On average they say that a proper advertising budget should be a minimum of 2% of the budget and upwards of 10%.  Some go as high as 30% of the gross sales of products, and especially in the start up of a new business.

I think that a safe and reasonable budget will be around 8 – 10%, however this may not include the whole re-branding costs, which is another budget altogether.

While there is no definitive answer as to how much any business should spend on marketing, there are general guidelines any company can use to develop a formula that works for them.

Your first step should be to try to find out what the advertising-to-sales ratio typically is in your field. Public companies in your industry may give a figure for their marketing spending in their financial statements (found in their annual reports). With a simple calculation, you can figure out what percentage of their overall revenue that represents.

If you can’t find any public companies that seem similar enough to yours, you might want to start at 5% and then adjust your projected spending up or down based on the size of your market, the cost of media, what you can learn about how much your competitors are spending, and the speed at which you’d like to grow.

A common question from entrepreneurs and marketing professionals is where to set the marketing budget. I wish I could give you a simple answer, but the truth is there is no one-size-fits-all amount. Since businesses and industries differ widely, it’s important to look at the maturity of the business, the level of competition, revenue goals, desired positioning and other factors, like how new you are to market.

Sometimes even within the same industry marketing spending can vary due to different goals and objectives. For example, Wal-Mart spends 0.3% of its revenues on marketing while Target spends 2.5%. The reason is Target’s business strategy is to position itself as upscale and exclusive (which requires reinforcement) while Wal-Mart’s positioning is based strictly on low prices.

Many entrepreneurs calculate all their costs and profit, and then use what is left over for marketing, which is NOT a good strategy. A better approach is to consider the factors I’ve described above to see where you might fall in the generally established range of 2% to 10% of sales.

If you’re looking to launch a new product or grow aggressively you’d be in the higher end of the range. If your product is well established and faces little competition, you’d be in the lower end. Often people focus on saving money when it comes to marketing, but there are serious risks of spending too little. Remember, if done properly, your investment in marketing will pay for itself by taking your business to new heights. After all, that’s exactly what good marketing is designed to do.

How to Set an Advertising Budget

How much should you spend on advertising your business? The price to promote your company can escalate quickly – print ads, banners, radio spots, direct mail, online marketing, telemarketing, social media, public relations. It all adds up. Here are the top four methods for setting an advertising budget used by the most successful independent businesses:

1. Fixed percentage of sales.

In markets with a stable, predictable sales pattern, some companies set their advertising spend consistently at a fixed percentage of sales.

Start with last year’s total gross sales or average sales for the past few years, then allocate a specific percentage of that figure for advertising. Most businesses set aside between 2% and 5% of annual revenues for advertising. So if your annual sales are $6,000,000 then spend $120,000 to $300,000 on advertising.

As a percentage of sales, advertising expenditure varies enormously from business to business, from market to market. For example, the leading pharmaceutical companies spend around 20% of sales on advertising, whilst business such as Ford and Toyota spend less than 1%. An average for fast-moving consumer goods markets (“FMCG”) is around 8-10% of sales.

* Pros: It’s easy to understand and safe: Rather than predict the future, you’re dealing with a known amount. If you’re in a stable, predictable industry, this method is sound. This strategy keeps your budget in relation to sales volume — the very thing advertising is attempting to affect.

* Cons: The budget is based on past performance. You may lose the opportunity to capitalize on shifts in the business climate or customer trends. This method also assumes that sales are directly related to advertising, which isn’t always the case. Numerous other factors affect sales.

2. Comparable to the competition.

Adopt the industry average for ad budgets for your company. Many trade associations and industry publications can provide the average amount or percentage companies spend on advertising.

* Pros: This is an easy approach for companies with predictable sales patterns.

* Cons: It assumes that the industry average applies to all businesses in the marketplace. Companies may ignore local market forces — and miss opportunities to increase market share — if they stick rigidly to this figure rather than boost spending.

3. Objective and task-based.

Begin by setting specific marketing objectives and deciding on the tasks required to meet those objectives. (Example: Increase out-of-state clients by 5% using online promotions.) Then determine your budget by estimating the costs of carrying out those tasks. If you can’t afford to fund all your ideas, rank them and focus on the top few.

* Pros: It’s an accurate method: It ties the use of funds directly to the tasks you want to accomplish. If properly executed, the advertising becomes an investment, not an expense. By spending whatever is needed, the company may grow at a faster rate.

* Cons: If the advertising campaign flops, it can be pricey. You may not recoup costs on a bad promotion.

4. The maximum amount.

Lots of fast-growing businesses put their faith in this strategy, which advocates setting aside just enough money to sustain the business — and your family — then spending the rest on advertising.

* Pros: Like most aggressive methods, it offers the reward of rapid growth.

* Cons: It’s risky. Unless you have a solid reserve to operate your business, you may run it into the ground if your advertising fails.

Marin Media Group, with over 30 years experience, has been instrumental in helping many businesses establish and successfully implement advertising budgets from $50,000 to over $10,000,000 per year.

For a copy of my free booklet, What Should I Spend, send me an email; ross@marinmediagroup.com and I’ll get a copy over to you.

