Calculate Your Marketing Budget in 2 Steps

Calculate your marketing budget in 2 steps is something every business should try.

Marketing is a cost of doing business, plain and simple. A marketing communications budget is an estimate of costs to market your product or service, less the salary of your marketing staff.

Surprisingly, I find that many business owners never set a marketing budget despite its importance in business strategy. That’s why I’m encouraging all business owners to bring their marketing budgets back.

Many factors can influence the right amount to spend on your marketing programs, including industry, age of the business, competition and growth objectives. Here’s a quick, back of the napkin, 2-step method to arrive at a ball park for what your business should spend on marketing communications:

Step #1:  Determine Your Business Stage

Which best describes your business in the year ahead:

A.  We want to maintain our current market position – Factor of 5%

B.  We want to grow and gain market share – Factor of 10%

C.  We’re a Start Up – Factor of 20%

Step #2:  Calculate Your Annual Marketing Communications Budget:

Take your 2012 Revenues [or Estimated 2013 Revenues if you’re a start up] and multiply that figure by factor A, B or C (above) depending on your business stage.

Some Examples

  • A mature business that made $1,000,000 last year and is interested in the status quo can spend 5%, or $50,000 on marketing to maintain its current market position.
  • A small business owner that made $80,000 in revenue last year and is interested in market expansion in 2013 would allocate at least 10%, or $8,000 to marketing.
  • A start up with a revenue projection of $100,000 in year one should plan to spend 20%, or $20,000 on their website build, marketing programs and brand launch.

Admittedly these scenarios are simplistic, so every business should add or subtract one to two percentage points to arrive at the right fit budget for their goals.

Where to Spend Your Marketing Dollars

Business owners need to have a new budget every year and appropriate their marketing dollars with surgical precision.  The marketplace is constantly changing and new channels are constantly emerging to connect you with your ideal customer. Consider that many global brands report spending more than 50% of their marketing communications budget online today.

A Glimpse of the Marketing Mix

  • Print [brochures, direct mail, business cards, signage]
  • Website Development & Maintenance
  • Content Marketing
  • Social Networking Programs
  • Trade Shows & Special Event Needs
  • Public Relations
  • Telesales
  • Telemarketing
  • Advertising [online & print]
  • Client | Customer Acquisition Programs

You’ll never have enough money to do everything in the marketing mix, so prioritize your marketing programs on those things that result in the maximum number of leads and business opportunities.

The Bottom Line

Companies that don’t have a marketing budget are hard to take seriously. Organic word of mouth marketing only gets you so far. I recommend putting your trust in the hands of an experienced marketing advisor who can design a cost effective marketing mix to help you get the word out on your brand.

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