How to develop a Marketing Budget that supports Business Growth
Marketing is essential to reach your target audience, to promote new products and services, and to grow your customer base. This, in time, will ultimately boost your sales. Without Marketing, companies will struggle to grow. A comprehensive marketing budget is key to your success. Here’s what you need to know.
How to Refine your Marketing Budget
As a general guideline, your Marketing Budget should be between 5% – 10% of your total revenue for the year. Some businesses will have much more room to work within their budgets than others.
Start-up companies who have high overheads may struggle to invest in marketing. However, an advantage of the percentage approach is that the budget is not fixed. So it will grow as revenue increases ensuring long-term profitability. Whether you are a start-up or established company, no businesses can afford not to invest in marketing.
Once you have an overall figure set aside, the next question is how and where to allocate the budget. As a business owner, you should have a good idea of your products and services. This includes knowings what the ‘cash cow’ currently is, and which product shows the most potential for future growth.
Where most get it wrong is that they focus all their efforts (and marketing budget) on the cash cow and lose sight of where the businesses future growth will come from. As a first step, identify the current cash cow and set it to one side. Then identify the future ‘money maker’ and have a marketing allocation for each.
Budgeting with the Pandemic
With the current pandemic, there are a few things for business owners to consider when developing or adjusting their Marketing Budget. Is the Marketing Budget in line with current expenses? How much should I set aside for future growth? Does the Marketing Budget support business goals? In the same respect, how have the current consumer trends shifted?
Imagine your business as a pie chart, ‘Product A’ currently drives 60% of your business revenue, ‘Product B’ makes up 30% of your revenue and ‘Product C’ only makes up 10% of your current business revenue. One would naturally split the marketing budget allocations as such, 60% of the budget to ‘A’, 30% to ‘B’ and so on. But what if your future ‘money maker’ was ‘Product C’, then it would make sense to allocate more marketing spend and focus on growing Product C that will one day evolve into your cash cow. With some research, market insight and a good understanding of the change in consumer and media trends, one can identify how to adapt their current budget and strategy to ensure future growth.
Future-proof your Strategy
If your business is only barely covering costs, then a 5 to 10 percent marketing budget may not be practical. Although identifying your Product C or future money maker and investing as such could have a significant trade-off. Ultimately marketing is required for growth, and if carefully thought out, the trade-off of cutting into narrow margins now to increase overall sales in future will pay off in the end by preparing the business for cycles of future growth. Budgeting is a long view undertaking, think about where your business is headed, not just where you are now.