Today in Digital Marketing - Weekend Edition: Best Practices for Marketing Budgets

Episode Date: January 15, 2022

We all have to do it eventually — develop a year-long marketing budget. There are lots of approaches (do we budget based on a percentage of revenue? or a fixed amount?), but what are the best practices for this important process?In this paid partnership series with CMOx, Tod speaks with Casey Stanton about best practices for marketing budgets.MORE INFO: http://becomecmo.comOur Sponsors:* Check out Kinsta: https://kinsta.comPrivacy & Opt-Out: https://redcircle.com/privacy

Well, now that we're finally past Q4 and into a new year, your thoughts might be turning to your annual budget. What do you put in it? How do you spend it? And most importantly, how do you track the results you get from it? For the answers to all those questions, we are back with another paid partnership with Casey Stanton, who runs the fractional CMO training company, CMOX. You can learn more about them at becomecmo.com. Casey, welcome. Hey, Todd. So let's start here. Do I really need a budget or can I just go campaign to campaign? Right. So as a marketer, as a CMO, you have to consider obviously the budget and the more junior you are in the marketing role, the less you define the budget. So the more senior you become in marketing, the more the budget really is something that you're in control of. I think oftentimes marketers are given a requirement

and they feel like the only way that they can do their job is just to put the muscle in. They have to do it themselves. And I want everyone listening to this to consider for a moment that having a budget means that you have an opportunity to solve a problem that isn't based on your raw ability to do it yourself. So you want to have a budget, you want to have a budget for all things. And I think back to this thing that I learned years ago from from I think Tim Ferriss's book, for our work week, which is this idea that employees can schedule a meeting at any time with anybody, right? There's like no rule that says you can't schedule a meeting. But if you consider what happens if like the CEO, the COO and the CMO are all in a meeting with this other marketing person, it's like a very expensive meeting. That meeting can cost a thousand dollars

for that hour or hopefully more, right? Hopefully that talent's worth more than a thousand bucks. Anyone has the right and privilege to set that meeting and spend a thousand bucks, but could it be better for you to spend that $1,000 elsewhere? Instead of having that meeting, could you go buy a course or a tool or hire a consultant for an hour to do something? What can you do to actually solve the problem that's outside of this notion of, I just have to put more time in. I just have to work harder. And this is this idea that we have at CMOX, which is solve bigger problems. You've got to just move up in the quality of the problems you solve.

Because if you continue to solve small problems, you just deserve small rewards. So the budget is this first kind of place for a marketer to start considering, how can I go from I have to do this to this needs to get done? That's the distinction. I have to do this is where most marketers sit. This needs to get done is the ascended role or the ascended position of the marketer who's like taking on more leadership and saying, I got to get this stuff done. It's not possible for me to do it. I'm not the right person for it. This is worth $5 an hour and I'm paid more than that. I need to

be able to give this to somebody else. So you need a budget, you need to have a budget, you need to know what your working budget is. If your budget's a thousand bucks a month, or if it's $100,000 a month, right, you just got to know what your budget is. And if you don't have one, you got to go get it from your executive. Right. And this document, is it like a, does this live inside the annual plan itself? Is it a standalone budget? What's the structure of this kind of document? Good question. So the budget is a document budget? What's the structure of this kind of document? Yeah, good question. So the budget is a document, it depends on the size of the team, right? So if you have a team that has a CFO, and you've got like a, like the full kind of finance team laid out, they're probably gonna have a more traditional budget, that's going to be a Google sheet or a spreadsheet, it's going to have line items for talent, it's going to have line items for

consultants, for tools, for ad spend, things like that. So that's, that's where I want you to consider what you're building. Anything that anyone listening to this is building on the budgeting side should ultimately go to that kind of style or implementation. As the company grows, it doesn't make sense for you to build kind of an ad hoc budget that couldn't kind of build into a more traditional budget process. So that's what I want everyone to kind of think of. If you did it right, you would have a spreadsheet, you would have the line item in a column, you'd have a category of it in a column, for example, advertising expense, tools, headcount, etc. And then you'd have every month what your anticipation

