3 Easy Steps to Creating a Marketing Budget

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.