Questions

Hi! Our project is a crowdsourcing marketplace. We are now building our budget in order to estimate how much we should ask investors. We have a good estimation on the operative costs and IT development costs, but we have no clue on how much to spend in Marketing (Adwords + Social Media). Could somebody please help us to know how big this number should be? or at least the range.. 1K/10K/100K per month? Thanks!

There could be 2 approaches to it.

The first one - the perfectionist approach - is more suitable for already established companies (big, medium or small) that have been in business for more than a couple of years, & that have some market insights on their target customer segments, their needs, their consumption/spending patterns etc. + previous years' revenue figures & budgeted vs actual spending. This is where we need to understand your upcoming years' business objectives/goals which we translate in to your marketing objectives/goals which we further translate in to your marketing spending. Simply put, the more demanding your marketing goals, the bigger your marketing spending, & vice versa.

The second approach is quick-&-dirty, usually suitable for startups or greenfield projects. This is where we can build it bottom-up or through benchmarking vs other similar projects etc. As the name suggests, it's always going to be rough.

Net, considering your project is a startup, I'd use a rule-of-thumb for estimating marketing budget, i.e. it should be no less then 10% of your expected revenue for the year. & since you're budgeting to raise capital from investors, you should be a bit more aggressive in your estimates & plan about 15-20% of your expected revenue to be on the safe side. Doesn't mean you spend it all but you might need this cushion considering you're a startup & might need to invest a bit heavily in the beginning years while justifying your marketing ROI.


Answered 4 years ago

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