A Step-by-Step Guide to Hitting Revenue Goals
Budgeting for marketing is no small task. There are many moving parts, and it can be difficult to know where to begin. In this post, we’ll focus on the part of your marketing budget that’s directly tied to generating revenue. Other critical aspects, like staff costs, agency fees, and MarTech expenses, will be covered in a future post.
When planning a marketing budget, we recommend starting at the end—your revenue goals—and working backward to figure out what it will take to get there. This approach can be challenging, especially when determining the goals and translating them into specific actions. Here’s a breakdown of how to tackle this process.
1. Define Your Goal and Identify Revenue Drivers
Your starting point is your revenue goal for the year. Once that goal is clear, you need to identify your revenue drivers—specifically, the products or services you’re selling and their average deal size. Accurate estimates are crucial at this stage. A wild miss on deal size could lead to significant problems down the road, so take the time to get this right.
2. Set Realistic Opportunity Conversion Rates
The next step is to consider your opportunity conversion rates. If this is your first attempt at marketing-led growth, it’s important to be realistic. Companies that traditionally rely on referrals and networks often have higher close rates because the trust is already there. However, with marketing-led growth, you’re working with colder opportunities. We recommend using 20% as a good but aggressive close rate if you’re new to this approach.
3. Understand Your SQL to Opportunity Conversion Rate
Your SQL (Sales Qualified Lead) to Opportunity conversion rate is another important metric. This represents the percentage of leads that are a good fit for your company and advance to the opportunity stage. Depending on your lead sources, this rate can vary. For companies just starting with marketing-led growth, assuming around 50% of SQLs convert to opportunities is a reasonable expectation.
4. Estimate MQL to SQL Conversion Rate
Now, let’s talk about the conversion from MQL (Marketing Qualified Lead) to SQL. This rate can vary based on how you define an MQL. Traditionally, we look at MQLs as form fills, but they can also include other actions like downloads or webinar attendance. For general planning, you can expect around 20-25% of MQLs to convert to SQLs. However, if your calls to action are more sales-focused, such as offering consultations or personalized plans, that rate could increase to 35-40%.
5. Determine Your Traffic Needs and Paid Media Strategy
With a clear understanding of what it takes to move someone from the top of the funnel down to a closed deal, the next step is to calculate how much traffic you need to fill the funnel. Paid media can be an effective way to generate this traffic, but relying solely on paid channels can be expensive. Start by estimating how much lift paid media can provide, then consider how other marketing initiatives can help fill in the gaps.
When planning for paid media, consider your traffic conversion rates. For example, if you’re using Google Ads, a well-optimized campaign might yield a 2-3% conversion rate from traffic to form fills. From there, calculate the total traffic needed to hit your revenue goal via paid efforts, and estimate your budget by multiplying that traffic by the average cost per click (CPC).
6. Balancing Paid and Non-Paid Approaches
It’s important to note that most companies don’t rely on paid media alone to fill their entire funnel. Once you’ve determined the budget you believe can be approved, run that budget through your funnel calculations to see what percentage of your total goal can be covered by paid media. This will show you how much more you’ll need to make up through non-paid channels.
Non-paid approaches, like content marketing or SEO, typically have longer conversion times and lower conversion rates than paid media. Depending on how sophisticated your marketing program is, it’s not uncommon for paid channels to contribute to 60-80% of the deals that close. As you plan your non-paid tactics, weigh the man hours required against the additional paid budget that could fill the funnel faster and more efficiently.
Bringing It All Together
This process of starting at the end and working backward gives you a clear roadmap for aligning your marketing budget with your revenue goals. By taking the time to estimate your deal sizes, conversion rates, and traffic needs, you’ll be better equipped to create a marketing plan that drives growth while staying within your budget constraints.
In future posts, we’ll dive into other essential budgeting areas, such as staff costs, agency expenses, and MarTech investments, to help you build a comprehensive and well-rounded marketing budget for 2025.
If you’d like some assistance with planning your budget, reach out to Grey Matter and we’d be happy to help you build your 2025 budget!
