“You have to spend money to make money,” or so they say. They also say, “time is money.” So when it comes to spending money on advertising your business, how much time and money should you spend? We would all like it to be be less of both, but how can you figure how much of which ones would be best for you?
Let's start with the easy part; how much should you spend on your marketing? Obviously, you never want to spend more money than you have. The most common setup used by businesses is to set a percentage of your annual gross revenues, or the projected revenue, for your marketing. The United States' Small Business Administration suggest the following base percentages dependent on how long your business has been open.
For a new business/start-up you will want to have 3-5%
For running businesses, 2-3%
From there you will need to make some determinations based on the size of your business, the type of business and so forth. For example, a small business, making less than five million dollars per year, 7-8% of revenue would be advised; but a retail business may spend up to 20%.
From there, we now need to determine how much time you should spend on your marketing. Begin by figuring what your time is worth if you are a small one person business, or how many employee hours you are putting towards marketing, if you have employees.
If you are a one-person business, and you are running your business on the side with no compensation other than a portion of the profit, consider what you feel you should be paid. This can be tricky as everyone would like to think that they should be paid the highest possible amount, but this is your business, so think about what you are actually going to be doing and determine a rate, as you would for an employee.
If you are a bit bigger and have employees who are going to be handling the marketing for you, determine how many employee hours are going to be going to your marketing. How much are you paying them for those hours? What are their benefits and taxes that you pay for those hours that they spend on marketing.
For example, let's say you have an employee who spends 23 of their 40 hours each week working on marketing. You pay them every other week and part of that pay includes medical benefits which cost you 80 dollars per paycheck. That means 46 dollars of that 80 is part of your marketing budget.
Once you know how much you are spending in work hours for the marketing you will then want to calculate and compare that amount to your revenue, projected or real. If your projected revenue is 750,000 dollars and you are a start up, then you would want to spend in the realm of 22,000 to 37,000 minimum for marketing each year. Which, if you are paying the employee mentioned above 10 dollars per hour, should put you at about the bottom end of that amount.
There is of course the third option, which many companies take, and that is to hire a third-party firm to handle your marketing for you. This eliminates most of the time aspect, as the only time you need to spend is how much time you work with the firm to determine the best advertising methods for your company. If you choose this route, make sure you stay in contact with the company, or your representative within the company, to keep track of what they are doing and the timeline for what they are doing; it is after all still your advertising. Also make sure they do not try to push you over the budget that fits your company.
If you are starting your business, then you will want to ramp up the amount you spend gradually, no matter which of the above methods you choose. But, do not forget to regularly check back with your budget and decide what is best for your business. As a start up, if you are basing the amounts on a projected revenue, you may need to change the amount after a quarter or two, but in turn you may be able to spend a bit more time with your marketing.
Marketing, in one form or another, is important to every business, and only you can determine the best option for your business. If you know your target market, you can gear it more towards them, but don't go off the deep end. Don't advertise some place because you like the idea, if it is not one that will draw in true potential customers, and not just people who like the same idea; after all, many people ignore ads on Facebook, or many of the sites we go to for news. Finally, do not be afraid to change course if you find it is not working, but also don't abandon a marketing campaign without giving it adequate time to work.