale.

Consider price increases, especially for software tools. Most SaaS companies raise prices annually by 10-20%. Add this to your calculations.

Add new line items

Focus first on new channels and experiments you want to test. Map out marketing initiatives and campaigns before deciding on additional headcount or contractor needs.

Plan your headcount category

Create a separate category for headcount costs. Split your workforce budget between full-time employees and contractors. During budget approval and analysis, you'll need to know what percentage of your total budget goes to FTEs (hardest to reduce) versus contractors (quickest to cut if needed).

Each marketing role must align with a clear business goal: acquisition, conversion, or retention. In a growth-driven company, most of your team should focus on acquisition activities.

Don't waste time creating multiple budget versions upfront. Instead, first align with your CEO and stakeholders on the core strategy approach - whether you're pursuing aggressive growth or taking a conservative path.

Still, many CEOs request multiple budget versions: conservative, balanced, and aggressive. This often leads to wasted effort as typically only one approach aligns with the company's true strategy. After all, if your company aims for aggressive growth, why spend time preparing a conservative budget that doesn't support this goal?

Better Approach to Budget Versions

Don't create budget versions if you're not forced to it. Use this better approach:

1. Align on strategic direction first
2. Create one solid budget matching that strategy
3. Use versions later to show impact of specific cuts or changes
4. Keep detailed notes on what changes between versions

The line item review requires a structured approval approach. Your team must use clear statuses as line item property to track progress and enable efficient collaboration. Use this status flow to manage all budget line items:

Focus on evaluating each category owner's submissions thoroughly. Pay special attention to items that seem disconnected from team or company targets. For example, if your paid media specialist proposes a 200% budget increase while projecting only 50% conversion growth, that needs discussion.

When rejecting or significantly modifying budget items, provide clear feedback through comments. This helps team members understand expectations and adjust their proposals effectively without requiring meetings for every change.

After completing all reviews, do a final check of the aggregate numbers. Verify that the total approved budget aligns with your target metrics and company growth goals. This becomes your baseline for stakeholder discussions.

The stakeholder approval process requires two different approaches: one for the board/CEO, and another for the finance team. Each group needs specific information presented in their preferred format.

For CEO and Board - Business View

The CEO and board need a concise pitch deck visualizing the budget plan. Focus on metrics they care about: budget versus conversion growth, major category changes, and marketing spend as a percentage of total company revenue. Address potential questions proactively by including relevant charts from your budget analysis. Show clearly how your budget plan aligns with company growth targets.

For Finance Team - Technical Requirements

As covered in chapter 2.3, the finance team needs your budget in a specific technical format. Export your budget with their required line item properties:

• Cost center names and IDs
• Currency details
• VAT information
• Payment terms
• Vendor details (if applicable)

Remember that final CEO approval typically comes after the finance team reviews all department budgets. They need to evaluate marketing spend in context of the total company budget. Be prepared to wait for this broader financial review to complete before getting final signoff.

After submitting your budget, stay available for questions. Quick response times during the review period can significantly accelerate the approval timeline.

Common Budget Review Questions

The most common scenario is that you will get follow-up questions after submitting your budget. Prepare answers to these typical questions in advance:

Budget revision is a critical moment that tests your strategic thinking. The way you handle budget cuts shows your ability to protect growth while being flexible and responsible.

Budget Reduction Process

When reducing your marketing budget, follow this recommended order to minimize impact on business growth:

1. 1.

   Start with reducing initiatives that serve operational purposes, not acquisition or conversion (line item property: goal)

   • Internal tools that can be replaced, reduced, or fully eliminated to move faster with fewer processes
   • Marketing Operations headcount that can be automated or responsibilities redistributed
   • Non-essential team activities
   • Administrative expenses
2. 2.

   Look into budgets for other non-acquisition goals

   • Brand awareness campaigns without clear conversion metrics
   • Content projects without direct lead generation impact
   • Market research that can be done internally or through cost-effective tools like Wynter instead of agencies
3. 3.

   Review all acquisition costs that are fixed-costs, not variable

   • Software subscriptions
   • Agency retainers
   • Contractor agreements

Budget Version Presentation

Create another version of your original budget to show changes clearly. Present to the Finance team and Board using their language - cost centers, not marketing categories.

Show what bets you're making with the remaining budget and set clear evaluation timelines. For each major initiative that raises budget concerns, document:

• Expected outcomes
• Evaluation timeline (no more than 3 months/1 quarter) - this is most important to do!
• Maximum budget at risk