How to Figure a Marketing Budget That Pays

"We don't have money to spend on marketing." I've heard that excuse so many times, only to find out that whomever said it, turned right around and wasted money on some ill-conceived, roll-of-the-dice gambit that paid back nothing. Without careful forethought, you simply won't have money to spend on marketing. That is certain. So let me offer some advice:
Marketing should not be viewed as an expense. In fact, if it is budgeted correctly, it will serve as an investment, and yield a pay off many times greater than anything you could expect in the stock market. It will be an investment in yourself, and you will have total control over the outcome. Here's how you do it:
1. Write down how much you expect to gain in revenue for the period in question. Let's say, for the sake of illustration, you're marketing a gadget that sells for $10,000. After one year, you expect to sell $1,000,000 worth of gadgets. That's 100 sales in one year.
2. Subtract your overhead from that. By overhead, I mean cost of goods sold, salaries, taxes, real estate, insurance, everything you need to pay out before all the rest is yours. Staying with our illustration, let's say that number is $750,000. You now have $250,000 to spend on whatever you want. Conservatively, that's a 25% margin. You've been paid, your employees have been paid. Your vendors are all paid. The rest belongs to you to use as you wish. You can buy a boat, put it in the stock market, bank it, even bury it. OR, you can re-invest a portion of it back into your company.
3. According to the World Advertising Research Council, benchmarks for marketing budgets in a business-to-business environment hover at around 15-25% of total margin. In consumer circles, where audiences are larger and more unwieldy, the benchmark is 25-35%. Some companies reinvest as much as 75%. Taking our current example, let's re-invest 25% of the margin. That's 25% of the $250,000 left over, or $62,500 in marketing budget.
4. With one sale equaling $10,000, anything after your sixth sale is gravy. So, your 1:1 ROI on the campaign would be six sales. Odds are, you'll likely tee up well more than that on your $62,500 marketing investment. If you do it right, you should get 100 sales for that investment. Will your stock investment yield a better return? Probably not.
Carve your marketing budget out of your available margin, and you won't be looking at an expense burden. You'll be reinvesting a portion of your proceeds. Tie those to the number of sales you need to make to determine your ROI. And build a plan that hits the target.
I'll be happy to visit with you for more on this topic, if you like. Email me or call the office. We are in business to help your business grow.