{"id":21550,"date":"2022-12-07T03:03:15","date_gmt":"2022-12-07T03:03:15","guid":{"rendered":"https:\/\/mailinvest.blog\/index.php\/2022\/12\/07\/how-to-calculate-demand-gen-budget-a-rough-guide\/"},"modified":"2022-12-07T03:03:15","modified_gmt":"2022-12-07T03:03:15","slug":"how-to-calculate-demand-gen-budget-a-rough-guide","status":"publish","type":"post","link":"https:\/\/mailinvest.blog\/index.php\/2022\/12\/07\/how-to-calculate-demand-gen-budget-a-rough-guide\/","title":{"rendered":"How to Calculate Demand Gen Budget: A Rough Guide"},"content":{"rendered":"

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Budgeting season is here again, and demand marketers are not immune.\u00a0 How big does your demand gen budget need to be in order to support your organization\u2019s revenue goals in the new year?\u00a0 Alternatively, is the budget you\u2019ve been handed enough to do the job?<\/p>\n

Based on the work we do with our agency\u2019s B2B clients<\/a>, here\u2019s a basic, funnel-based approach to determining a realistic demand gen budget based on specific revenue targets:\u00a0<\/p>\n

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1.\u00a0 Start with your revenue goal for the year (or deals x ASP\/ARR).<\/p>\n

2.\u00a0 Define the percentage of that revenue (or pipeline) for which marketing is responsible.\u00a0 Industry standards for this figure vary widely, from 25% to 80%.\u00a0 The trend is towards the higher end of that range, as marketing assumes responsibility for more and more of the funnel.\u00a0 Your number will depend on your business model and sales cycle, amongst other factors.<\/p>\n

3.\u00a0 Use this online lead calculator<\/a> to arrive at a total number of MQLs or raw leads (inquiries) required to hit your revenue number.\u00a0 Enter \u201ctarget revenue\u201d based on total revenue x the % figure from #2 above, plus your average deal size.\u00a0 The calculator uses industry standard figures for conversion rates (Lead to MQL, Close Rate, etc.), but if you have your own funnel metrics based on historical data, those real-life numbers should take precedence and you can adjust the calculations accordingly.<\/p>\n

4.\u00a0 We prefer to base budgets on MQLs vs. raw inquiries.\u00a0 Raw leads (form-fills) can convert to MQLs at widely disparate rates based on channel and CTA (e.g. SEM, Webinars, content syndication) so using MQLs allows for a more even playing field.\u00a0 In round numbers, a common cost standard is $250 per MQL.\u00a0 Here again, use your own figure based on the historical data if you know it.<\/p>\n

Voila: there\u2019s your demand gen budget (number of MQLs required x $250).\u00a0<\/p>\n

Here\u2019s a sample calculation:<\/p>\n

Total target revenue is $5 Million.
Marketing needs to drive 80% of that number ($4 Million)
$4 Million is 40 deals at an ASP of $100K.
At a close rate of 20%, 40 deals requires 200 opportunities
200 opportunities requires 400 SALs (50%)
400 SALs requires 606 MQLs (66%)
At $250, 606 MQLs requires a budget of $151,500.<\/p>\n

What do these budget numbers not include?<\/p>\n

* People (in-house or outsourced, salaries or agency fees)
* Content (Webinars, ebooks, video)
* Technology & infrastructure<\/p>\n

A traditional metric for marketing planning is 50% programs\/50% people.\u00a0 (A $150,000 programs budget would translate to a $300,000 total budget including people costs.)\u00a0 In this tech-driven era, consultant Dave Kellogg suggests a more modern 45\/45\/10 people\/programs\/infrastructure split<\/a> or even 40\/40\/20.\u00a0<\/p>\n

How to Calculate Demand Gen Budget: A Rough Guide <\/a><\/span>Click To Tweet<\/a><\/span> <\/p>\n

It goes without saying that these formulas and the underlying assumptions are subject to your specific sales model, tech stack, staffing model, product category, target audience, and marketing preferences.\u00a0 If you have little if any content that\u2019s suitable for demand gen, for example, you\u2019ll spend more on content development than the formula otherwise allows for.\u00a0 If you outsource 100% of your programs to an agency, your people costs may be higher but (says the agency owner with no bias whatsoever) your metrics should be higher.\u00a0 If your organization is ABM-centric, many of these lead-based formulas simply won\u2019t apply, for obvious reasons.<\/p>\n

If you\u2019re handed a budget that won\u2019t support target revenue goals based on this model, you can ask for more money, certainly, or alternatively you can look to improve the underlying metrics:<\/p>\n

* improve ASP by integrating ABM or target-account programs to secure bigger deals
* improve close rate by leveraging intent data or AI technology to target \u201cbetter-fit\u201d prospects
* improve lead conversion rates by optimizing lead nurture strategy<\/p>\n

Greater effectiveness at the top of the funnel can have an out-sized impact.\u00a0 Increasing Lead to MQL conversion rates even by a few points, for example, can have an exponential effect on pipeline downstream.\u00a0 It\u2019s worth also taking a hard look at MQL definition.\u00a0 In many cases, the weak point in these funnel-based models is when companies have a too-generous MQL threshold, resulting in a scenario where marketing hits their MQL goals, but pipeline and closed-won numbers don\u2019t keep pace.\u00a0<\/p>\n

Photo by <\/em>Towfiqu barbhuiya<\/em><\/a> on <\/em>Unsplash<\/em><\/a><\/p>\n<\/p><\/div>\n