Day 1: Marketing 101 – The Budget
Budget.
My advice, nail one down.
The thought of defining a marketing budget sends most business owners into hiding. However, creating a budget you can live with and one that supports the company goals and objectives is easier than you think. It is also a relief to be clear up front about what you will and won’t spend on marketing.
Some people cringe at the thought of allocating revenue to marketing. Expecting that you can develop a business without a marketing budget is like opening a storefront business on Michigan Avenue and leaving the windows covered in brown Kraft paper. It makes no sense to think you will attract customers.
Refrain From Doing Marketing On The Cheap
Today, many marketing options are free or low-cost. Because of this, many business owners undercut the budget and try to do it themselves or on the cheap. If that’s you, ask yourself if cutting corners is worth jeopardizing the success of your business?
Since marketing is “Everything you do that creates an emotional impact and causes someone to part with their money to purchase your product or service,” determining a budget can be overwhelming. The best piece of advice I ever got about budgeting is to base your total marketing spend on a percent of gross income. Find a number you can live with, and then commit to it. Once you wrap your arms around the total spend, you will be amazed how easy it is to make solid business decisions around what to implement and what to put on the back burner.
Most success driven small businesses will allocate 3%-6% toward marketing initiatives. An gross revenue goal of $1Million = $30,000 – $60,000. Take a deep breath and determine what is best for your business. Next, check out Day 2 and get on the road to developing a realistic marketing plan that is supported by the financing behind it.
When A Flat % Of Gross Income Seems Out Of Whack
If you’re scared at the thought of allocating 3%-6% of gross income toward marketing then it’s time to dig into the details and come up with a number that fits. Use the formula below to help you in determining the right marketing budget for your business.
Budgeted Income / # Of Clients = Per Client Value
Dudgeted Income: $1Million / 100 Clients = $10,000 Per Client Value
Using the example above, does it make sense to spend $300-$600 to acquire a client worth $10,000? If not, take a look at last year’s results. What % of your expenses were allocated to marketing? How does that break down on a per client basis? Did you acheive the results you wanted?
As you determine the right amount of funds to allocate to the marketing budget, use the sample budget below.
Click here to access a sample marketing plan template.
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