Setting budgets is so critical to any business, big or
small. But I often see so many small
business owners just winging it, not really knowing where all of their money is
going. I’m not an accountant but staying
on budget is crucial to my job.
Everything I do is based on a budget.
Without a budget or a plan, a business runs the risk of spending more money
than it is taking in or, conversely, not spending enough money to grow the
business and compete. We all know that we need to spend money to make money and
we want to save as much money on those expenses whenever possible. But how do you determine how much to spend on
marketing your business?
Creating, monitoring and managing a budget does not have to
be a scary, overwhelming thing. Even if
you have no accounting experience or if you don’t think you have enough time in
a day to do it, it really is imperative that you take the time to do it… and do
it well. It will allow you to allocate
resources where they are needed. You simply need to work out what you are
likely to earn and spend in the budget period.
Here is an easy 3 step plan for creating a marketing budget that works.
Step 1:
Start by creating budgets for the entire year. Be realistic
about your projected sales for the budget period. If you overestimate, it will cause you
problems in the future. Develop separate budgets for marketing, inventory, payroll,
and anything else that you will be required to spend money on. Continuously check to make sure your budget
balances and that your numbers make sense. Don’t forget to work in a salary for yourself. I see this happen all the time, where the business owner sinks so much money into the business that they don’t bother paying themselves.
Step 2:
To create a marketing budget for the year, set your budget between 5 and 10% of your
gross annual sales. When you think
about it, if you only have $100,000 in sales with a marketing budget of 5% that
means you only have $5000 to work with for the year. Choose a number that you
are comfortable with but a substantial amount of money to achieve all of your
marketing objectives. In step 3, you
will need to use your creativity to know where best to allocate those dollars.
Step 3:
From the budget amount you determined in step 2, develop your
individual marketing campaigns for the year.
Determine a budget for each campaign based on the yearly marketing budget
you have just set for the company. Make
sure you align your marketing goals and objectives with your campaign planning
and spending. You may need to put more
money into marketing activities in one or two months in the year, especially if
you’re running a strong campaign or if you run a seasonal business, and less in
other months. Just really take a look at
your marketing goals and make sure you’ve budgeted enough money for each of
those activities. If that 5% you
allocated in step 2 isn’t enough, go back and adjust your numbers. Remember that advertising doesn’t have to cost you a fortune. Leave the big marketing budgets for the big corporations who have the money to spend on it.
It’s going to take some time to play with your numbers to
make everything balance. That is
ultimately the goal… to make sure you’re not in the red. Stick to your budget as closely as possible,
but review and revise it as needed. Remember it’s a plan, a guide to your
business finances. It’s not set in
stone, but constant review of it is essential to make sure you know where your
business stands.