is that you're going to spend. And you summarize all those things, and that gives you your full budget. If you're a marketer and you're inside of a company and you're wanting to ascend to a more leadership role, if you propose a budget and start putting this together, that's a really powerful thing to do. The organization currently doesn't have that. They're going to be able to see your expertise and give you more trust. And through that trust and respect, hopefully higher pay as you ask for it. So that's how you can ascend as a marketer in house. But if you're working outside as a marketing consultant, or better yet a fractional CMO, which is like a marketing consultant, except you get to stick around longer, right? Consultants are really

short lived. The fractional CMO is they step in and they have this budget and have budget conversation laying out a clear comprehensive budget budget just builds all sorts of confidence that the company has the money to pay, clarity that you're going to be able to actually achieve the outcomes that have been defined by the C-suite. So C-suite says we need 1,000 new customers. You say, cool, it cost us last quarter on average $100 per new customer. I need $100,000 to get those customers. But I'm actually only going to ask for $80,000 because I think we can have a 20% increase in efficiency. So you can start having these conversations and putting together a budget. And that is just like so critical for any business growth. If you don't have a budget, and if you don't have an annual

plan, you're probably the kind of marketer who is doing the best you can and kind of guessing. And I want you to get better and better every quarter. It's always messy when you get started. You kind of don't know what you're doing. But after you move through a quarter with a company, develop a budget, develop your scorecard, and start kind of building up from there. Right. And I guess there's really two kinds of models, aren't there? There's the percentage model where you're given as the CMO a percentage of revenue, or there is the flat feet where you're just told $50,000? Is there a better approach? Should we be picking one or the other? Yeah, good question. So when you think of a budget, you're right, there's two types of budgets. There's budgets that's an allocated cash amount, like you have $1,000 budget a month,

or there's the budget that's a percentage of revenue or percentage of new customers or whatever. You know, you could be funky and say for every new customer that you bring in under $1,000, you get that delta as a marketing budget. You have $1,000 to attract a customer, to get a customer. What's nice about those budgets when they're based on the number of results that you get is that they scale. So you could say, okay, you get 33% of the lifetime value of a customer to acquire them. So for every customer that you add,

you get more and more money in that marketing account. That's cool. I never really thought of attaching it to the customer lifetime value before. It depends on the company, right? So if the lifetime value of a customer for e-commerce is a single purchase, you could attribute it to that. But if you also have a higher lifetime value of a customer for e-commerce is a single purchase, you could attribute it to that.

But if you also have a higher lifetime value because it's like a SaaS tool, and you get a customer in in their past 30 days, then that customer is going to be worth to you five figures, six figures, whatever lifetime customer value. You can do your calculations based on that. I don't know any company that would turn away a $100,000 lifetime value customer with, let's say, a 50% margin on SaaS, let's say. They wouldn't turn that away if you said, hey, I can go acquire that customer for you for $10,000. They're going to be like, hell yeah. Every time you spend $10,000, we get $100,000 and keep $40,000. That's a pretty good scenario. So what the marketer listening to this, what you

need to understand is that you need to have money that you can lose. Like that's part of your budget too. You have to have an R and D budget. So when you're just starting off, you want to have a control. Let's talk in marketing baseline. You need to control. What is your control in marketing? It's when we do this thing, we get this result. We know that to be true. If you don't have a control, you have to establish a control. So you're working with a new client. They have a Shopify site. They've never seen anything before. You don't know what it's going to cost. You do your best just to get sales and you hopefully make profitable sales. You're going to get a benchmark baseline number. It cost us $10 for a new customer, $100 for a new customer, whatever it is. Once you have that number, you figure out, is it profitable or not?

What do you have to do to it? But you'll have that control, and then you need to have a budget around that to kind of reduce the cost or increase the efficiency of that control. That might mean new web page builds. That might mean new copy. That might mean conversion rate optimization with headlines or subheads or pricing or guarantees or whatever, testimonials, social proof, that kind of stuff. You need to have a budget for kind of the work, and then you need to have a scaling budget. So I'd like to have a budget, let's say it's 5% of the whole marketing budget,

10% of the whole marketing budget. 10% of the whole marketing budget, I want to be okay burning and having bad results from. I want to be able to risk. I want to go over to the betting table and say, I'm going to try this. I think this could work. I want to go put some money in this campaign. For example, browser notifications.

