Are you one of the many business owners overspending on marketing costs? Without a solid marketing budget, it’s easy to fall into the habit of taking a shotgun approach to your marketing, and purchasing marketing tactics at random without evaluating the results. But building a marketing budget can be intimidating. Where do you start? The first step to creating a solid marketing budget is to examine your current financial situation and get organized. It’s impossible to be realistic about a marketing budget without knowing what revenue you have to work with. Start by evaluating how much your company makes on a monthly basis, and then consider what variations there may be. Often, and especially for small businesses, income varies throughout the year.
Once you’ve taken any variations into account, find an average range of income per month. Once you’ve discovered the average monthly income range, use the lowest possible revenue as your base. For example, if your company’s revenue ranges from $6,000 to $8,000 per month, $6,000 will be your “reliable revenue”, or the minimum amount of money your company makes each month. Any excess revenue is variable and shouldn’t be added to the budget because it is unreliable.
Next, subtract your expenses from your reliable income. Start with your monthly expenses like rent and utilities, which are easier to determine the total annual cost of. Be sure to factor in variable costs, paying employees or ordering materials for example, which are costs that may vary throughout the year.
Just as you did to determine your reliable revenue, examine your expenses and find your monthly range. Now that you’ve settled on your range, subtract the high end of that range to find what your disposable monthly income is. When forming a budget, it’s always best to factor in the least amount of guaranteed revenue, and highest amount of expenses. It’s always better to end up with more income than anticipated.
Now that you have determined what your monthly revenue (minimum) and your monthly expenses are (maximum), the remainder is what you will use to set a realistic budget plan. Next week we’ll examine how best to distribute your newfound marketing budget.
Carl Designs expert brand communications design.