Among all the topics of discussion between CMOs and Finance/Management, one stands out as the most uncomfortable of all. Budget increase requests. Discussions relating to budget tend to be contentious because of the generally poor state of affairs in the Marketing Finance relationship.
As marketers, we always want (need!) more budget. Increased budgets mean that we can test new marketing channels, scale our top channels, expand brand presence and drive greater performance and growth.
But this is our view on things…
Finance and Management often see it very differently.
In 2018, Marketers themselves estimated that around 30% of their budgets are wasted through poor strategic planning and/or wrong channel focus. In addition, 44% of marketers identified the inability to prove the value of marketing as a threat.
With these numbers, can you blame Finance and Management for being skeptical towards marketing budget increase requests?
Here’s the thing though…
Most marketing budget increase requests are rejected because the marketing leader didn’t do a good enough job of:
- Emphasizing why a budget increase necessary
- Providing good visibility into the ongoing cross-channel marketing spend and results
- Providing a detailed accounting of where the additional budget will be invested
- Forecasting what the expected outcomes of that budget increase will be on the business bottom line (which is all Finance and Management care about at the end of the day).
“Ask and you shall receive” does not apply in B2B Marketing.
There is, however, a clear-cut process that successful B2B marketing leaders follow to get the budgets they need to continually drive growth within their organizations.
In this post, we will lay out this process and outline what you need to do to give yourself the greatest chance of getting your next marketing budget increase approved by finance and/or management.
Before we dive into the process, it’s important to cover the characteristics that your budget increase request must meet in order to even have a chance at approval.
A Marketing Budget Increase Should Be…
Your marketing budget increase request must be feasible and realistic
When we say feasible, we are talking about the ability or your marketing organization (or other departments) to operate with an increased budget. Can your team really handle an increase in the production of content or an increase in paid marketing?
If your content team is just barely able to produce the current quantity of content, how would they deal with the demand for increased quantity? Maybe you need to hire more people to produce content?
If you’re a sales-driven organization, can your sales team even support the results from a budget increase? Do they have the current capacity to deal with more opportunities or SQLs?
You need to make sure that any budget increase that you request is feasible for your marketing organization.
Your marketing budget increase request should also be realistic!
If your B2B SaaS company is currently spending $3M annually on marketing and has annually recurring revenue (ARR) of $10M, it wouldn’t be so realistic to ask for an additional $3M in marketing budget. This would bring double your annual marketing budget to $6M and would now account for 60% of your company’s annual recurring revenue.
Without any extenuating circumstances, like raising a very large round of funding, Finance and Management would likely balk at the sheer size of this request and deem it unreasonable and impossible to grant, without even hearing out your plan!
Prevent this from happening by grounding yourself in reality. Consider factors like marketing budget as a % of company revenue and what kind of % increase your request would represent of your existing budget.
Now, let’s get back into the process of getting your marketing budget increase approved.
Step 1: Set a Goal
Essentially, the first step in the process is to set a goal by answering the question “why do I want an increase in my marketing budget?”
Like good B2B marketing goals, it should be a bottom-line contribution that your marketing organization needs to provide to help attain the business goal.
Some examples in B2B SaaS marketing would be:
- More Opportunities
- More SQLs
- More Trial Users
- Increase MRR/ARR
For the sake of building out an example, let’s go with Opportunities.
“Why do I want an increase in my marketing budget?”
“I want an increase in my marketing budget to generate 20% more opportunities in Q3”
Step 2: Create Your Hypothesis
Yeah, we used the word hypothesis. This isn’t science class, but B2B Marketing isn’t too far off.
Your hypothesis answers the ”how” part of the equation.
“How am I going to increase opportunities by 20% in Q3 with an increased budget?”
This answer is going to serve as the initial idea for a tactical plan to achieve your stated goal.
Let’s say, based on your general observations, that video content and promotion, along with LinkedIn ads and Quora Ads are great at generating opportunities for the sales team, you would set this as your hypothesis.
“We will achieve a 20% increase in opportunities by investing our increased marketing budget in the production and distribution of more video content and the expansion of our LinkedIn ads and Quora ads campaigns.”
Step 3: Analyze Your Data & Create Forecasts
Time to bust out those spreadsheets (are you really still using them!).
Your data analysis and forecasting will serve to prove (or disprove) your hypothesis and help you craft the exact tactical plan that you will employ to hit your goal.
Can your marketing organization actually achieve a 20% increase in opportunities with more video content, LinkedIn ads and Quora ads? Is this really the most efficient way to generate 20% more opportunities?
You need to be prepared to accept that your hypothesis was wrong and that there may be better, more efficient ways to achieve your goal with the budget increase.
What you need to do is to pull your historical and current channel performance and cost data to get a sense of channel performance. We advise going back as long as far as possible to get the full picture, but if this is a manual task, go back at least 1 year in the data.
You need to find out:
- What impact will an increased marketing budget have on your mix of channels?
- What correlations are there between your marketing channels?
- Are there any upcoming events or holidays during Q3 which could impact the production of your channels?
