Budget, the Old Bugbear

Facing the prospect of building a new business, I find myself looking back at tasks undertaken in the past and having to re-assess the value of each step a small business faces. One key aspect I have tried over the years to get through to my clients has been the need to ensure that a marketing budget is linked to revenue; not Gross profit, and certainly not to net profit, or “whatever is left over”. Back in 2008 when businesses were battening down the hatches, I couldn’t believe the number of businesses essentially removing marketing from their budget entirely. Revenues were dropping, sure, but the knee-jerk reaction of “saving money” by stopping promotion was a terrible tactic when two things had happened;

  1. As competitors dropped by the wayside, their was market share there for the taking. This market share could potentially have made up for lost revenues elsewhere.
  2. Customers still needed goods and services. Make sure they know you are still around and positive!

So in 2012, do those same challenges and rules apply? Of course!

Marketing is often the single most important investment for a small business, especially in a growth phase such as either entering a market, trying to make a leap into a bigger client category, or trying to move from a word-of-mouth business into a broad commercial offering. Be sure to work out a specific, fixed marketing budget relative to revenue (and that number could be anywhere from 3-20% of revenue depending on business, margins etc) and stick to it. Invest it wisely and keep track of ROI. It is all pretty simple and done well, can take a lackluster business and drive both short term sales and long term brand recognition – the gift that keeps on giving.

Leave a Reply

Your email address will not be published. Please enter your name, email and a comment.