There isn't a cookie cutter answer to the question, "How much should I put towards my marketing budget?" With so many factors to consider, such as the type of business, whether it's exclusively online, or if it's a product or services business, it's no wonder that so many entrepreneurs have different answers. The best answer you can get is a recommendation on the percent of your expected sales revenue. Answer the following questions to help you make your decision:
How Many Years Have You Been in Business?
If you're just starting out, then you need to test what works in marketing your business and what doesn't. Don't just throw a lot of dollars to a marketing budget that's unproven. You won't have real results to measure, and you'll waste time and money. Test your marketing methods for at least three months. Weed out the methods that don't work, and keep the ones that do. You'll end up with a list of tactics to spend money on. If you've been in business for a few years and you've nailed down your marketing tactics, then you can allocate a percent of your expected sales revenue without worries of throwing your money away. New business owners should spend more in marketing than veteran business owners.
What Is Your Expected Sales Revenue?
The amount that you should spend on your marketing budget will depend on your expected sales revenue. You have to determine how much you expect to make in sales each month, and base your percent on that. When you're first starting out, this can be very difficult. The best approach is to conduct research on your competitors and aim for a conservative amount. It will take you time to build up your business, so you won't be earning as much as them initially. You also have to compare competitors who are working from home and have limited staff and other resources like you. Don't base your expected sales revenue on what a large corporation makes.
How Will You Market Your Product or Service?
Your marketing mix will have an impact on how much you spend on your marketing budget. It's cheaper to market online than to use print, media and other traditional forms of marketing. You can use low cost marketing methods online, such as social media and article marketing, and be effective. If that's your approach, then you'll end up spending a lower percent than a competitor who has to spend money to print and mail marketing materials.
What Is the Recommended Percentage?
Marketing experts recommend that you spend anywhere from two to 10 percent of your expected sales revenue. If you're a new business owner, you should start at 10 percent. Many business owners stay around the four to six percent range. There are times in your business where you may have to double the percent. For example, if you make most of your sales during the holidays, then it may make sense to spend as much as 20 percent of your expected sales revenue on your marketing budget.
Your marketing budget doesn't have to remain the same forever. Test it and measure the results. Make adjustments and change the amount you spend when necessary.
Daphne Mallory, Esq. is the co-owner of Mallory Writing Services and has written more than 100 articles helping home based business owners and entrepreneurs start and market their business. You can learn more about her here.