- How much am I currently paying for an opportunity in each of my marketing channels?
- Do I currently have efficient channels that I am underinvesting in?
With new channels that you haven’t invested in previously (therefore no performance data), try and use reliable industry benchmarks to back up your request.
Once you have insights into the above, you can start creating forecasts to see how your channels would perform with increased budgets. From here, you can start attaching some numbers to your request.
Based on your forecasts, you might see that the most efficient way to achieve a 20% increase in opportunities in Q3 is a:
- 20% increase in Video Production and Distribution
- 13% increase in LinkedIn Ads
- 9% increase in Google Ads
Notice how your hypothesis has changed? Data has shown that Quora was not an effective way to attain your goal, but an increase in Google Ads was a better path.
With these numbers, you can calculate the value of the budget increase for Q3.
- 20% budget increase for Video Production and Distribution = $95,000
- 13% budget increase in LinkedIn Ads = $79,000
- 9% budget increase in Google Ads = $70,000
The total budget increase that you’d want to request for Q3 would be $244,000
“In order to increase opportunities by 20% in Q3, we will need and additional $95K for video production and promotion, $79K for LinkedIn Ads and $70K for Google Ads”
Step 4: Finalize Your Plan
Since your data and forecasting has shown where you need to invest your budget and has given you specific dollar amounts to request, you need to build out the specifics of your plan.
OK. So you have $79,000 in additional budget for LinkedIn Ads. How is this going to be invested? Are you just going to increase the budgets on your existing campaigns? Are you going to test new ad formats and bidding strategies?
In collaboration with your team, you need to map the specifics of each channel and create a detailed plan on how the budget increase for each channel will be used to achieve the goal of a 20% increase in opportunities.
An example could be:
- 40% will go to increasing the budgets of existing campaigns
- 35% will go to testing new campaign types, specifically Lead Generation Form campaigns
- 15% will go to testing new audiences
- 10% will go to testing new creatives and landing pages
You need to specifically account for how the budget increase will be utilized within those specific channels and what the outcome will be from each investment.
Now that you have crafted a detailed plan about your channels and what will be done with the increased budgets, you are ready to move to the next step.
Step 6: Get Support
Now that you have a solid plan in place, it’s a time to collaborate with Sales.
By explaining the idea and showing your plan to sales, you are giving them clear visibility into the activities of marketing. Because the goal of your budget increase request is directly tied into the business goal, Sales will understand exactly what you are aiming to achieve because it closely aligns with their own goals.
What Sales team would be against a 20% increase in opportunities?
An added benefit is that Sales will inevitably be excited at the prospect of being able to close more deals and increase their own production. This will translate into direct support for your request.
By having Sales as your champion, you will present a much stronger case to present to Finance and/or Management for a budget increase than if you were to approach them without the support of any other department.
Use the power of the crowd!
Step 7: Pitch Your Plan
Now comes the moment of truth…your pitch!
Make sure you lay the groundwork ahead of your pitch by telling Finance and/or Management about the plan that you are working on (the basics, no specifics). By giving them a heads up, they can mentally prepare to engage with you on the topic.
Nobody likes the unexpected. By not informing them ahead of time, you risk hardening their resistance to your plan, just based on emotion. You need to set the stage.
Timing is also a considerable factor. You may have the best plan in the world, but if you pitch it at the end of a quarter (when Finance is very busy) or during some strategic negotiations (when management is focused on other things), you might find your audience unreceptive to your ideas. As the saying goes, timing is everything!
The actual pitch itself needs to be crafted like a story. You need to cover the current position of marketing and sales, show what the bottom line would be like with a 20% increase in opportunities for Q3 vs. what would occur with no budget increase, show why a 20% increase in opportunities would be a game changer for the company, etc.
It’s important to start your pitch with the problem and explain why an increase in marketing budget is the right solution compared to just adjusting your current budget.
Inspire hope, show a better future, show that the increase is reasonable and worth it and emphasize that this is a chance to significantly improve results with a modest budget increase. It’s also important to highlight that these factors change frequently and that there is a need to act now.
You need to prepare a slide deck that visually displays the numbers, explains the reasoning and does it in a clear and concise way. The slide deck is just meant to visualize the data but your presentation should be what sets the tone. Make sure it’s filled with passion and excitement about creating better results for the company.
The request for additional marketing budget doesn’t have to be a source of contention between Marketing and Finance/Management. It should be an opportunity to open dialogue on improving the position of the organization and welcomed by everyone.
The key to getting your marketing budget increase requests approved is to show Finance and Management that:
- You’re making a reasonable and realistic request
- You have carefully thought through the impact of the request on the bottom line of the company
- You have a solid plan, backed by data, for when and how the increased budget will be invested
- You believe in your ability to deliver meaningful results for the company and that your team is prepared and excited to execute this initiative
By following the steps outlined in this article, you are well on the way to crafting successful marketing budget increase requests and should expect many approvals in the future.
What does your process for request a marketing budget increase look like?