Recommended Budget for Marketing Based on Gross Revenue
Your small business can’t survive without marketing, but it can be difficult to know how much to spend on it. You have other obligations you have to meet, and your bills are not voluntary. However, marketing is voluntary. You have to learn how to commit a percentage of revenues to marketing and treat marketing not as an optional expense, but as an absolute necessity for the survival and growth of your business.
A Minimum Percentage
McKinsey and Company recommends that a firm spend 5 percent of its gross revenues on marketing. If you consistently figure your marketing percentage on gross revenues, you will be paying yourself first instead of paying everyone else first. As you make this a routine part of doing business, you may cut back in other areas each month so you will be sure to have your marketing money.
Small-Business Premium
Drew McLellan, a 25-year marketing expert with clients such as Kraft and John Deere, says a small business should budget 7 percent to 8 percent of its gross revenues for marketing. This will enable a small business to compete more effectively against larger companies. Since marketing expenses are tax deductible, the increased marketing expense for a small business can pay for itself in tax savings.
McKinsey and Company recommends that a firm spend 5 percent of its gross revenues on marketing. If you consistently figure your marketing percentage on gross revenues, you will be paying yourself first instead of paying everyone else first. As you make this a routine part of doing business, you may cut back in other areas each month so you will be sure to have your marketing money.
Small-Business Premium
Drew McLellan, a 25-year marketing expert with clients such as Kraft and John Deere, says a small business should budget 7 percent to 8 percent of its gross revenues for marketing. This will enable a small business to compete more effectively against larger companies. Since marketing expenses are tax deductible, the increased marketing expense for a small business can pay for itself in tax savings.
Spending Ad Money on Rent
“Entrepreneur” magazine suggests that some businesses can spend more money on renting a high-profile location and cut their actual advertising expenses to less than 4 percent of gross revenues. The better exposure from the rented location can more than make up for advertising dollars the business no longer has because of the increased rent.
New-Product Launch
According to Legal Zoom, when you launch a new product you should expect to spend a larger portion of your gross revenues on marketing. Set a time limit on the launch period, and dedicate a few percentage points more than you usually do to marketing. Monitor the income from the new product to make sure it is paying the advertising bill plus profit.
Source: SmallBusinessChron
“Entrepreneur” magazine suggests that some businesses can spend more money on renting a high-profile location and cut their actual advertising expenses to less than 4 percent of gross revenues. The better exposure from the rented location can more than make up for advertising dollars the business no longer has because of the increased rent.
New-Product Launch
According to Legal Zoom, when you launch a new product you should expect to spend a larger portion of your gross revenues on marketing. Set a time limit on the launch period, and dedicate a few percentage points more than you usually do to marketing. Monitor the income from the new product to make sure it is paying the advertising bill plus profit.
Source: SmallBusinessChron
