Last month I wrote about a lunch I had with Ankur Gopal, an entrepreneur whose B2B technology company, Interapt, is growing rapidly. He asked me two great questions: 1. TIMING: How will he know when it’s the right time in his business’ life cycle to bring in Argentum or a similar strategic marketing resource? 2. BUDGETS: Should he start saving money now to pay for marketing in the future? Last month’s post tackled the timing question. Today we’ll look at the budgeting question and review the resources assessment tool I pulled together to help Ankur evaluate his company’s readiness to allocate money to marketing. While I’m sure there are more scientifically-based opinions about the areas the tool touches on, this is a good back-of-the-envelope way to help you start to thinking more about whether you’re ready to ramp up your marketing spend. I’d love to hear what you think about the tool! Rough Assessment: Does Your Business Have the Resources to Ramp Up Its Marketing Spending? 1. Sales: Q: Do you currently have the sales bandwidth to handle an increase in leads? A: YES: Typically a B2B company will have hired a dedicated, non-founder sales person prior to going deep into marketing. Q: Are customers responding to your offering? A: YES: It’s good to have a sense for whether you have a viable, desirable product prior to kicking your marketing spending into high gear 2. Operations: Q: How much growth can your current infrastructure handle? A: You’re probably going to want to be able to handle at least +20% growth, depending on your marketing spend 3. Revenue: Q: What is your projected runway of available cash to allocate to marketing to help your company grow Good A: We will be able to allocate at least 10% of revenues OR at least $100K (whichever is bigger) to marketing across the next 12 months Great A: We will be able to allocate 15-20%+ of revenues to marketing in the next 12 months OR at least $100K if that’s bigger. Important note: These percentages are a rough rule of thumb if you’re pursuing growth. If you only want to maintain revenues, the percentages can be as low as 3-5%. And I have some clients who spend as little as 0.1% (not that I encourage that)! Ankur then asked a great follow-up question: “Do I need to have all of the money for marketing ready and available to spend at once?” Happily for him, the answer is most definitely not. While you need to have a decent comfort level with your projected quarterly cash flow, you won’t need to have all the money available to spend in one chunk. That said, it is probably a good idea to have about 40% of your planned annual marketing budget available to spend in the very first quarter. This is because the costs for ramping up a marketing program (think: creating ads, building out a trade show booth, updating your website, etc.) are typically more than those costs needed to maintain one. On the flip side, it’s also important to not lock in all of your marketing commitments, as wiggle room is always a great thing to build in. Heaven forbid, if your Third Quarter is a disaster, it’s nice to know that you can ratchet back your non-committed marketing spending in the Fourth Quarter if you absolutely must. Finally, for what it’s worth, I prefer not to count marketing personnel as part of any of my clients’ marketing budget. Leaving personnel out gives me a better sense for the spending on customer and consumer-reaching tactics. Although, as a rule of thumb, for most of my B2B clients, the first marketing hire is typically a junior marketing person. Their responsibilities are typically executional and their salaries are generally under $70K. You can see more about the evolution of sales and marketing and their budgets in an older post of mine: How Marketing and Sales Evolve at Companies.