As much as l wanted to continue with the next phase of my R8 Program, l feel that it is important that l deviate slightly and talk about sales. Remember, “nothing happens ‘til a sale is made”.  This is the premise that is the driving force behind the Marin Media Group (www.marinmediagroup.com).

At a recent seminar that l was speaking at, it seemed that 75% of the questions that came my way from business owners was, “what can we do to generate more sales from our website”?

A website, no matter how much time, effort or money you may put into it, is only effective if it is seen.

It is not different than having a beautiful car, but never taking it out of the garage.

Business today has evolved into such a competitive level that you cannot afford to sit around with a website that’s not getting any page views, its all about exposure. That’s why at Marin Media Group, we want to help you, the business owner, to get in the race and bring people to your very own homepage. The amazing thing about the world wide web today, is that we believe perception is 90% of everything, and no matter how small or big your company is, how people perceive it is probably what is going to get them browsing through your site. We have all seen them, sites that most would not even want to put their name on. With the advent of so many quick build softwares, it’s not hard to build a website, but what can be a challenge is making that website work for you to drive customers to your place of business, be it a local store or a global store through e-commerce.

What bothers me is that business owners tend to take the “cheap” way out. They know a friend, who has a neighbor whose cousin can build a site for next to nothing. Reality is, once we get a hold of these “next to nothing” sites, it cost a lot more to rebuild it.

Image… you build a home taking shortcuts on the quality of material, less than adequate labor, work on it part-time only to find out that when you go to put in all the windows and doors, guess what… they don’t fit. Now you have two options; tear it all down and make them fit, or have the windows and doors reconstructed to make them fit. Either way, it costs more! Stay away from this. It is not worth it. It really makes you look bad.

Website Creation to Hosting, Under One Roof
If you’re like most business owners, you probably don’t fully understand the internet that well. In fact, from our experience, many aren’t that interested in understanding what is called the “back end” of things. They just want to have an effective website, a good domain name and a growing business.

That’s why Marin Media Group had decided over a year ago to bypass all the service companies and become a full service provider for our clients.

What that means is simple; we can do whatever you need done – period! Need a domain, done! Need a website, done! Need that website hosted, done!

Essentially what we did was eliminate the process of going through several hoops to get to where we need to be. That’s why we had launched our new service website – to help you get things done!

I want to help you and it won’t cost you a thing to talk to me. I want to make a big job simple for you.

Visit www.marinmediagroup.com, click on the PORTFOLIO tab and check out what we have done for others. Then send me an email with your corporate website address. I will take a look at it. I will then call you and give you my opinion…absolutely FREE. Then you can take my advice and go back to your website person and get them to implement the recommendations. If they don’t get it, drop them. After-all, we’re talking, right?

If you don’t have someone who oversees your site, let me know. I can promise you that the Marin Media Group will implement the solution(s) in a quick, efficient and cost-effective way while providing you with the most professional looking website and/or service available today!

I’m sure you have a clear understanding of what your company does! Do your existing customers or potential customers know what you do or why they should be dealing with you? Marin Media Group has been in the communications industry for 30 years. We have advertised in all mediums (radio, TV, newspapers, magazines, on-line, sponsorship, etc.) and have created many campaigns that have reached and surpassed clients expectations.

Recently we rebuilt our website; www.marinmediagroup.com (would of done it sooner, but we were busy) and when it was completed, I had included the fact that it was done in one sentence as a “P.S” at the bottom of all the emails that l sent out over the next few days. Now keep in mind, we always promote our services to our clients. BUT, are they listening? Maybe NOT! Maybe they are but they just don’t make the connection.

The marketing manager of one of our clients mentioned to me in a meeting several days later, “l went on your site and l didn’t know you did all that”. I was stunned!

Always send your clients, customers, suppliers…updates of what you are doing, no matter how minor it may seem to you.

As a result of this one client, we got additional business because they saw how much we really were ahead of the curve when it came to Digital Media.

Take the time to find out how your employees and your customers think about your company, how they perceive your company. Does your tag line still make sense? Do you have a tag line? One of our clients is Rugcutterz Danz Artz, a childrens dance studio that is the leading provider and experts in childrens dance lessons. They have locations in Vaughan and Sault Ste Marie in Ontario Canada. Two years ago at the end of the dance season, l heard a new parent who had been at the studio for only one year, comment to the front desk staff, “I am so happy here. My daughter loves it. At the other studio (name withheld) they taught my daughter a dance (one dance!). Rugcutterz taught my daughter to dance”. For the last 2 years, that has been their tagline…Let Us Teach Your Child To Dance!.

Are your corporate colours bold or soft enough? Walmart just changed their logo; they went from bold to soft because they did not want to come across as un-sensitive in these tough economic times. Is your logo outdated? What is your corporate culture? Do you have one?

Marin Media Group, with over 30 years experience, has been instrumental in helping many businesses re-brand and re-position themselves and get their business back on track.

For a copy of my free booklet, How Do I Re-Brand My Company?, send me an email; ross@marinmediagroup.com and I’ll get a copy over to you.