How much should I budget for advertising?

How much should I budget for advertising?

How much should you budget for advertising?

So I get this question all the time… How much should I spend on advertising? It’s insane to me how most business owners don’t even have an advertising budget planned out for the year. They basically throw darts into print publications or Google ad campaigns or random services that they really have no idea if they’re going to work or not.

My short response is you should be spending 7 to 8% of your gross revenue for marketing & advertising if you’re doing less than 5 million a year in sales and your net profit margin after all expenses is in the 10-12% range.

Every business is different and lots of industries would need to tweak this up or down but that’s a pretty good rule of thumb.

And sure there are companies out there that will tell me hey I don’t really need to spend money on advertising because I have more business than I know what to do with. My to these folks would be how about hiring more people and figuring out how to handle more business?  If your business is 95% referral-based and word-of-mouth…hey That’s great… How about getting another 25 to 40% through advertising?

But here’s the thing that really drives me batty is most companies don’t even create a budget for the year in advertising. They have no plans except to continue with what they’re currently doing and maybe adding or subtracting a thing or two as the year rolls along.  To me that’s just an insane way to conduct business.

If you’re a business owner here’s a good strategy to start implementing. Create a budget that makes sense for your business for the entire year. Whether that’s 2 percent or 10 percent of your gross revenue, figure out how much you’re going to spend in online advertising, print publications, TV, radio, video productions, graphic designs, t-shirts, cups, or any shwag that you want to get your brand out. Then plan it out and spend it. If opportunities come up or the market has a hiccup or whatever adjust it. But come up with a plan and stick to it. Most campaigns really take 3 to 6 months to start gaining momentum. Commit to a plan and then the following year tweak it and fine-tune it so that you can increase your business. And for god’s sake anything that you spend money on you have to monitor and require reporting from the service provider that’s handling your business.  Hold them accountable for results they’re promising and if they don’t perform….boot em!  Find someone that can do the job you need and provide proof monthly!  Trust me, advertising can be a game changer if managed properly.  Get your business positioned for growth today to insure you’re successful tomorrow.

Dave Revere is the creative director at MediaTamer, a Southern California local online marketing company that utilizes the latest technologies and proven proprietary strategies insuring small to medium sized businesses are able to succeed online.

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