How Do You Determine Your Advertising Budget?

Every business must advertise in order to get their business’ name out there and spark interest in potential customers. The tricky part is finding the right form of advertising for your business. There are so many forms of advertising, finding the form that matches your business objectives is hard to do. Setting a budget for your marketing plan can be even trickier than choosing the right means.

According to entreprenuer.com, there is a three-step process to finding the right budget for your marketing needs.

  1. Calculate 10% and 12% Of Your Business Profit

You shouldn’t spend more than twelve percent of your business profit on advertising. You calculate this percentage based off of the gross markup earned not the margin earned.

“Markup is gross profit above cost, expressed as a percentage of cost. Margin is gross profit expressed as a percentage of the selling price. Sell an item for $150 when it only costs you $100, and your markup is 50 percent. Your margin, however, is only 33.3 percent. This is because the same $50 gross profit represents 50 percent of your cost (markup,) but only 33.3 percent of the selling price (margin.)”
  1. Subtract Your Cost of Occupancy

Once you’re fully calculated what ten percent and twelve percent of your gross markup are, you can select which part of it can go towards advertising.  You have to cover the cost of operating your business if you want to have a business to advertise.

  1. The Remaining Amounts Are Your Budget

The money you have left after subtracting your cost of occupancy is what you have available to spend. The lower number is the minimum amount you should be spending, and the higher number is the maximum.

 

Now that you’ve calculated what you can spend on advertising, it’s beneficial to know the best ways to spend it. There are many forms of advertising, and picking the best one for your industry will maximize your return on advertising.

There are forms of marketing every business should spend money on to make a profit:

  • Branding

   A business isn’t a business without a brand. The brand is the look and feel of the business, it’s what makes the business look familiar, memorable, and interesting.

  • Website

   Every business needs a website. In today’s day and age, operating without a website is a sure-fire way to get little business.

  • Social Media

   Social media is a key way of keeping the brand updated and sharing bits of information to a wide range of customers in a matter of minutes.

  • Advertising

   Advertising is how the brand gets represented. Getting the business name out to the public is the only way to gain profit.

  • Content

   Content is what fills up your website or social media. Without content, your website and social media sites are just pages. Content is what brings your brand’s ideas to the surface.

Advertising efficiently is the best way to build your brand, gain more revenue, and rise to the top of your industry.

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