How to build digital marketing budgets for clients

Your small and medium-sized business (SMB) clients share the same challenges all business owners face: competing priorities, limited resources, and the need to capably make strategic decisions that foster growth and serve the business’s best interests. Your digital agency may have a wide range of powerful solutions available to drive SMB growth, but your clients have to stick to a digital marketing budget and spend it thoughtfully to maximize their returns.

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Without a digital marketing budget plan, SMBs run the risk of poorly spending their marketing dollars and running out before they see any results. This is a losing situation for marketing agencies and clients alike. A better situation is to work together to come up with a realistic digital marketing spend and to find solutions within that budget to grow the business. If you want to build profitable, long-term relationships with your clients, you must know how to create a marketing budget for them that’s realistic and mutually beneficial. Read on to learn how to do just that.

What’s the average digital marketing budget for small businesses?

Digital marketing costs for small businesses depending on a number of factors that can significantly impact their budgets. These include:

• Business niche or industry: Appropriate digital marketing budget allocations can vary dramatically by industry. For example, businesses in high-competition industries may require a larger budget to stand out. Similarly, those with high value big-ticket products or services might spend more than those in industries with lower margins.
• Business goals: Your client’s goals can impact their digital marketing spend. For example, some business may be focused on running awareness campaigns, some may be trying to maximize conversions, while others may be trying to increase their average order value. These goals can be associated with different budget requirements.
• Ideal customer and target audience: The size of an SMBs target audience, and characteristics of it such as where it is best reached, can impact budget. For example, a narrow niche audience may be more expensive to target than a broad one.
• Preferred platforms: Different digital marketing platforms and channels have different costs, so the choice of platforms can inform the digital marketing budget.

Given the significant variation that these factors alone introduce, and the fact that “small business” can range from solopreneurs to enterprises with dozens of employees, the dollar amount of a digital marketing budget can vary dramatically. It can be more helpful to think in terms of ranges or percentages.

For example, the Business Development Bank of Canada gives a range of 2-5% of annual revenue as a rule of thumb for B2B digital marketing spend, and a range of 5-10% of annual revenue for B2C digital marketing spend (BDC). Here’s an interesting breakdown of spending on website services and digital marketing by Canadian businesses broken down by annual sales:

BDC

Since this data is from the 3 years preceding 2019, these numbers are likely slightly larger today.

For some of your clients, a realistic marketing budget might be considerably smaller than the numbers in this table. For a realistic digital marketing budget example, let’s say you’re working with a small two-person commercial office cleaning business. Their revenue may be $150,000 per year. In this case, a reasonable online marketing budget using the BDC reference range for B2B businesses would be around $3000-$7500.

Essential expenses in a digital marketing budget

Whatever your client’s digital marketing budget allocation is, it’s important to be aware of the key components that should be included in the typical digital marketing plan. These might vary somewhat depending on industry, goals, and budget constraints, but a robust digital marketing strategy should take these elements into account.

Website development and maintenance

Based on the BDC data above, website expenses are a major component of SMBs digital marketing spend—sometimes over half. This makes sense: a website is a business’s digital storefront, and it must be modern and highly optimized to convert for product and service-based businesses alike.

In addition to the initial design and build, digital marketing plan budgets should include an allocation for hosting costs, maintenance, and security. These can be significant for high-traffic websites.

Branding

SMBs need a strong brand identity to build recognition and trust in a noisy digital landscape.

Search engine optimization (SEO)

Investing in SEO enhances a website's visibility on search engines, driving organic traffic. A well-optimized site ensures discoverability by the SMB’s target audience, which is important for growth.

Content creation

Content creation is a non-negotiable component of digital marketing today. Businesses need fresh content regularly for their social media platforms and blogs. This encompasses writing, photography, videography, and graphic design. Since it can be time-consuming to create in-house, it’s common for SMBs to outsource it to digital marketing agencies.

Paid advertising

The other components of a digital marketing budget discussed so far take time to grow to fruition, but paid advertising and deliver quick results. Reserving a relatively small portion of the digital marketing budget allocation for ads makes sense in the beginning, until more data is collected. Then, as agencies have enough data to get better results from ads, this portion of the budget can increase. Check out this video for more on understanding digital advertising metrics:

Analytics

Digital marketing efforts need to be tracked and analyzed to ensure the budget is being used effectively and delivering results. Analytics tools make it easy to interpret data, and while they don’t have to be extremely expensive, room should be paid for them in the budget.