Do you know that they work for your audience or not? Maybe they do, maybe they don't. But if it's going to cost you five grand to implement browser notifications, you don't know if that's going to get you a result. So you can't bet on it. So you should have $5,000 in burn money. You're going to do your best. You're going to try, but you might lose. And that needs to be okay. You need to have the psychological safety in the organization. You need to be forward and say, hey, executive, I need five grand a month in play money, in money to test stuff. And I'll tell you, we're going to lose more than we'll win.

But we know that when we win, we'll be able to innovate. And that should be worth it. And then on top of all of that, you need just your kind of baseline budget. And your baseline budget should be based on your control, based on the outcome that's required for a successful month or quarter. You should be able to devise a budget. Like we said before, 1,000 customers cost you $100 per customer. A good budget would be $100,000. And then you would just want to have efficiency.

You'd say, yeah, we'll do what we did last quarter, but I think we can drop costs down a bit. Maybe it's down to $80 customer acquisition instead of $100. So your budget that you request is, you want 1,000 new customers, I need $80,000 to make that happen. You know, this sounds like an idea I had for the podcast, which I am planning to launch sometime, called Stupid Media Buys, where I just take the most ridiculous media placements possible and see what happens.

I actually have some money right now with an app for swingers. It's promoting the podcast. It has nothing to do, of course, with swingers, but I've got some money in now with an app for swingers it's it's promoting the podcast like it has nothing to do of course with swingers but i've got some money in there sure um and it's like mad money right it's it's a percentage of stuff i guess you're willing to lose um like like spending on reddit for instance or something like that it could pay off yeah you know reddit has its own issues with his like scalability and i feel like every time i've wanted to buy media on Reddit, they're out of media. It's booked out for the next six months or something, and you kind of miss it, which is tough. But Reddit certainly is an interesting audience. But every company can advertise on Facebook and Google. So if your company is only on Facebook and Google, just

anticipate CPMs to rise over time. Anticipate CPLs to increase over time. Just anticipate it. That has to happen. There's no efficiency that's going to come to Facebook that's going to reduce that. What's going to happen is big box retailers are going to get their act together and they're going to realize that Facebook's smart. And we're going to lose this heyday that we're in Facebook. Right now, we're in a heyday of Facebook. We're getting, what, $30 CPMs on Facebook? That's pretty good. So when you see that number climb up to 40, 45, 50, 50, 60 over the next few years, you'll realize how hot the times are, but that doesn't mean you should build your business standing on one leg. You can't build a business on Facebook alone, like not a business. You can

build an offer. You can make some money, but you can't have a business. A business needs to have more channels that drive in traffic. So you get your control, you establish your control, and you say, Facebook is we're going to drive 90% of our traffic, and we know it. And this quarter, we're going to try Twitter, and we're going to go nuts on Twitter, we're going to build out really great threads, we're going to, you know, comment in a certain way, we're going to do really smart stuff on Twitter, and we're going to grow it. And maybe that works. Maybe it doesn't. Next quarter, what are you doing?

Next quarter, what are you doing? I recently hired someone as a fractional CMO. I hired them to do outreach, and they have a target. Every single month, they have to bring in a certain number of new test relationships. And their whole marketing budget, their whole headcount, so what we pay them as a salary and then what their marketing budget is, that's all money that we're committing to burn. We don't want to burn it.

Obviously, we want a good outcome. But if that person delivers nothing to us, the business doesn't really suffer. And if they deliver something great to us and we have an upside, then really the sky's the limit. So we're able to bet on them and find these additional traffic sources. And you need, again, a budget uniquely for that. I'm speaking with Casey Stanton. He leads the fractional CMO company, CMOX,

which you can learn more about at becomecmo.com. Casey, can a budget hurt a company in any way? Yeah, so a budget can be kind of annoying. You know, when the finance team or the executive comes back and they limit your budget and you're like, listen, boss, like, listen, CEO, if I put a dollar in, I know in 30 days, two and a half dollars come out and you want to limit me. It can be frustrating. It can also force you to, uh, have to build out campaigns that maybe can never work. So for example, if your lifetime customer value is small, if you're selling a small

ticket, small ticket is tough because you just don't have the acquisition budget. You know, if the average lifetime value of someone is $30, like that's, it's really tough to acquire a customer for less than 30 bucks for 10 bucks, right? You can't really do that. I can get leads for 10 bucks. I can't get customers for 10 bucks, unless maybe I'm on, you know, outbrain taboola native ad stuff. Maybe if I'm on TikTok, but like, generally speaking, you can't go the traditional routes and get such cheap customers. So if you're given a budget and you're kind of forced to be more traditional on it, you might just be shooting yourself in the foot. You might also have a governor on your ability to create scale in the business, which can be frustrating.

