Marketing Budget

Both to demonstrate that you know marketing is ongoing and to help quantify activities, set up a rolling 12-month calendar of those activities, showing the costs of each. Plan for at least two types of marketing efforts every month. Calendared activities might include quarterly ads in publications, which customers a salesperson plans to visit, trade show opportunities, etc. A calendar reminds you that you always need to be marketing your product or service, and helps let others know what you have planned so you can make the necessary advance preparations.

If you must spend $150,000 a year on marketing to reap $70,000 worth of sales, then this venture may not be worth your effort. One rule of thumb says that you can expect to spend an amount equal to 20% of your revenue on annual marketing – the amount necessary for your business may be more or less. The first year it will probably be quite a bit more.
New entrepreneurs generally budget way too few dollars for marketing. It is hard for newcomers to business to understand that a very good result for a direct mailing effort would be to have sales result from 2% of the population receiving the mailing. In other words, for every 100 people receiving your mailing, you could expect to perhaps hear from 2 of them.

How do you know how much to budget? Look at your calendar of activities, and add up the expenses in each month. Some months will include higher expenses that others, particularly if you participate in trade shows. This is to be expected, and budgeting ahead will help you make sure you have enough cash to meet these expenses.