So it’s that time again and your wondering how to plan your budget for the new financial year.
We have been getting loads of inquires which are all asking the same questions…
everyone wants to know…
Where should I be spending my marketing money this year!
well…
While there is no easy answer there is a simple way that you can figure out where to be spending your money this year.
Step 1 – Determine what your goals are for the coming year
Too often we are talking to business owners who ask how much is my marketing going to cost. That is such a difficult question without having an in-depth knowledge of what you are hoping to achieve. It would be like saying how much petrol does my car need with no knowledge of where you are hoping to go.
Think about what you hope to achieve whether it be starting a new sales funnel, launching a new product or service, etc.
Step 2 – Look at the results that your achieved last year
The one thing we always do when planning budgets is use a reverse calculator to understand what results you are likely to get based on the your past history and future plans.
The best way to go about this is looking at your fixed costs, variable costs, and results that you achieved in the previous year. We throw out the book when it comes to this and look at the conversion results and not your vanity metrics that we spoke about here.
These vanity metrics do provide some use when looking from campaign to campaign to improve and optimize but for a whole marketing plan you will be stepping over $2 to pick up 10 cents.
We hope that you have been tracking your marketing spend in terms of return on investment because that is the key to growing and improving your business! If your not you can reach out to us about how we can help you with our FREE template that we normally sell for $1,279
(this is not for people who aren’t serious about growing their business and does require your input).
Step 3 – Pick a budget allocation model
This one is something that people rarely consider because they are stuck in their way of thinking which is doing things the same way that they always have.
but…
There are other models out there and you do not have to keep using the same old model to choose how your going to allocate money to marketing.
Model 1 – Let someone else assign a budget (just the number)
This is one of the hardest things to do when trying to achieve a goal as it is a number and it is usually set in stone. This can really limit growth and agility and impact your businesses bottom line. This can come in many shapes, sizes, and forms and is usually a bad thing for your businesses growth. Take a hypothetical situation where you have an agency sitting on a retainer with a fixed advertising spend. There is no ability to scale up or down depending on your business goals and you are really limited on the ability to transfer budget between communication mediums.
Model 2 – Copy the comptition
This is an interesting method with a conflicting concept behind it. With this budget allocation method you are always following your competitors and therefore always competing for the same customers. This makes it more difficult to compete and cut through the crowd.
but… that’s not the worst part!
Not only does chasing them mean that you are competing for the same customers it also means that it is going to cost you more and that you are going to get significantly lower returns!
Model 3 – Goal based resource allocation (our favorite)
This is our favorite method of allocating budgets as it means that you are goal driven and it is the most agile of the four methods. With this method you are planning based on your capacity and ability to service the work. This means that you can scale up and down to meet you goals and that you will have the ability to trial different methods of communication which generally leads to better returns.
but… there is a catch
You cannot employ a method like this without a good strategy and understanding of how your marketing spend is performing. Tracking is essential to ensure that you remain on track.
With changes in technology over the past several years we are now able to achieve better returns than ever before with new ways to reach your potential customers.
Model 4 – Percentage of revenue
This is a very tried and tested model that several companies of all sizes still use. This method means that you are going to attribute a percentage of revenue to your marketing budget.
Depending on your industry and margins the percentage may vary, for example a Gucci bag is obviously going to have a much higher marketing spend than a no brand bag you can buy in a corner store.
Several SME choose thing method as it is easy to employ and easy to benchmark with competitors and industries.
If you want more information on budgeting click here for a guide from Quick Books.
You can also check out Custom Logo Cases post titled, “Budget-Friendly Ideas to Promote Your Small Business and How to do it (2019 Guide)”
Step 4 – Forecast the results you expect this year
This is the most daunting task because you need to be cautious and as a SME owner your probably thinking what if I’m wrong and I commit to spending all this money and it doesn’t work out.
your not alone…
Most business owners are going through the same predicament in their planning phase and are wondering the exact same things. The most important thing to think about is where you are planning to be in 5 or 10 years. Marketing your business should always be an investment and it should be agile enough to make changes on the fly.
Nobody in their right mind is going to say to a SME owner that they should commit to a 12 month TV campaign that sucks up 95% of their budget because that is plain and simply suicide in today’s market.
You should be able to predict roughly how many leads you will generate based on input with a reverse calculator. You could even do this using our marketing tracking template that we spoke about earlier.
This will show you an estimation of your costs based on an overall CPA from the previous year, from here you can predict based on the people you have and are planning on hiring. You will be able to see quickly just how easy it is for your business to grow.
If you are looking for more information regarding your marketing strategy talk to one of our marketing consultants today!