For many small business owners the thought of making a budget is more overwhelming that the thoughts they had when starting their business.
In reality, budgeting allows you to create a spending plan for your money, it ensures that you will always have enough money for the things you need and are important for you and your business. Following a budget or spending plan will also keep your business out of debt and can help you work your way out of debt if your business is currently in debt.
What’s that? You’ve been running your business “just fine” without a budget. Is that so?
Answer these questions quickly without looking them up on Quickbooks or calling your bookkeeper: How much did you spend last year on marketing? By category? What does it cost you to run your business each month - including paying your self?
Can’t answer these questions with 100% confidence and certainty? Things aren’t fine and your business is in danger.
You have to know what’s working and what’s not, what provided good ROI and what is eating up cash.
In your small business there should be a big budget - that covers the entire company and then subsets - as an example a marketing budget - and that marketing budget can be broken down by categories and let’s you evaluate how your investments in marketing are lining up with your marketing plan and makes certain your money is supporting the top priorities for each period you review, whether that is monthly, quarterly or annually.
It also let’s you reflect and improve using quantifiable units of measurement. When you are closely tracking marketing dollars and comparing to results and performance you can see quite clearly what is working and what is not.
I find in my business coaching for women that starting in a single segment of the budget is less overwhelming to start than attempting to build an entire budget.
Would you like some ideas on how to prepare a marketing budget and what you might include? Understanding that if you build this small and significant part of your budget you can build the whole BIG budget too! If you said yes then read on:
It starts with knowing what to include and then what you need to budget or allocate for each category and line item.
A little good and not so good news. There is no exact formula for determining how much your business should spend on marketing. It really does depend on a variety of things and yet there are some formulas and considerations you can use to identify the best budget for your business.
Start with your gross revenue. This is the money you receive before expenses. Consider the age of your business. If you are an itty bitty brand new business with no customers, you will need to spend MORE on marketing than if you have a solidly established company with a loyal client base.
Here are my recommendations on marketing spend (you can totally disagree with me - this is just what I have worked with in my businesses and show other clients how to do the same with success):
There will be some fixed and recurring costs like website maintenance, hosting, tools and apps and any contractor retainers - these need to be counted in the marketing part of your budget too.
In your BIG marketing budget you can have as many as 9 subsets including:
Website development and/or redesign
Miscellaneous (where you put the things that don’t fit anywhere else, and yes Virginia, it is perfectly fine to use this category)
Start by reviewing your marketing plan for the year and look at what categories are included and match them up here - keep in mind your success isn’t predicated on having ALL of these. Your success will be tied to execution and measurement of results.
Go back and review what you spent in each category last year and match that up with results.
As an example if you spent $10,000 on events and can tie zero revenue as a result it could be argued that those $10,000 will be better allocated somewhere else.
This is a two part series. Once you get this first part completed, come back next week for the specifics and a handy dandy spreadsheet.
Still have more questions? Join the Women’s Business Profit Lab where I show you how to keep more of the money you make.