Create a Marketing Budget Using SpotOn’s Planning Formula

Business Growth

Oct 24

Determining a marketing budget might be one of the most difficult parts of building a marketing plan for the year or a portion of the year. Marketing isn’t only about being creative.
Good marketers use data, formulas, and sales cycle savvy to align good planning to the organization.

No magic number works for every business or industry, and every organization will have a different budget depending on their audience type, product offerings, company size, and revenue or customer goals.

While there is no one-size-fits-all marketing budget, there is something better — an informed formula for figuring out what is right for you.

By considering the data specific to your business and working backward from your goals, you can arrive at the marketing budget that works for your unique organization and objectives.

Let’s look at the variables our team uses to help SpotOn clients arrive at the ideal marketing budget.

How to Find the Ideal Marketing Budget

To find your ideal marketing budget, you will need to pull historical data from your business.

If this data isn’t available to you, start to track it immediately. While you gather data, use industry benchmarks to offer a baseline for the formula, and then tweak and enter your metrics as you gather your own data.

1. What’s your annual revenue goal?

An informed marketing budget is directly tied to your objectives and Annual Revenue Goal. How much revenue do you want your organization to bring in over the next year?

2. How many TOTAL customers do you need to meet your revenue goal?

Once you know how much revenue you’d like to bring in, consider how you will do it. Figure out how many customers you need to meet your revenue goal.

Determine how much revenue an average customer brings to your organization each year. This number is the Average Revenue Per Customer (ARPC). Then, divide your Annual Revenue Goal by your ARPC to determine the Total Customers Needed to meet your revenue goals.

Average Revenue Per Customer / Annual Revenue Goal
=
Total Customers Needed

3. How many NEW customers do you need to meet your revenue goal?

If you are an existing business, you likely already have customers. Determine your number of Existing Customers while factoring in Customer Churn Rate (the percentage of customers you lose over a set period of time).

Subtract the amount of Existing Customers from the number of Total Customers Needed to find the number of New Customers Needed, the amount of new customers you must acquire to meet your revenue goals.

Total Customers Needed - Existing Customers
=
New Customers Needed

4. What’s your cost per lead?

To get new customers, you need to start with new leads. Determine how much you need to spend to move potential buyers into your sales funnel. This is your Cost Per Lead (CPL).

To find your CPL, use your historical data. Divide your total marketing spend by the number of leads you have acquired.

Number of Leads / Marketing Spend
=
Cost Per Lead

If you don’t have data to inform you of CPL, look to industry benchmarks. Benchmarks vary greatly based on industry and campaign type, but they average around:

B2B: $40–$150 per lead
SaaS: $100–$300 per lead
E-commerce: $30–$50 per lead

5. What are your conversion rates throughout the buyer’s journey?

Now, consider your conversion rates once you generate a lead. Go through the customer lifecycle to measure how many leads become customers. If you don’t know your rates, use industry averages to for the following conversion points:

General Lead to Marketing Qualified Lead (MQL): When a lead has been vetted or assessed by the marketing team and identified as having a higher likelihood of becoming a customer due to their engagement or specific behaviors (e.g., downloading content, visiting key pages). This average conversion rate is typically around 15–25%, depending on industry, the quality of leads, and the marketing channels used.
MQL to Sales Qualified Lead (SQL): SQLs are MQLs that have been further vetted by the sales team and show real potential to convert. Benchmarks are around 40–60%, but this also depends on the lead quality and sales processes.
SQL to Opportunity: The stage where a sales conversation is happening, and there's a clear business opportunity. Benchmarks are around 30–50%, as this reflects more serious conversations between prospects and sales teams.
Opportunity to Closed Deal (Win Rate): Percentage of opportunities that result in a closed/won deal. Average win rates are between 20–30%, but high-performing sales teams can exceed this.

6. What’s your average lead conversion rate?

Use the data from your customer lifecycle conversion points to determine your overall Lead Conversion Rate (LCV), the percentage of leads that successfully turn into paying customers.

Divide the Number of Leads Covered to Customers by the Total Number of Leads and multiply it by 100.

(Total Number of Leads / Number of Leads Converted to Customers ) X 100
=
Lead Conversion Rate

The average lead conversion rate varies greatly depending on industry, marketing efforts, and sales processes, but it typically ranges between 2-5% in many sectors.

7. How many leads do you need?

When you know how many leads you need to generate a customer, you can figure out how many leads you need to reach your goal of new customers. Divide the Lead Conversion Rate by New Customers Needs to get the amount of Total Leads Needed.

New Customers Needed / Lead Conversion Rate
=
Total Leads Needed

8. How much should you spend on marketing?

Once you know how many leads are needed to get your ideal amount of customers, you can come up with an estimated amount of what you should spend on marketing. Multiply the Total Leads Needed by Cost Per Lead to arrive at your Marketing Budget.

Total Leads Needed × Cost Per Lead (CPL)
=
Marketing Budget

Need Help Developing an Ideal Marketing Budget?

Accurate, informed marketing budgeting may seem complicated, but it is just math. When you have lifecycle metrics and your own historical data, it becomes easier and easier to see what type of investment you should make to reach your company goals.

Are you missing the data needed to make an accurate marketing budget? Do you wish you had better metrics to inform your campaign spend? Let’s talk.

Our team can walk you through marketing planning to help you go from your goals to the spend needed to get there. Contact us to talk to our marketing strategy team about building your data-backed marketing budget today.

Raubi Perilli