Three steps to a solid marketing budget

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

Without a solid budget, you can accidentally overspend on marketing expenses. Here are three steps to help you organize your current finances, figure out where to spend marketing dollars, and make strategic adjustments.

Step #1: Organize financial information

The first step to creating a solid marketing budget is to organize your current financial situation. When working on estimates, it’s impossible to create a realistic marketing budget.

Understanding your finances starts with organizing your income information. You need to know how much money your business makes on a monthly basis and the variations that may exist. Although earnings can vary greatly throughout the year, you should organize the information according to reliable earnings.

“Reliable income” is the minimum amount of money your business earns each month. For example, if your business has revenue ranging from $5,000 to $7,000 per month, reliable revenue is the lower figure of $5,000 per month. Any amount above this monthly minimum is additional income that cannot be added to the budget as it is unreliable and subject to change.

After arranging the total reliable income you can expect to earn each month, you need to subtract the expenses. Your business expenses may include renting a space, cost of materials, cost of employee compensation, etc.

Any expenses the business has to pay each month should be subtracted from revenue before attempting to create a marketing budget. A realistic budget plan will always focus on revenues that exceed expenses, not total revenues that come in.

Once you have determined the amount of disposable income available to the business, you need to determine where the money will go. Marketing is just one area of ​​focus that you should incorporate into a budget plan. You should also consider setting aside money for unexpected costs and future growth.

Divide the money according to your goals. For example, if your main goal is to attract customers and you put hiring on hold until your customer base is stronger, you can invest more money in the marketing budget.

If your goal is to set up a second office or store, then you’ll want to spend more of the disposable income on growth and less on marketing until the new location is established.

Step 2: Determine where you want to spend the marketing funds

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

You will want to start arranging how to spend the funds based on the amount. If you have a limited marketing budget, you should probably consider small print ads, online ads, social media, and email ads to attract new customers.

A large marketing budget would provide the opportunity to include radio and television advertisements to attract a wider range of customers.

Beyond the limits of your budget, you also need to consider strategies that have worked in the past. If you’ve noticed that email newsletters help attract more customers, you should start over, even if you have the funds for more expensive alternatives.

Also consider which marketing channels will allow you to reach the right audience. Write a detailed description of your target customers. Then think about the media they use (eg what website they frequent, what TV programs they watch, etc.). This is where you should advertise.

It’s important to note that when considering a new marketing channel, you need to set aside funds for testing. Since you don’t 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 will more funds flow into the new marketing channel.

Step 3: Assess the data and make appropriate changes

The final step in building a strong marketing budget is analyzing the plan and making adjustments that improve revenue generation. Ultimately, marketing is designed to generate additional revenue. If the strategy isn’t bringing in new revenue above cost, it’s best to scrap that strategy and try something else.

Data evaluation is an essential part of creating an effective marketing strategy. Evaluation begins by comparing past performance to post-market performance of the product or services. Review the changes to income and determine if they have gone up, down, or stayed the same. And ideally, you’re able to directly tie increased revenue to each ad source.

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

Work the plan

Taking steps to improve marketing strategies starts with developing a solid budget. However, a plan alone is not enough. You have taken action and remain determined to follow through.

By keeping the budget in mind when making decisions, you’ll avoid overspending on marketing and have the ability to explore different strategies to find the best solutions for your business goals.