Formulas for deciding a marketing budget

Most of us want to grow our business revenue, and understand that marketing plays a large role in making that dream a reality. But it can be confusing about how much to spend and where to spend it.

Typically, advertising and marketing is a set percentage of gross revenue as it is an operational expense. The less you make, the larger the percentage based on your revenue is generally needed to make an impact. For many small businesses, the percentage of gross revenue that has to be devoted to marketing to help growth is around 15%.

15% sounds like a huge number, but there are ways to work with your budget to keep it from dramatically impacting your home pay. Let’s take a look at two scenarios.

If you generate $200k per year, 15% of that would be $30k for your marketing budget. With this split, you can make a pretty good dent in your marketing needs and your personal income is not likely to suffer. Depending on your circumstances, industry, market and the speed you desire to grow, you may even be able to adjust down to 12% and still make progress toward growth.

If however, you make $70k per year, then apply the same 15%, your ad budget becomes $10,500 which is still significant, but would seriously impact a livable income. Therefore, for a lower annual income, you may only be able to make a 10% contribution to advertising. In this situation, it’s worth considering pooling resources to make a larger impact – for example, if you work in an office building with many small businesses that service similar types of clients, could two or more of you create joint ads that both of you would benefit from?

The first step is to identify what services are best for your business, and how much they cost. If the cost is too high, it is time to get creative and look for alternatives that can still drive sales. Once growth is realized, then you can step up to the next level of services.

Even if you can contribute only 5% of your annual budget you should stick to a consistent plan, whatever it is. As long as your messaging is directed to very targeted audiences with compelling visuals and messaging, you will see a return on investment over time. Commit to something. It will be like a savings account. You can count on it and it’s always there!

Let us help you

Web Design & Development

Web Design & Development

Learn more
Traditional & Digital Advertising

Advertising

Learn more
Creative & Design Services

Creative & Design Services

Learn more
2017-08-08T14:46:21-08:00

Leave A Comment