As I meet with new clients, I find that people have no idea how much money to invest in their advertising. The good news is that there are several methods to determine how much money you need to put aside for your ad budget.
Here are some methods to use:
- Research where your competitors are advertising if you want to be competitive within your industry. Are they using multi-media components or focusing on one medium?
- Percentage of Sales Method (my preference) uses a percentage of past sales and projections for a basis of your calculation. You may choose anywhere from 2% to 5% of your sales as your annual advertising budget.
- Percentage of Total Budget – if you are a new business you may need to devote more of your budget to marketing. Many businesses delegate between 20-30% of their total annual budget to advertising during the first and second year. If you are purchasing an existing business that is already established, you should consider putting aside 7-10% of your total budget for advertising.
Whichever method you use, please remember that as your advertising becomes more effective and produces more revenue, you should re-evaluate your budget to continue to promote growth for your company.
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