If your business is like our business, then the key leadership team or owners are likely sitting down this month and laying out goals and budgets for 2017. If you operate your business on a calendar year versus your tax year (for C corps) then this post will hopefully catch you at just the right time— to make you think. Think about what? Adding a line item to your budget for marketing.
We meet a lot of businesses who are looking at hiring new sales people. They have a line item in the budget for sales. They are always willing to hire an additional sales person. We love selling and love sales people, but is hiring that sales person always the best decision— especially if you haven't added a line item to your budget for marketing? When I say marketing, I'm also talking about digital advertising. We see a lot of small businesses up to 10 million a year in revenue that don't have a marketing line item in their budget.
Well, first let me say that we are recommending it to clients as we meet them, but I wouldn't say it's a novel idea. The USSBA (US Small Business Administration) recommends businesses with revenue less than 5 million per year invest around 7-10% in marketing. The one caveat they mention is that these businesses would typically be operating on a 10-12% net profit margin.
So I like math. Let's do some math. If you don't like math, just bear with me, it'll be over shortly.
If your business is pulling down 1 million per in revenue you'd invest $70,000 on the low end and $100,000 on the high end into your marketing.
Let's break down a couple more scenarios:
So that's a good chunk of change, but it's well worth assuring that your sales people have leads to follow up on and to make certain your brand reaches a growing audience.
Let's focus on how to start planning and creating your unique marketing budget for 2017.
First, let's get started with a list of marketing expenses you should already have:
Things to consider adding:
I tend to think it's best to lay out which expenses are recurring (monthly, quarterly, or annually) and which ones are one-time expenses. Whether you use a spreadsheet, Quickbooks, or a tool like LivePlan to build your annual planning, the key is laying out your budget in annual numbers (start with % goals and work into specific numbers) and then break it down into monthly expenses.
Let's look at an example.
For example, you may say staffing is going to be 40% of your overall budget. You might think ongoing digital marketing is 30%, with digital advertising at 20%, and 10% would cover all other expenses like brand collateral, networking, events, and etc.
Using the midpoint of investment for the 5 million revenue business we'd be at $265,000 annually.
From this high-level approach, you can then break these categories down into as many line items as you like and build this out into a monthly budget.
These are just ideas and are not the gold standard for budgeting. The SBA has some great marketing budget information that can also help. We don't have a monopoly on good ideas so feel free to share what's working for you in the comments below. Thanks for reading along and good luck building your budget and achieving your goals in 2017.