A guide on how to determine your marketing budget
By now you’ve become an expert in the field of measuring results and forecasting, but you might be beginning to think about when exactly you should (or shouldn’t) scale up your marketing budgets. By increasing spending or altering plans there’s always a risk that you could wind up out of pocket, but here are some suggestions on how you can mitigate the risk to your business and cash flow.
Measuring Results: A Recap
Your aim when measuring the success of your campaigns should be to work out what works well for you and your audience, and what could be improved on to further enhance your sales or popularity. Spending time analysing the data and using this to successfully plan ahead and anticipate any changes in the market are vital processes for any type of business.
How to Determine Your Marketing Budget
In theory, the best way to determine one’s marketing budget is to set a percentage of the projected gross revenue (just one more reason why accurate forecasting is so important to businesses of any size). Start-ups would usually be looking to spend roughly 12-20% of their gross revenue, according to experts, while businesses that have been trading for five or more years would allocate far less on the basis of them being better established in their market. The idea of a higher spend is to enter the market with a bang and go all out to show who you are and what you do. As such, remember that in the long run your marketing spend won’t be nearly as high as it is to begin with.
What is Scaling Up?
It’s important to bear in mind that there should be a change in circumstances before any business decides to scale up their budgets. For start ups, this means that you should first set out an initial marketing budget to discover who your target audience is. This is in fact a leap into the unknown and a case of trial and error. It is only when you have established your brand and gotten to know who your customers are that you should consider scaling up. Businesses that are scaling up are usually ones that trying to quickly increase sales and grow to the top. Though it is the aim of many start up businesses to be at the top of their game, it is unrealistic to set those kinds of goals before having even established your brand.
When and When Not to Scale Up?
Reaching a stage at which you feel it is right to scale up should come at a time when you have successfully found a trend or a repeat tendency from your customer base. This will allow you to shift all of your attention and funds onto efficiently scaling up this interest by means of sales and repeat orders. Though it is hard not to jump at the chance to scale up and to bring focus to your marketing campaigns, you should be certain that the time is right and that you have enough experience and knowledge to be sure that the pattern isn’t an anomaly. Therefore, it would be wise to only scale up when you have a solid pattern emerging and not at the first sight of an increase in sales.