You need to know all about your current marketing budget and how your firm approaches the budgeting process. As we often say, you need to know where you have been to understand where you are going.
Know How Your Firm Determines a Marketing Budget
The budget season looks different at every law firm. There is generally a tedious process, involving multiple back-and-forths before you get to a final number. Who is involved and what factors are considered during the process can vary greatly. It is important to understand how your firm determines budgets to know how to navigate the process successfully. Law firm marketing budgets are determined in one of four ways:
- When We Get Paid, We Market: Also known as percent of revenue, the firm’s managing partner and/or finance department head determine two things. First, the expected revenue for the following year and, second, the percentage of that revenue the firm will devote to marketing efforts. The marketing department is given a dollar value for their budget based on that calculation.
- Dictated: Also known as the top-down approach to budgeting, the firm’s managing partner and/or controller give the marketing department a dollar value as their budget based on unknown reasoning.
- The Firm Down the Street: Also known as competition matching, this method of budgeting involves knowing what your competitors are spending on marketing and budgeting the same amount for your firm’s marketing.
- Objective Driven: The firm’s goals align with the marketing department goals, creating a strong foundation for the marketing initiatives you will undertake in the coming year, enabling you to create an accurate marketing budget tied directly to marketing activities. This form of budgeting is straightforward, easy to explain and defend, and has clear KPIs built-in.
Understand the Previous Year’s Marketing Budget and Expenses
If you have not been closely monitoring your marketing expenses throughout the year, now is the time to dig into the data. (Although you really should be monitoring it at least monthly throughout the year, but that is for another post.) The information you want to gather will include:
- Marketing expenses
- Current and previous years’ marketing budgets
- Previous years’ end-of-year marketing reports (including budget-to-actual numbers)
- Firm and attorney revenue figures
- New client and new contact reports (ideally from your CRM, but likely from multiple systems including client intake, CRM, and finance)
- Website, marketing, and social analytics
Dig into this data. Sort the data, reorganize the data – whatever you need to do to make sense of it. Break it out by practice area. By attorney. By event. By whatever method makes sense to you, your firm, and your marketing initiatives.
Where did you have a great ROI? What areas performed poorly? What initiatives did you undertake that yielded everything they could and now that they are ending can make room for a new project?
Establish KPIs for Your Marketing Budget
Now that you have an understanding of how your firm budgets, what you have done in the past, and what you want to accomplish in the future, determine how you will track and monitor the marketing activities you intend to budget for moving forward.
Some key performance indicators to consider include:
- Website traffic
Organic or paid visits to your website, depending on your strategy. You can find data on your website visits in your website analytics.
- Social media reach and engagement
Views and interactions with your posts. This data can be found in each social platform’s analytics section.
- Leads captured
How many new potential clients were generated. Your CRM or other contact management system should allow you to pull this data.
- Conversion rates
The percentage of people who took the next step toward becoming a client. You can set up parameters around what defines a new lead, qualified lead, or new client. Once you know how many people moved from one stage to the next, you can determine the conversion rate. Many CRMs will compile this data.
- Revenue – new clients
The amount of billed work that new clients generated. This can generally be found in your finance software.
- Revenue – new matters from existing clients
The amount of billed work that existing clients generated, over and above the previous relationship with you. You may need to request specific data be pulled from your finance software based on the targeted marketing campaigns executed to generate additional revenue in, for example, an additional practice area.
- Customer acquisition costs
Determine all the costs associated with acquiring more clients and divide that by the number of clients acquired in that period. This information will be found in your finance software.
- Growth in client spending
The increase in fees billed year-over-year per client. This can be found in your finance software.
- Practice areas per client
You can determine this by undertaking a white space analysis for each client. Finance software should be able to get you the information needed here.
- Marketing originated clients and fees
New business that was closed after marketing generated the initial lead. This can be found by combining the leads generated report from your CRM with a finance report focused on fees generated by new clients.
- Marketing influenced clients and fees
This is a calculation of the new clients and fees generated in a given period where there was some interaction with the firm’s marketing inititaives but marketing did not originate the lead. This can be found by combining the leads generated report from your CRM with a finance report focused on fees generated by new clients.
Once you have determined what KPIs make the most sense for the marketing objectives you have established, create a reporting framework (it can be as simple as a spreadsheet) that tracks marketing spending and marketing performance for the upcoming year. Calendar time (at least monthly and based on when your firm issues financial reports) to track and monitor your marketing performance.
Whatever method your firm uses to determine budgets, the more information you have, the better the business case you can make for your marketing needs. Explaining what you absolutely need and what is nice to have makes a big difference.
You have laid the foundation for your marketing budget by understanding where you have been and where you want to go. The next step will be determining what efficiencies the marketing department can find to make that happen.
Budgets can be overwhelming. Not sure where to start? Download our Annual Budget Template today.