Challenges in client digital marketing budgets

As a digital marketing services seller, you’ll encounter some common roadblocks in the process of establishing budget for your digital marketing plan with clients. Let’s take a look at the most common challenges and some actionable tips to address them.

• Limited resources: SMB clients have many expenses that aren’t optional, like inventory, staffing, and office space. As a result, digital marketing can feel like a less “essential” way to spend their limited resources.
• Lack of expertise and understanding: Most SMBs know their product or service well, but they lack a strong understanding of digital marketing tech and strategies. This can make it difficult to communicate why services have a given price tag.
• No ROI guarantees: Even the best boutique marketing agencies can’t provide a fool-proof guaranteed return on investment (ROI) for clients. There is always an element of the unknown to marketing, which can lead to hesitancy when it comes to creating a digital marketing budget plan.

Overcoming digital marketing budget challenges

Overcoming these challenges is all about providing effective, evidence based marketing consultation. Try these strategies:

• Provide case studies: Create case studies from past client successes. These should include infographics, testimonials, and compelling data as evidence of your results. If you’re just starting a digital agency with no experience, you may not have case studies yet. In this case, you may want to consider a short, low-cost trial for clients to get comfortable and trust your capacity.
• Take a phased approach: Give clients the option to scale their budget as key performance indicators (KPIs) are hit. Offer low-cast starter plans, and create a roadmap for scaling the digital marketing budget as ROI is generated.
• Ace your analytics: Demonstrate your value with irrefutable data by creating robust, easy to understand analytics reports for your activities.

How to build a digital marketing budget for clients

Follow these steps when working on your next online marketing budget. By taking this systematic approach, you can be confident your budget takes every key consideration into account and that you and your client are on the same page about expectations.

1. Conduct market research: Your first step should be to understand your client’s industry or niche, target customer, and competitor landscape. These will inform the next step of your budget checklist.
2. Define clear marketing objectives: Work tougher to set precise, realistic digital marketing goals. These should be associated with measurable KPIs so you and your client know when each goal has been met.
3. Determine a total budget amount: Work with your client to find out how much they can realistically spend on digital marketing over a given period.
4. Analyze past performance: If you have historical data, evaluate the effectiveness of past campaigns to determine what worked well and areas for improvement. Evaluate the effectiveness of previous digital marketing efforts. Analyzing past performance provides valuable data to identify successful strategies, areas for improvement, and insights into consumer behavior.
5. Prioritize expenses: Identify the key components of your digital marketing strategy and the expenses associated with each.
6. Allocate funds strategically: Based on the goals, budget, and expenses identified in previous steps, determine a realistic distribution of your client’s digital marketing budget across key areas. Aim for a balanced allocation that isn’t spread so thin as to be ineffective.
7. Implement tracking mechanisms: Set up analytics tools to monitor the performance of each marketing channel. Regularly track and assess these, allowing for adjustments and optimizations.

Digital marketing budget example

Let’s take a look at a realistic digital marketing budget example to see how it all comes together. For our example, we’ll imagine an Alberta-based custom home renovations company, Mike’s Custom Homes (MCH). Their annual revenue is 1.2 million dollars. They plan to spend 6% of their revenue on digital marketing, giving them an annual budget of $60,000. Their budget might look like this:

Rationale

• Website development and maintenance: MCH has an out of date website, so this budget allows for a sophisticated, modern site to be built that reflects the quality of their workmanship. It also covers hosting and security to ensure client and business data isn’t compromised.
• SEO: Because MCH is a local business that serves a relatively small geographic area, the largest portion of the online marketing budget will go to making the business highly visible and discoverable to locals searching home renovation-related topics. Allocating marketing budget to SEO will help MCH get in front of potential customers when they’re most in need of MCH’s services.
• Content creation: High quality content is necessary to convey the complex, high-end projects MCH works on, and to establish the business as an authority in the space. Investing in content creation will work synergetically with the goal of generating leads through a robust SEO strategy.
• Paid advertising: This will help deliver traffic to the new MCH site and build the lead pipeline quickly.
• Analytics: A smaller portion of the budget is allocated to ensure high-quality analytics software is used to track campaign progress and ensure continuous improvement.

Conclusion

A digital marketing budget plan will help your clients grow by allocating funds to the most beneficial platforms and strategies. It will also help you create more profitable partnerships with your clients by taking into account their business goals and crafting strategic, aligned marketing plans to achieve them. Whether you’re a startup agency or a seasoned pro, take action today by helping your prospects and clients update their online marketing budgets to better reflect their current business aspirations.