When I’m assisting small to medium business owners develop their marketing strategies, there’s one question I get asked whenever we get to the budget. That question is, “What should I spend?”
Having a formula would be ideal. For instance, you could base your budget on a percentage of sales. However, if you do a bit of research, you soon find that one recommends 3-5%, another 5-7% and still another 10-15% and pretty much everything in between.
What’s a Business to Do?
Let’s start by saying that not all businesses are the same. Some businesses, for instance, might have high expenses related to overheads, such as a retail space requiring rent and inventories. Another might be more of a virtual service, where overheads are relatively low and a third might have very low profit margins.
Your budget, therefore, will depend on your business and a realistic projection of what your sales will actually be for the coming year. What your goals are will also play a major role.
Also it is important to define what types of advertising are available and which will work for your business. Not all will.
What’s in the Budget?
Advertising budgets can include any or all of the following:
* Web site development
* Social media marketing
* Print and broadcast advertising
* Trade shows
* Design and printing costs for all print materials, such as brochures and press releases, as well as direct mail costs
* Grand openings or special events
What Else Should I Consider?
There are other considerations you should keep in mind. For instance, when did you start your business? Starting up can often be expensive and unless you’re good at it or have good advice, starting a new business can be like a renovation. Sometimes you uncover unexpected expenses that can potentially drive your budget down to almost nothing.
Who’s your competition? How strongly are they entrenched in the market? How much are they spending to get their name out there? You probably looked at some of this before launching your business, but perhaps you didn’t take into account how successful the competition’s marketing has been. This could well be the deciding factor for you when you are deciding to go big or small.
Having considered all of the variables and the marketing needs of your business, decide on the percentage of sales or anticipated sales that works for you.
As the year progresses, revisit your plan and your budget periodically. Remember that budgets, particularly for marketing and advertising, need to be flexible enough to correct if necessary. Don’t doggedly stick to your budget if, after the first quarter, it’s clearly not working.