Focus & Planning: Determine a marketing budget – and stick to it
Companies large and small, established or start up all need to establish a marketing budget for the next 12 months if possible. Many companies underspend on marketing thinking that by not spending on marketing, they are saving. In reality, marketing drives revenue, not the other way around.
5 Main benefits of developing and sticking to a marketing budget:
- Provides clear sense of direction for the management of your marketing efforts.
- Allocates scarce financial resources more effectively.
- Encourages coordination and planning with other areas of – and people in – your business: finance, operations, HR, etc.
- Provides a basis for assessing actual results. How much you spent vs. how much you earned from a particular marketing source.
- Makes you successful! If you know how much you have in the budget to spend, you’ll have a better idea of which marketing avenues to go after to maximize your marketing ROI.
How much should you allocate?
The U.S. Small Business Administration recommends spending 7-8% of your gross revenue for marketing and advertising, if you’re generating less than $5 million a year in sales, and your net profit margin falls between 10-12%.
The older axiom was 3-4%. Those days are gone. The most successful clients we work with allocate between 6-10%. Just remember, this is not written in stone. As long as you allocate and plan, your budget is up to you. We can develop solutions for most budgets depending on need.
Don’t Get Discouraged.
Setting a marketing budget is a daunting challenge for many small business owners, we get that. No one can create a perfect and absolute marketing budget; it has to be flexible, and fluctuate as your revenue does. The best you can do to begin is evaluate your spending, assess your competitors’ advertising methods, look at your historical results, and go from there.
