Setting a marketing budget–do you use percentage of sales or goal-based budgeting?

If you operate a small business, or even a large corporation, marketing and advertising is essential to the long term success of your company. If you plan to grow, and be profitable, then consumers need to know about your products and services.

According to Entrepreneur online, “advertising goals should be established in your business plan. For example, you may want to obtain a certain percentage of growth in sales, generate more inquiries for sales, or build in-store traffic. The desired result can simply be increasing name recognition or modifying the image you’re projecting. Objectives vary depending on the industry and market you’re in.”

Marketing Budget for small businessEvery industry is different so the amount of money allocated for your budget depends on you. Should you spend it on a website? Social media? Billboards?  There are various avenues and you need to pick which one(s) will best reach your target audience.

If you are unsure of where to begin, or what your budget should be, this USA Today article  breaks it down with two main approaches:

  1. Percentage of sales.Some companies set aside a certain percentage of total sales for all their marketing activities, including advertising, public relations, brochures, social media and trade shows.
  2. Goal-based budgeting.With a goal-based marketing plan and budget, you have to define your business goals and develop a course of action. Of course, you may have to trim back spending to meet the realities of your small company’s finances, but at least the budget is based on what is necessary to accomplish your goals.

In summary, here’s an important rule: “Develop a marketing plan, set aside a marketing budget and then [wisely] spend it.”

“The great personal fortunes in this country weren’t built on a portfolio of fifty companies. They were built by someone who identified one wonderful business.” –Warren Buffett

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