Let’s talk about the “B” word.

Because if you haven’t talked about it, you should.

Let me pause for just a moment to explain. One thing I don’t want to do is gatekeep. I am about to bring up something that I think many marketing people (or those exploring marketing for their brand or business) may not discuss openly.

Ok, here we go…

I had a college professor who had such an impact on me that many of his words live in my brain rent-free daily.

During one of my first classes with him, he presented the idea of the “B” word to a classroom of primarily young twenty-somethings, and it was met with snickers of small laughter and mostly surprise.

Do you know the “B” word?

Now that you have run the list of bad words through your mind, let’s get to the point.

The “B” word is for budget.

Most people consider it a dirty word. Yet, it doesn’t have to be if you pay attention to how you use the income flowing into your business.

If you are a small business owner, when you first started, it was likely money in and money out in the form of a paycheck.

As your brand grew, you likely realized the need to invest funds into the business, such as through marketing, to gain new clients.

I have had many conversations with my clients in which they explain the tactics they have tried in the past, which may have fallen flat or had no visible return. This is why they look to marketing strategists for successful tactics and a roadmap to impactful marketing campaigns.

But before you get there, you need to analyze your budget. That’s where the word “B” gets a little dirty, and if you don’t know where to start building your marketing budget, you can run into pitfalls.

So, here are a few points to help guide you forward with putting together your proposed marketing budget:

1.) Find the marketing dollars:

Step 1: What is your annual revenue?

        This is easy to answer if you’ve been in business for over a year. If you haven’t, average your month-to-month sales and project what you think your first year of business will look like. Or have you been given investor dollars to help support your marketing initiatives? If so, that’s your budget number.  HINT: If you are struggling with this number, re-evaluate what you can reinvest in your business. It’s ok if the answer is that you need to establish your business further before investing in a whole marketing strategy. There are options (soon to be offered by me!) that are affordable and effective.

Step 2: Portion out your marketing dollars. But how, you may ask?

Your marketing dollars should be 7-8% of your annual revenue.

This is a shift compared to two or three years ago when the average marketing dollar spent was 9-10% of annual revenue. This is likely due to increases in the cost of goods (COGs), which impact a brand’s margin, so companies have to figure out how to scale back to continue to make a positive margin.

Step 3: Marketing dollars should include everything you need for...marketing!

Your total marketing budget should include the cost of hiring an agency or marketing strategist and the tactics you plan to invest in. This can sometimes be surprising for small business owners. It's easy to say, ok, I have $5,000 to spend on marketing. Yet you must include all costs, such as agency fees, design costs, printing, etc., which is why many brand owners try to do marketing on their own. It can be done, but you must also educate yourself and your team on identifying what marketing strategy will work for your business. If this is the most viable option for your business, let’s discuss a work session to strengthen and plan a smart, cost-effective marketing roadmap.

Step 4: Plan, plan, and plan again.

You need to revisit this number yearly, based on sales revenue, as this is not a one-and-done process. Your sales numbers and COGs will fluctuate, and changes will happen in the industry and within your brand. Thus, your profit/loss statement will indicate how much you can realistically and effectively invest in marketing. You will also need to evaluate the effectiveness of each marketing tactic. Plan to revisit your marketing budget continually and determine what is best for your business each year.

2.) Plan ahead and segment your spend:

Step 1: Approximately 20% should go to any marketing outsource (agency or strategist).

Step 2: The remaining 80% should go to marketing programs or tactics—social media ads, mainstream advertising, SEO, or anything that will help you gain awareness for your brand.

Step 3: Take that final number, segment the most critical parts of your business income, and then assign a percentage to each segmented initiative.

Key questions to answer include:

• Are we launching a new product or bringing innovation to the business category this year?

• Are we looking to gain new clients or expand sales with existing clients? (if it’s both, figure out how much focus goes to each)

• What tactics have worked well?

• Do we want to invest more dollars into those tactics?

• What are the tactics that you don’t want to let go of? If you have those, dedicate dollars to those initiatives. Dedicated dollars should be pulled or subtracted ahead of time from the final number you will redistribute for the year. For example, if direct mail has brought in 25% new revenue, don’t change it. Don’t fix what isn’t broken. So that is a fixed marketing spend. The remaining dollars can then be divided based on the current marketing strategy for the year.

Planning ahead helps make the "B" word manageable.

3.) Talk about the “B” word…

Because it works in the long run.

Nothing is worse than looking at the end-of-year profits and realizing that you spent more than you wanted on marketing because you didn’t analyze the dollars beforehand.

If sales significantly increase for the year, then your marketing spend can adjust accordingly to the growth for the following year, or you can always go back and readjust mid-year if you want to increase your spending. But you certainly don’t want to get in a position where marketing overtook the brand’s profits.

Do the dirty work on the budget beforehand, and you won’t be disappointed.

Now, let’s get to strategizing!

Until next time -

Bridgette