Most people believe that overspending is a no-go. It causes financial strain, derails campaigns, and creates unnecessary stress. But did you know that underspending can be just as harmful?
The 2024 Gartner CMO Spend Survey shows that marketing budgets are taking a hit, dropping from 9.1% of company revenue in 2023 to 7.7% in 2024—a 15% decrease compared to last year. This reduction adds to a series of consecutive funding cuts, further tightening fiscal constraints for marketing teams.
One important metric that helps you stay on track is the Budget Burn Rate (BBR). If you’re wondering what exactly this is and why it matters, stick around as we unpack everything you need to know.
Why Underspending is a Problem?
It’s a common misconception that staying under budget is always a good thing. While saving on things like electricity or IT projects is great, marketing underspend often does more harm than good.
If your marketing team doesn’t spend the allocated budget, it can break the agreement with your company about delivering results—like generating leads, boosting brand awareness, or driving pipeline growth. Think about it, how can you hit your goals if you’re not using the resources you planned for?
Let’s not forget, that underutilizing your budget can also raise questions about your team’s effectiveness and lead to reduced budgets in the future. That’s why understanding and managing your BRR is so important.
The Basics of Budget Burn Rate
Simply put, BRR measures how quickly you’re using your budget. It’s like calculating how fast you’re going to finish a pizza if you eat one slice every 15 minutes. Except here, we’re talking dollars and days instead of calories and minutes.
For example, if your annual marketing budget is $1,800,000, you’ll need to spend about $4,932 per day to use up your budget evenly over 365 days. Easy enough, right? But things get more complicated when you’re not spending consistently or when your spending plan shifts throughout the year.
A Closer Look at Variability
Let’s say you decide to divide your budget unevenly across the year because some months require more spending than others. Perhaps January only uses $100,000, while June needs $150,000. By the end of January, if you’ve spent the full $100,000, your remaining budget would now need to be spent at a rate of $5,090 per day over the remaining 334 days.
The key is to track this burn rate regularly. If you consistently underspend, you’ll end up in a situation where the remaining budget becomes harder to use effectively as time runs out. Picture trying to cram all your spending into the last two months of the year—not ideal.
When underspending piles up month after month, it creates a scenario where your required burn rate skyrockets. This not only increases the risk of inefficiencies but also means you’re not maximizing the strategic potential of your budget. By monitoring BBR, you can catch these deviations early and make adjustments before it’s too late.
How to Monitor and Adjust Budget Burn Rate
1. Real-Time Visibility
One of the first steps to managing BBR effectively is having real-time visibility into your spending. Traditional tools like spreadsheets or delayed accounting reports don’t cut it anymore. Modern budgeting software can show you exactly how much you’ve spent and what’s left in your budget, giving you the insights you need to act promptly.
2. Plan for Capacity
Make sure your team has the capacity to execute the marketing plan. This includes full-time employees, contractors, agencies, and tools. Your team’s resources should align with your budget and goals. After all, even the best-laid plans won’t succeed if you don’t have the people and tools to carry them out.
3. Adjust Strategically
If you notice your actual burn rate falling behind your planned rate, it’s time to act. Consider options like:
- Hiring temporary staff
- Scaling up digital campaigns
- Reallocating funds to underfunded initiatives
The earlier you take action, the easier it is to course-correct without overwhelming your team.
What Happens When You Ignore BBR?
Neglecting your burn rate can lead to a snowball effect. Here’s what typically happens:
- Missed Opportunities – Underutilized budgets often mean missed chances to hit key metrics, like lead generation or brand awareness.
- Year-End Scramble – You’ll find yourself scrambling to spend leftover funds in ways that may not align with your strategic goals.
- Budget Reductions – Consistently underspending can signal to decision-makers that your team doesn’t need as much budget, leading to cuts in future allocations.
Using BBR as a Forecasting Tool
Think of BRR as more than just a spending tracker; it’s a forecasting tool. If your actual BBR starts to deviate from your planned rate, it’s an early warning sign. Addressing these discrepancies sooner rather than later can save you from headaches down the road.
For instance, if you notice in August that your actual BBR is lower than planned, you’ll know to ramp up spending before you hit the year-end crunch. Whether that means running additional campaigns or hiring more help, the goal is to keep your actual burn rate aligned with your planned rate.
Make Your Budget Work Smarter, Not Harder
Understanding and managing your BRR is more than just a financial exercise—it’s about ensuring your resources work as hard as you do to achieve your goals. You can avoid last-minute scrambles and missed opportunities by regularly monitoring your spending and making timely adjustments. It’s not about spending more; it’s about spending smarter.
So, the next time you’re looking at your marketing budget, ask yourself: Are we on track with our burn rate? If the answer is no, don’t wait. Make the adjustments you need to keep things running smoothly—and watch your efforts pay off.
