A key factor of running a successful business is to have a plan, and while the marketing strategy is a huge part of that plan, budgeting for advertising efforts can often be overlooked. Typically, a significant portion of the marketing budget is allocated to advertising, which is why it’s important to monitor what is being spent, analyze the efforts, and make adjustments when needed. A strategic advertising budget is crucial to increasing revenue for your business. Without a plan, a business might overspend on opportunities that don’t create a positive ROI, resulting in a loss, or they might miss out on opportunities to save money by waiting too late and missing deadlines offering advertising opportunity bundles and extras.
Not only does planning ahead create ways to save money and avoid losing it, but it also helps a business increase revenue by capitalizing on seasons, holidays, company promotions, and other calendar-related efforts.This article covers how to develop an advertising budget when planning for the next year.
Three Steps to Developing an Advertising Budget:
1) Evaluate and Organize Your Business’ Financial Information
Before you start throwing dollars into advertising, you want to see where your company stands financially. First, look at the “reliable” revenues the business brings in- the average revenue/projected sales that you expect to bring in every month. Then, subtract the “hard” expenses from that - labor, rent, materials, and any necessities to keep the business going. When you have determined your disposable income, factor in a buffer for future growth and unexpected costs.
Entrepreneur magazine suggests that you calculate your advertising budget by multiplying 10 and 12 percent of your projected gross sales by the markup received on your average transaction. Next, deduct your rent costs from the adjusted 10 and 12 percent sales numbers. The remaining balances represent the range of an allowable advertising budget to look at for the year.
The important thing to remember (and remind the executives) is that advertising should be viewed as an investment, not an expense. Marketing and advertising is an integral part of doing business as it is vital to be able to reach new customers and stand out from your competition, staying top of mind to your target consumer and reaching them at the prime time along their buyer’s journey.
2) Analyze Your Past Efforts and Research New Opportunities
If your business has participated in advertising or other marketing efforts before, now is the time to reevaluate those successes. Break down the amount spent on each advertising channel and analyze to determine what worked and didn’t work. Also, reach out to your media partners to get valuable advice on what types of media are available and the costs associated. A media partner who knows your business can offer suggestions to steer you in the right direction based on your goals and objectives.
You should also take the time to brainstorm and set goals for your business based on where you want to be in the future. Think about your goals and a reasonable ROI that you are expecting to achieve from your advertising efforts and how much of your product/service you need to sell to make this advertising worth the investment.
3) Outline Your Budget and Timeline
After you’ve set a budget, create a plan that clearly defines the various aspects of your budget. This can be an Excel document or something similar. Divide your advertising budget into an ideal timeline, whether that’s yearly, quarterly, or monthly, but remember that advertising opportunities might run throughout these timelines to ensure the ads run long enough to see a change. A longer run time is better for branding, so equate that when looking at the timeline within your budget If you have a seasonal business, you might consider ramping up advertising at certain times of the year when your customers are most in need of your product or service, but don’t limit yourself to just seasonal advertising opportunities. Plan to advertise even in your off-season to dominate the mental real estate in the minds of your target customer.
For example, if you run an HVAC company, you should budget for additional advertising in the summer and winter when the temperatures get extreme, and customers are likely to have a bigger need for your services. You should consistently attempt to be top of mind to your customers when they need your products or services the most, while using advertising even in times when your products or services might be needed less to ensure your company is the first that’s thought of when that time of need arrives.
Now that you are on your way to developing your annual advertising budget, you should find it easier to plan, budget and allocate for your marketing efforts throughout the year. Increase your overall revenue and avoid overspending on advertising opportunities by staying on course with your plan and budget, while consistently analyzing and evaluating to ensure marketing success throughout the year for your company.
