Marketing is an important part of any business plan, though its urgency, practicality, and expansiveness will vary greatly depending on a business’ age, size, and industry.
How to go about planning for a marketing budget can be difficult for any revenue-minded person because it involves weighing costs with returns and is generally full of risks. After all, we have to assume that some companies put an unwise amount of funds into marketing – too much or too little – and come out empty-handed. Otherwise, when also taking other planning errors into account, many more establishments would be thriving.
There are some basic rules that one can consider when determining a marketing budget, of course, in order to make navigating this process a bit simpler.
Check Out Your Revenue
There are two kinds of revenue, according to Forbes, with the first being reliable and the second being a sort of flexible gain. The reliable revenue is the minimum that you can essentially be guaranteed on a bad month. The additional revenue isn’t guaranteed and can be what you see coming into the business on any month besides your worst ones. This second kind of revenue is not something to typically consider when planning for the future, as it is not necessarily dependable.
Play With Your Reliable Revenue
Once you determine your reliable monthly revenue, subtract your expenses from it. Your expenses are essentially your overhead and related costs, like emergencies, payroll, expansion, rent, and so on. You then can check out the parameters of your marketing budget, which will typically be a chunk of that extra revenue that is discovered after your other expenses are taken care of each month.
Figure Out What Kind Of Business You Have
Entrepreneur notes that different companies usually have to delegate different percentages of their projected sales revenue (or reliable revenue) toward their marketing budgets, assuming a set dollar amount like above isn’t preferred. Companies that are over a year old but not established past five years may want to play with 12-20% of their total monthly revenue, while older companies may expect to use just 6-12% of that money for getting noticed. Legal Zoom, however, suggests that the numbers can vary as much as 1-50%, depending on the challenges a company is overcoming, like clawing at a piece of an already comfortable market.
Do What’s Right For Your Business
So far, you’ve been given a lot of helpful information to get started but it also comes with contradictions. How do you choose whether you should set a given percentage of reliable revenue aside for marketing or you should pick a dollar amount that stays consistent regardless of monthly sales for your budget? If you’re smaller (not just new, but actually a small business), you might find more comfort in going for the dollar strategy. It helps you to stay noticeable without worrying about sales to start, though this can be most advantageous in the short-term. If you’re a bigger business, the percentage strategy can give you more room to play with over the long-term.
Recall What Marketing Really Is
It’s easy to take your percentage or dollar strategy and jump straight into advertising or promotions, events and freebies. If may be wisest to focus on the kind of marketing that you’ll do after you take some other expenses into account, though. For example, Small Business recommends that the marketing budget should also cover research, testing, feedback surveys, tracking, and analysis of the marketing that you plan to use. This doesn’t have to be extensive; a simple one-month sampling of different avenues with follow-up data to sort through is probably fine for most newbies. It often wouldn’t hurt, of course, to hire a consultant that specializes in this stuff if you have the money to invest in one, especially if your market has a pattern of entry failure.
Consider What Works
If you’re starting from scratch, focus on who will consume your products or services. Millennials interact with advertising in a different way than Baby Boomers, and people who work in government may respond to marketing differently from people who work privately. Once you determine the access point for your focus demographic, consider the funds you will allocate to your methods. If you have a small budget, you may have to start with email blasts, social media posts, and newsletters or postcards. If your budget is a bit healthier, you can look at television advertisements and local event sponsorships. If you’re simply trying to revive your marketing plan, consider what has worked for you in the past. Just because you have a more extensive reliable revenue to work with doesn’t mean that you have to go down an expensive route. If door-to-door flyers earned you significant loyalty in the recent past, you probably don’t need to invest in radio spots.
Stay True To Your Brand
Your brand matters, or at least it should matter to you and your following. Remember to consider what you stand for and how people recognize your business when you work through your marketing budget. If you’re an outspoken eco-friendly business, consider using recycled materials for your business cards and marketing tools, or investing more in digital advertising. If you’re known for a pairing of colors in your logo, don’t confuse your consumers by using more than those two colors in your marketing. If you’re committed to giving back to the community, consider finding a way to make a percentage of your earned sales benefit a local charity. Consumers like a level of consistency – it leads to trust.
Don’t Commit Until You Know
At first, your marketing budget may not be used in its entirety. This is because you need to confirm that your approach will result in revenue that exceeds the expense used for the advertising and associated spending. Dabble in a few different kinds of outreach and then use your remaining budget on the aforementioned analysis of your methods. Only once you pin down the strategies that work best for your business should you really attack the market at full force. The time and scope of this trial period will all depend on your circumstances, but it will likely pay off on all accounts.
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