New Year - New Budget

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(Article first published in Jan '10. It has been modified slightly to suit its publication on our site)

As each new year starts (whether calendar or financial), business owners start to think about how they are going to generate business over the next twelve months. This leads onto how much it is all going to cost and I am often asked, "how much should I budget for marketing spend in the coming year?"

Before I answer that, let me cover off quickly why it is so important to budget for spend. Without a budget you WILL spend more than you would want to. I once met a business owner who had spent €60,000 without even realising it until he checked his expenses at the end of the year! A budget also allows you to plan where you are going to spend your money, so not only will you control your overall spend, but you'll also spend it where it gives the best return, which you can actively track because you planned the spend in the first place. Finally, having a budget helps you to avoid silly decisions. You know, when the advertising sales person rings you up with the "deal of the century", you simply say, sorry that's not in my budget plan, which has already been allocated for this quarter/year.

With that clarified, the starting point is how much you should plan to spend. The answer begins, rather frustratingly, with another question... how much revenue do you want to generate in the coming year? I always say that marketing is an investment in your business and not a cost. You spend X to generate Y, so you can't decide what you are going to spend without knowing what you want to achieve. Imagine if you asked someone for cash to buy "something". They are going to ask you whether the "something" is a pint of milk or a sports car; without the answer they don't know how much to give you.

So, once you know how much revenue you want to make, you should also factor in your net profit margin, then simply take between 5% and 10% of your revenue figure and you have your marketing budget. The reason for the variance in percentage is to cater for businesses with different levels of margin. A company that generates 40% net margin can afford to spend a larger percentage of their revenue on marketing than one that generates 10% net margin.

So, say you are targeting a turnover of €500,000. Your marketing budget would be between €25,000 and €50,000. That sounds like a lot if you think of marketing as purely advertising. However, you need to factor in the following elements:

1)   Your time in dealing with the marketing side of your business
2)   The cost of designing/creating your marketing materials (even if you design them yourself)
3)   The cost of printing marketing materials (even if you print them yourself - toner & paper still cost money)
4)   The cost of maintaining your website

Updating content
Yearly hosting
Domain renewals
Any promotional enhancements you might make

5)   Pure advertising costs for both print and on-line advertising (where applicable)
6)   The cost of any promotional goods you might buy (pens, mouse mats, etc.)
7)   The cost of any discounts/promotions you are going to run (These are a marketing activity too)
8)   The cost of display samples
9)   The cost of any other activities that you may need to promote your business

Photography
New stationery, etc

You will be surprised just how quickly your budget will "disappear" so to speak, but the difference is that instead of simply being spent, you will have a plan that you can stick to and track as you go through the year.

Franco De Bonis has worked in the field of sales and marketing promotion since 1990 and was most recently the global marketing manager for a major international technology company before setting up The DG Group in January 2007.

The DG Group is dedicated to delivering all the marketing solutions any company may require. Whether it's a website or leaflets and brochures, or even some product packaging; The DG Group will manage the whole project and even provide guidance along the way.

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