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Marketing Budget Calculator

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Marketing Budget Calculator

marketing budget calculator

This is the marketing budget calculator I use with my clients, and it will help you calculate how much to spend on your marketing budget. I want to just go through it today in the context of knowing your numbers. And there are four questions you need to be able to answer:

  1. How much is your average customer worth?

I know everybody’s business has got some people spending more than others but, everyone’s got an average. So how much is your average customer worth and then look at this in terms of gross margin. So to work this out look at your total revenue last year. And how many customers gave you that revenue? Divide one by the other and that’s your average customer revenue. Then as long as you  know what your gross margin is, you can work out that first number. Therefore take one year’s gross margin for an average customer. You could take two three if you have a lot of repeat business, or your customers come back to you for many years. So work out what the average customers worth to you. See previous article for more information on customer lifetime value.

2. How much would you pay to get one of those customers?

If one of those average customers was worth that much to you over the next two or three years. If they were stood outside the door right now? And all you had to do was write a cheque to get them – how much, how big a cheque would you write?

So actually you can afford to maybe not spend all of it but certainly spend a significant amount of that money to bring them in because once you’ve got that moving, you’ve then got a steady stream of income.

And that’s the key because it’s much easier to get rhythmic acquisition when you’ve got good mechanics.

So the second one requires a bit of skill of judgement.

If I’ve got a customer my average is worth say £500 pounds of gross margin over the next two or three years. How much would you pay to get one of those customers? I’d definitely spend £100. Some would probably spend £200 to get £500 every year over the next three years because that is still a good return.

3. How many leads or inquiries do you need to get a customer?

If you sell to one in four of the people you speak to, you need four leads to get one customer so your ratio is 1 in 4.

If your customer was worth £500 pounds and you’re prepared to spend £200 to get a customer and you need four leads to get a customer, now it’s straightforward. The answer is £200 divided by four. So it’s £50 to get a lead.

4. How many customers do you want next month?

Let’s say you want 10 customers next month So how many leads do you need to get 10 customers? 10 times four. So you need 40. So you need 40 leads and how much marketing budget to spend to get 40 leads? It’s 40 times £50 pounds. So £2000. So my marketing budget should be £2000 a month to get 10 customers a month and that that’s how you start.

That’s how a proper marketing budget starts to be compiled –  come at it this way instead of thinking tactically and looking at one-off activities. This way is strategically driven from a deep understanding of your numbers. That’s why it matters so much. It just has such a positive impact on a business and it can help you to get where you want to get to so much more quickly.

Want some help? Book some time in my calendar and we can work through it together.

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