Post about "Budgeting"

How Much Should You Budget For Marketing Your Small Business?

As a business owner, you do not need me to tell you that you have to have a marketing budget. Most starting entrepreneurs I worked with budget for everything in their business first, then allocate whatever cash is left at the end to their marketing activities. Obviously, they are putting the cart before the horse. What you need to do is to decide on the marketing activities that would promote your business first, determine how much each would cost you and then develop a budget accordingly, not the other way around.People ask me how much money should I allocate for a marketing budget. And the truth is there is no particular figure that is idle. In fact, this is like asking how much should I eat now where the answer would be: it depends on how much you feel hungry. The same applies to your marketing budget. It depends on where you are in your business now. Are you a starting business who would need to focus aggressively on marketing to create a market buzz or are you a well established business that already developed enough reputation to generate a steady stream of market leads? It also depends on your growth goals.Where do you want to take your business in the coming 3, 5, and 10 years? Do you want to take your business to multiple international locations in which case you would need an aggressive marketing budget, or are you happy with growing only locally in which case you would be content with a conservative budget? One more factor that determines your marketing budget is how easy it is to reach your prospects and persuade them of your products or services. If your prospects are hard to reach or do not represent a focused niche, you will probably need more frequent marketing contacts with them before they are ready to buy your products or services.Once you decide on a marketing budget you have to do a sanity check on the budgeted figure. This last step is very important and is usually forgotten by most entrepreneurs. You have to think of profitability while you are setting your marketing budget. What you spend on marketing should be looked upon as an asset that will bring over multiples of this figure in profits. Let me give you an example.I have a client who wanted to organize an opening ceremony for his business for which alone he budgeted over 30,000 USD. Now I have no problem with that, if he was going to generate from this event 30,000 USD or more worth of business. But I noticed that he was completely unaware of the second part of the equation. Without having a clear strategy in place to drive sales from this event and recoup his marketing costs, he would be blowing his marketing budget. So the key lesson is: do not think that a high marketing budget will automatically attract sales. Make sure that your marketing budget is realistic and have a system in place to transfer it into profits.