Unless you’re a start-up, determining a marketing budget for your business is a little more complicated than basing it upon your checking account balance. (If you are a start-up, that’s often the safest way to figure out how much to invest!) The best place to start is by making sure you look at marketing from the right perspective: as an investment, not an expense. Just like a savings account, marketing is an asset that generates revenue; one that gives a return on investment when invested prudently.While standards can vary significantly depending on your business category, there are a few ground rules you can apply to help determine your marketing budget. A popular rule of thumb has been to use 7-10% of your gross annual revenue as your minimum target, but this doesn’t address industry variables and other influences. Consider these points:
1. A business with a high-visibility location and good signage will not need to advertise as often as one ‘off the beaten path.’
2. Start-ups routinely underestimate the need for a robust marketing budget to successfully launch, yet conversely rarely have the necessary funds available. This dilemma is a significant contributor to the failure rate of new businesses.
3. A company in growth or expansion mode will need to market like a new business.
4. Businesses often fail to take into account the need for occasional spikes in their advertising to accommodate sales, or events like new product launches or relocation.
5. The number of competitors in your market, and the need to match or dominate their marketing, will influence your budget.
6. If you’re really a number cruncher, calculate your budget based on revenue, operating costs, margins and markup. There’s a formula available at this link: http://www.entrepreneur.com/article/54436
Last, you can always call on us to help you. We have other tools to help you decide what’s right for your business in your market.
About Carole Holden