But marketing is at the mercy of finance. If marketing doesn't have the money, then marketing has to put in the hours. And if you're out of capacity, then you're just done. You just can't do more. I think it's common for marketers also to have really poor boundaries, personal boundaries. They say, I want to help this company. I'm committed to the company. And they're working 60, 70, 80 hours. They're compensated for 40. And they feel burnt out. They feel dropped by their manager. But they just don't have a boundary. So they're given a set of tools. They're given a set of outcomes and the tools plus effort cannot ever equal the outcome. It's an equation that can never compute. And they say, it's my

fault. And sometimes it's just not your fault. You're just given an impossible outcome and you can't invent your way out of it. So what you need to do is you need to fight for a bigger budget, or you need to push down the outcomes that the executive says. And I am so direct about this stuff. If I work with a company and they're like, Casey, I want 1,000 customers by the end of the month. I'm like, I need a budget of $110,000 to do it. And they say, I can give you a budget of 50 grand. I say, cool.

I can guarantee you 600 customers. I can't get you your 1,000. They're like, I want 1,000. I can guarantee you 60 or 600 customers. I can't get you your thousand. They're like, I want a thousand. I was like, I need the money. We can battle. We can fight that out because I can stand in like the, the, the fact-based truth that there's an acquisition cost for customers and I can run all of the modeling I want. But ultimately, if I can't deliver, I have to say early and often, hey, executive, what you're asking for is impossible, despite everything I'm doing. And if they say, I need you to invent it, figure it out, then you say, I need a budget to hire a consultant, I need a budget for this tool, I need to, you know, figure out other stuff,

I need to take this off my plate so I can work on it. But the marketer has to be, you know, boundaried to be able to accurately identify what their outcome could be and agree or disagree with the executive. If the executive says it should be bigger and the marketer knows it can't be, then they have to either fight for the budget or fight for the time or fight for the outcome to be reduced.

Because no one wants to miss an outcome. You know, you should never feel like it's the last 10 days of the quarter and you're going to miss and it's a surprise. You should know from like day 14. Yeah. What about if there's no CFO? Because the CMO and the CFO often, usually, hopefully, work hand in hand. So what do you do if that role, the CFO, doesn't exist

or isn't working in partnership with a CMO. Yeah, for sure. And CFOs to me are incredible people. I have a lot of respect for them. I appreciate their ability to kind of like game up the numbers over time. That's something that's just awesome. And I lean on them as much as I can. If you work with a client as a fractional CMO, if they have a CFO, you're just in a really good place. You have someone who's kind of got your back on the finance side. But where you start with everything is just what you've been spending. Just pull credit card reports. Just ask what's been spent to get the current result. And oftentimes, it's tough if the organization is kind of in that growth stage where the executive is doing a lot of the work. Let's say it's a single founder and they're going on trips and they might have their,

you know, spouse's car going through the business. And there's like all these unnecessary expenses in the business. But what you could do is you could get a report on all the expenses related to marketing. And you could see, are you spending money? Where should you? Where shouldn't you? And you can start putting in plans moving forward. I mean, the simple thing that all marketers here, regardless if you're an in-house

marketing consultant or a senator to the role of the fractional CMO, you should know when your CRM is going to need to be on the next pricing structure. You should know based on current lead growth, you're going to need the next level at ActiveCampaign or HubSpot or Pardot or whatever. You should just know these numbers and be able to predict that. You don't want that to be a surprise. If you work with someone in finance too, sending a credit card expense notice. So you might have kind of use of the credit card. You might have a $5,000, $10,000, $100,000 a month budget, whatever it is.

