Bright Ideas # 54 – How to Find Your Ideal Marketing Budget 

“Marketing is not an optional expense; it’s a necessary
investment in the health and growth of your business.”

I don’t know about you, but for me it seems the holidays always creep up kind of slowly…Then boom! Suddenly it’s Thanksgiving. And with all the traveling and visitors, New Years arrives practically the next day.

Which means now is the time to finish making plans for next year. And that includes working on everybody’s favorite topic— budgeting.

So this week I thought I’d answer one of the most common questions I get from my clients and workshop attendees…

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How much money should I spend on marketing?
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Now, I have to warn you. There is no one, simple formula for coming up with a marketing budget.

It really depends on a number of factors, including:

• Your business and sales goals
• The marketing strategies you choose
• The costs of those strategies
• The potential return on investment

Basically, you have to determine your goals and how you are going to get there first. Then figure out the money second.

It’s a bit like planning for a vacation. Sure, you might have a general budget in mind when you start your planning. But there are lots of factors that can have an impact on total cost like...

The destination…
The mode of travel…
The time frame…
Where you eat and sleep…
And the places you decide to visit

Usually I start with an idea of what I want to spend. Then I plan the trip and see what it’s really going to cost me.

If it turns out to be too expensive, I either splurge or adjust my plans to save money.

And this is exactly the same way you should approach your marketing…

First, figure out your goals and objectives

Second, choose your strategies

Third, determine total cost

Once you’ve done that, you’ve found your ideal marketing budget. If you can’t afford that much simply rethink your strategies.

Maybe you can’t afford TV commercials, but you can afford radio. Perhaps newspaper ads would fit your budget better. Or a press release.

Just keep in mind that many strategies have hidden costs. Because at the very least, you are probably going to need some printing, copywriting or graphic design. And you either need to do it yourself, or hire it out—both of which cost money.

So don’t base your decisions, or your budget, on initial up-front costs.

Instead, add up the true costs of each strategy. Then compare that to your potential Return on Investment (ROI).

After all which makes more sense: A $5000 campaign that brings in 20 new clients who each spend $300 (net profit of $1000), or a “free” ad that you spend $800 to create but only brings in two clients (leaving you in the hole by $200)???

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How do you figure out the true cost of your marketing?
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Try using this simple set of questions and guidelines:

1) What is my initial, up-front cost?

2) How much time will it take me to manage the project
and/or put everything together?

Now add on 1/3 more time than you think you will
need, then multiply the number of hours by your
hourly rate to calculate your time cost.

3) Do I have time to do this right, or will I have to pull an
all-nighter to get everything done?

If you have to work late, count it as time and a half.

4) Do I need professional services like printing, graphic
design, Web development or copywriting (if so, call around
and get estimates)?

Once you know the total cost, you also need to know the projected Return on Investment. So ask yourself…

5) How many new clients or sales do I need to break even on the investment for each strategy (Divide total cost by the average annual revenue generated by one new client)?

6) Is that figure possible, let alone probable?
Keep in mind that a 1-2% response rate is considered decent in direct response marketing (sales letters or ads that ask the reader to take action). Plus, if you are handling all of your own marketing, it may take a few tries to find a formula that works. So don’t expect the sales to just start rolling in.

However, don’t worry if you don’t have the knowledge or experience to get your numbers perfect. Simply start with a monthly budget you think might work and try it for six months.

If you aren’t seeing the ROI you want, rework your strategies, messaging and/or budget every few months until you do.

Remember, any budget is better than no budget. So whatever you start with is a step in the right direction.

©2002-2006 Success Stream. All Rights Reserved. www.success-stream.com

Do you have a marketing, advertising or writing question you’d like to have answered? Email me and you might see the answer in a future edition of Bright Ideas.

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