Operating and Capital Budgets: What’s the Difference?

by Don Miller, Director

Company budgeting

Understanding how operating and capital budgets work can help you project, track and adjust your digital marketing strategies to optimize your investment.

The Importance of Creating a Budget

A digital marketing budget is a measuring tool that assigns a dollar amount to your goals, allowing you to be efficient with your expenses and investment return. Creating a budget provides you with a baseline to compare effective spending against the success of your campaigns, so you don’t allocate money to digital strategies that don’t work for your company. There are two types of budgets: operating and capital.

What is an Operating Budget?

An operating budget is a financial plan for daily expenses that puts short-term dollars to work on a monthly basis.

A digital marketing operating budget usually includes:

  • Website maintenance
  • Blog article writing and posting
  • The media spend
  • Organic traffic management
  • Social media campaigns

An operational budget should account for ongoing digital marketing services and provides the flexibility to allow time for review and adjustments. If your digital marketing program doesn’t provide a big enough return, you can adjust your daily spending to shift funds to an alternate approach.

This type of budget can pay for programs that track daily growth and short-term goals, such as conversion rates, search engine optimization (SEO) success, search engine results page (SERP) ranking and click-through rates (CTR).

What is a Capital Budget?

A capital budget addresses long-term goals that promote internal investment strategies. Creating a thorough capital budget determines which projects and improvements are necessary for the future success of your digital marketing efforts.

That money is typically budgeted for digital marketing projects that last several months or years. Capital budgets aren’t as flexible as operating budgets, and you don’t usually see investment returns for at least a year.

Setting aside funds for a website build or rebuild is an example of digital marketing capital budgeting. Building a website can be expensive, and creating an optimized site requires careful planning and a higher budget. A web build also lays the foundation for daily web operation and maintenance.

How Operating and Capital Budgets Affect Each Other

Short-term goals influence long-term goals, so your operating budget will impact your capital budget. However, your capital spending also dictates the funds available for daily expenses.

That’s why conducting monthly or quarterly operating budget reviews is important. You may find your daily digital marketing expenses aren’t generating the expected return, which will determine the available funds for your capital budget. Learning to adjust one budget to reflect the goals of the other can improve the likelihood of your digital strategy’s short- and long-term success.

TouchStone Digital will work with you to determine optimal operating and capital budgets to suit your digital marketing goals. Contact us to schedule a meeting.

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