You can swipe that credit card in any marketing expense. But you should also then fill out a credit card authorization form and just say like, hey, I know I'm authorized to use it, but whatever it is. You can swipe that credit card in any marketing extents, but you should also then fill out a credit card authorization form and just say like, hey, I know I'm authorized to use it, but here it is. I just bought this software and it's going to cost us a hundred bucks a month. And I think we'll have it for the rest of the year. So you start passing that over to finance and then they are able to add that to their budgets. That makes your budget review every quarter a lot easier because everything's been added. It just kind of simplifies things. You want that budget to always be living and breathing. Again, I'm speaking with Casey Stanton of the fractional CMO training company, CMOX. Casey,

can you talk a bit about what a fractional CMO is, just to kind of recap, and then what you at CMOX can offer people who are interested in becoming a fractional CMO? CMOX. I started this business because I became the CMO of multiple companies. This idea of a fractional CMO is that you're the CMO for multiple companies. That's it. You're the CMO. Everyone sees you as the CMO. They don't see you as the fractional, right? So the experience of everyone on the teams that you work with is that you're the CMO,

and you have the authority, and you're given the, you know, you're deputized as the leader of the marketing department. The reason that this is exciting for a lot of folks and our members is because as a CMO, it's the shortest lived C-suite role. CEOs last longer than CMOs. COOs last longer than CMOs. CFOs last longer than CMOs. So the chief marketing officer is the shortest lived C-suite role. So if you want to ascend to the top role as a marketer, you want to be the CMO. The problem is, the risk is, you should think that that role will only last two years, three years. And then you're going to get cycled out for whatever reason. It's like when a football team doesn't win the Super Bowl, you know, they might lose their coach, right? It's kind of what's going on with you, right? As the potential CMO. So by being the CMO of multiple companies,

you kind of buttress yourself financially. You have multiple sources of income, you serve multiple companies, but you're giving them an incredible value. You're giving them the marketing strategy and leadership that they need without the high cost. And what I love about it is that you get to do the fun stuff, the stuff that you want to do, which is the marketing strategy. I assume if you love working on WordPress websites, if you love building out ad campaigns, go do that professionally. But if you're done doing that stuff and you want to ascend to this top role as the CMO, I encourage you to be the CMO for multiple companies. And becoming a fractional CMO is kind of like the term that's used right now. At CMOX, the company that I founded, I founded it because I had an overwhelming demand for people who wanted to hire me as their CMO. And then I had people who wanted to work for me. And I decided,

you know what, I don't want to give people work. That's not what a marketer wants. They want to be their own boss. They want to be their own business. So I've trained them in every worksheet, every process on how to find, attract, convert, and finally serve customers, serve clients as a fractional CMO. We have members who've joined. I'm thinking of one guy. He joined it in 21 days. He closed a $10,000 a month client. And then a week

and a half later, his second one. Before that, the guy was charging three grand a month for clients, two to three grand a month. He brought in $20,000 a month in recurring business in his first like, whatever that was, 40 days. And that's recurring business. That's business that will likely last multiple years. And then he adds more and more to it. So that's what we do. I think it's a very exciting time to be a marketer. And if you adds more and more to it. So that's what we do. I think it's a very exciting time to be a marketer. And if you want to ascend to the top role, and if you're worried about like your fees getting kind of chipped away by offshore labor, by people who are willing to work for less than you, and you want to just keep ascending in your career,

you ascend to the top role. It's clear, right? You got to be the number one role in marketing, which is the CMO. And then just support yourself by having multiple clients. And if it's something that you're interested in, we'd love to help you become CMO.com. You can watch a video kind of tells you what we got going on. And if it makes sense, you can book in a call with Hannah on our team, and John, and they'll walk you through everything, ask him any questions you want. We'll show you, you know, the people that we've helped and how we've helped them bring in 10,000 $15,000 a month, individual clients where they're working a handful of hours each week for them. Well, this has been great.

I'm especially looking forward to next month where we're talking about hiring and building a marketing team. That's a very important role, of course, of the CFO. How to interview to get the best candidates. We'll talk a bit about remote workers, some risks in hiring, all that. But for now, thank you very much for this, Casey. Thanks, Todd. Really appreciate it. Casey Stanton from the fractional CMO training company CMOX. Again, you can find them at

becomecmo.com.