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Three Steps To A Solid Marketing Budget

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Developing a solid marketing budget is an important part of creating a plan of action that is realistic and will help improve revenues.

Without a solid budget, you can accidentally overspend on marketing costs. Here are three steps to help you organize current finances, determine where to spend marketing dollars, and strategically make adjustments.

Step #1: Organize Financial Information

The first step to creating a solid marketing budget is to get organized about your current financial situation. When you are working around estimates, it is impossible to create a realistic marketing budget.

Understanding your finances starts with organizing your revenue information. You need to know how much money your company makes on a monthly basis and the variations that might exist. Although income can vary significantly throughout the year, you must organize the information based on reliable revenue.

“Reliable revenue” is the minimum amount of money your company makes each month. For example, if your company has revenue ranges from $5000 per month to $7000 per month, the reliable revenue is the lowest figure of $5000 a month. Any amount over that monthly minimum is extra revenue that cannot be added to the budget because it is not reliable and can change.

After organizing the total reliable revenue that you can expect to earn each month, you need to subtract expenses. Your business expenses can include renting a space, the cost of materials, the cost of paying employees, etc.

Any expense that the company must pay each month should be subtracted from the revenue before trying to create a marketing budget. A realistic budget plan will always focus on income that exceeds the expenses, not the total revenue that comes in.

When you have determined the amount of disposable income available for the company, you should determine where the money will go. Marketing is only one area of focus that you need to incorporate in a budgeting plan. You should also consider putting aside money to for unexpected costs and future growth.

Divide up the money based on your goals. For example, if your primary goal is attracting clients and you are putting a hold on hiring until your client base is stronger, then you can put more money into the marketing budget.

If your goal is to set up a second office or shop, then you will want to put more of the disposable income into growth and set aside less for marketing until after the new location is established.

Step #2: Determine Where You Want to Spend Marketing Funds

After you know the total amount available to spend on marketing, the next part of creating a solid plan is organizing how you intend to spend that money. Three main factors contribute to how you spend marketing funds: the budget size, your past experiences, where you can reach the right audience.

You will want to start organizing how to spend the funds based on the amount. If you have a limited marketing budget, then you should probably consider small print ads, online ads, social media and email advertising to bring in new clients.

A significant marketing budget would provide the opportunity to include radio and television ads to bring in a wider range of clients.

Beyond the limitations of your budget, you also need to consider the strategies that have worked in the past. If you’ve noticed that email newsletters help bring in more clients, then you should do that again, even if you have the funds for more expensive alternatives.

Also, consider which marketing channels will allow you to reach the right audience. Write down a detailed description of who your target customers are. And then think about what media they are consuming (e.g., what website they frequent, what television programs they watch, etc.). This is where you should be advertising.

Importantly, when you are considering a new marketing channel, you should set aside some funds for testing. Since you do not know if the new channel will work for your business, you should only use a small portion of your marketing funds.

Only after determining that it works for your business should more funds funnel into the new marketing channel.

Step #3: Assess Data and Make Appropriate Changes

The final step of building a solid marketing budget is the analysis of the plan and adjustments that improve revenue production. Ultimately, marketing is designed to bring in extra revenue. If the strategy does not bring in new revenue in excess of the cost, then it is better to remove that strategy and try something else.

Assessing the data is a vital part of creating an effective marketing strategy. Evaluation begins with comparing past performance to the performance after marketing the product or services. Look at the changes to revenue and determine if it has increased, decreased, or stayed the same. And ideally, you’re able to tie increased revenues directly to each advertising source.

Also, make sure the changes are caused by your marketing strategy and not outside influences like holidays or seasonality.

Work the Plan

Taking measures to improve marketing strategies starts with working out a solid budget. However, a plan alone is not enough.  You have take action and remain committed to following through.

By keeping the budget in mind when you make decisions, you will prevent overspending on marketing and you will have the opportunity to explore different strategies to find the best solutions for your business goals.