How Do I Set a Realistic Marketing Budget for My Accounting Firm?

It’s true that marketing feels expensive, and it IS – sometimes. But the problem is that most firms don’t adequately budget for it, which is why you’re feeling that pain point. When that happens, it feels like a large and unexpected expense instead of something that’s a necessary piece of your business – like the cost of production. 

The other problem is that most firm owners don’t know where to start when budgeting for marketing. You know you need to do it (or you’re THE WORST accountant of all time), but the work needed to start often feels insurmountable for setting a realistic marketing budget for an accounting firm. As the saying goes, the cobbler’s children go shoeless, right?

Well, we’re at the start of Q1, and guess what? It’s time to get your marketing budget done. Is there a universal method to this that works? Well, yes sort of. We’re here to walk you through it. Let’s take a step-by-step walk-through of what we need to get you from point A (absolutely no clue) to point B (a workable budget for your accounting firm). 

TL/DR version: The easiest way to determine your budget is to look at the total percentage of your revenue that’s going into your marketing and sales. It needs to be at least 5% for your business to see meaningful growth. 

How to determine your revenue goal for your marketing budget

If there’s one thing you take from this section, let it be this: If you want your firm to grow, you should be allocating at least 4-5% of the budget to sales and marketing. This amount will also change depending on the size of your firm. Small firms should spend 5%, larger firms will need to be at 8-10%. That’s because the more clients you have, the more you’ll ultimately lose to attrition. That number can be as high as 15% in most cases. 

IF your firm is especially aggressive with their growth goals, you may even want to push that budget to 15%. With the right plan, this can work to shorten the ramp up to your growth as an accounting firm. 

2-3% is the magic number for a marketing budget

There can be a fuzzy line between sales and marketing. Some firms are able to primarily use sales to drive revenue. If you have a rockstar-filled sales team, then that’s great – but in most cases, your marketing budget should be 2-3% of your revenue. That should include absolutely everything. In-house salaries, agency fees, ad spends, tech platforms, contract employees, etc. That’s at the bare minimum. If you’re spending less than 5% then you’re behind your peers (or at least the peers that are successfully growing your business. 

How your budget is connected to your sales goals

Most firm owners drastically underestimate how much it costs to bring in new business. That’s for a few reasons, but one of the biggest is that as the quality of the client you want to attract goes up, the cost of getting those clients goes up too. So how do we understand that cost more accurately? Here is some food for thought. 

Compare your budget to last year and ask, ‘How much a client is worth?’

Most folks know what they spent last year. You probably know, in general, then what to expect for THIS year if you paid the same amount. Here’s the thing: a client can last for longer than a year (in fact, we hope they DO). So, we’ve come up with an algorithm to better track how much a client is worth to you. Basically, you want to know

• A client’s monthly average fee
• Any year end fees
• Average client lifetime (in years)

Those three numbers will give you the lifetime value of a client. 

How much is a new client acquisition worth

To discover how much a new client is worth to your business, you want to look at the number for a client’s monthly fee and multiply it by four. That’s your target cost of acquisition. Now, in some cases we can push that number up to six times the monthly fee, but ideally that number is falling between 4-6 times the amount of your monthly fee. 

How many clients do you have? How many do you want this year?

In a spreadsheet, list the number of clients you already have. For the purposes of this exercise, let’s say that you had 60 clients in 2023. Now, we’ve already talked a bit about attrition – so let’s apply that here and say you’ll lose about 15% of the ones you have. That means if you want to net 24 new clients, you’re going to need add 33 TOTAL clients because you’re ultimately losing nine clients. 

Now we can compare the numbers from last year to this year. If a $6,000 marketing budget gave you 20 clients last year, then it’s reasonable to expect that you’ll gain about 20 this year. That still means you need to make up the 13 additional clients in some way. There are two ways to think about how to calculate the cost of acquisition. 

• 7% of the lifetime value as a reasonable cost of acquisition. (in this case about $7k)
• The aforementioned 4 months of fees can be a simpler way to find COA ($4,800)

Looking at those numbers will give you a more accurate view of what your monthly marketing should be. So instead of a stated budget of $6k where you guess/hope that each new client would cost $692 to acquire, it’s actually more likely that it may cost between $4,800 – $7,000 based on either of those other algorithms. 

Most accounting firms have no idea what to think about for their cost of marketing, so these numbers likely sound like a huge amount – and it is – but the fact is that it’s also a realistic and reasonable COA when you factor in that these clients will pay out many more times than that over the lifetime of their contract. 

So, how much will adding 13 new NET clients actually cost you?

If you multiply 13 (the number of new clients needed) by $7,000 (7% of the lifetime value) that will give you a budget of $91k.

If you multiply 13 by $4800 (the 4-month COA target), you’ll get $37k.

The real answer is probably somewhere in between those numbers. Just remember, the pickier you are about the client, the harder they generally are to find, so the COA goes up. Aim high, budget high, and then if you can bring them in at a lower COA it’s profit.

TL/DR version: The easiest way to determine your budget is to say what percentage is going into marketing. Is it 5% for sales and marketing? It needs to be for you to see meaningful growth. 

Want to know more? Give us a jingle. 

We use a more complex spreadsheet when planning marketing strategies for our accounting firm clients. But this should at least get you started. How you spend your marketing budget to get the best ROI for the tactics you invest in is a completely different conversation. In reality, there are not a lot of cheap, easy, effective marketing tactics available. The stuff that works tends to cost real dollars. If you don’t set aside enough, you’ll likely spend your entire budget and not get anywhere close to your goal. You might even get ‘nothing’ if you don’t invest enough.

Was this helpful? We create client specifically designed for accounting firm owners to better understand their marketing. To get it before anyone, the best way is to sign up for our (absolutely free) emails. We won’t ever pressure you or send you ads.