How to set up a marketing budget from scratch

Photo credit: Sharon McCutcheon

Established companies tend to take last year’s budget and increase it by inflation to get to next year’s: not a great process in any case, and useless for a new venture without any precedent…!

Take a percentage of sales maybe? why not. 5%? 10%? That top down approach might give you a (fairly random) overall number but no clue whether it is the right amount or how to spend it, so let’s skip that one as well.

In my experience, there are only a couple of useful methods to set up a marketing budget from scratch:

  • zero-based budgeting (aka ZBB). This works as well for established as for new businesses. It’s fairly simple: take all the activities we think (or know, if they have a successful precedent) we need to grow our business next year: a couple of trade shows, some digital marketing, PR, and a few other things maybe. We can then cost the various activities and arrive at our budget. If it’s not your very first budget, you can look at the funnel and try and compute an expected ROI by activity and for your total marketing budget (ROMI), optimising the spend based on tests and learning what works / doesn’t. To be honest, this is not my favourite method, as it relies mostly on personal convictions rather than evidence: great if you already know what you want to do. But to be true to the spirit of ZBB, you’d need to start from scratch every year and reconsider every single activity: few use it that way, instead using it for the first budget and then falling back into the “just add inflation” trap.

A few rules of thumb:

  • as mentioned above, try to “test and learn” before committing big budgets, to reduce your risk in case the activity doesn’t work as well as expected.

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