Creating a marketing budget

Business owners often ask how much they

should spend on their marketing budget. You

can choose from different methods to deter-

mine your budget; it really comes down to your

business and what works for you. You can

determine your budget by:

 ✓ Allocating a percentage of your revenue

 ✓ Allocating a percentage of your net sales

 ✓ Allocating all profits back into your busi-

ness for marketing

Allocating a percentage of your revenue is one

of the most popular ways to determine your

budget. The formula is easy. You simply take a

fixed percentage of everything that your com-

pany brings in and allocate that amount for

marketing. Common percentages are anywhere

from 5 to 10 percent for big businesses, approxi-

mately 20 percent for smaller businesses, and 2

to 5 percent for larger businesses that are pull-

ing in millions of dollars worth of revenue.

Allocating a percentage of your net sales is a

method that’s similar to the previous one. The

difference is that you’re only allocating a fixed

percentage of your net sales. This method isn’t

as aggressive as the previous method, because

you’ll be excluding expenses from your revenue.

Allocating all profits back into your business

for marketing is a more aggressive approach,

especially for small businesses. You’ll find

that there’s a little more risk involved with this

method. You take the revenue that you make,

subtract the expenses that keep the business

alive, and put the remainder right back into

marketing. The trick to this method is having a

backup source of revenue.

It’s important to remember that a marketing

budget is only a projection or an estimate of

what you will spend in marketing. Sometimes

your spending will be more or less than your

estimated budget. By having a budget, you have

something to work from. With no budget, you’re

simply setting yourself up for marketing failure