Setting your marketing budget

Setting the marketing and advertising budget is a daunting challenge for many small-business owners because of the many ways to approach the task. Percentage of turnover is one of the more favoured methods of budgeting because it allows your spending to fluctuate as your revenue does.

marketing-strategyGenerally, it is recommended that your marketing spend should be between 3 and 6% of your turnover, and that’s normally to maintain your current revenue levels. Remember that marketing drives turnover, so if you spend more than this percentage, you increase your chances of growing your business.

Also be aware though that certain internal and external factors may cause your spending to fluctuate. Starting a business or introducing a new product requires more spending than spending on an established business. If you’re selling high-ticket, high-margin goods or services, you can afford to spend more on marketing. Likewise, if the competition is giving you a run for your money, you may have no choice but to increase your marketing spending.

The percentage-of-turnover calculation is a useful ballpark gauge of spending parameters. But, you need to be flexible depending on the requirements of your marketing plan and affordability.
It is worthwhile to write down your turnover objectives for your business and the percentage of turnover you should allocate to your marketing budget.

Small business owners may find they have two things generally that impact the choices on how to get their marketing done:

  1. You have time but no money. In the case where you are starting out you may not have many customers yet so you have time on your hands and you have no money so you may wish to do your marketing or aspects of it yourself.
  2. You have money but no time. In the case where you are still employed and thinking of starting a business). In this case you may wish to make use of your income to prepare your marketing plan and get your website ready. And since you are working in your full time job you may not have time and can pay someone else to do it for you.


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