When running a business, you face making key decisions daily. These decisions include setting budgets for business activities such as marketing and outreach to attract new clients and customers.
Creating a detailed marketing budget is an important part of producing a plan of action that is realistic and will help improve company revenues.
Before committing large amounts of time and money, it is important to create a spending plan. This will ensure there is enough money to fund projects, allowing you to make informed decisions and prevent overspending.
How much should I budget for?
Know your current financial situation by understanding your finances and organising your revenue information. You will need to know how much money your company makes each month and any variations that occur. Income can vary throughout the year, so based your budget on reliable revenue, not on “what ifs”. Reliable revenue refers to the minimum amount of income your company makes monthly; anything above this, is not reliable and could change.
Company expenses, such as rent, salaries, utilities, should be extracted from the reliable revenue to determine the amount of disposable income you have. You should also consider putting aside money for unexpected costs and future growth before committing all of it to a marketing budget.
Dependent on your goals, divide the money up accordingly. For example: –
No matter what size your spending budget is, you should always consider how to maximise the return on the money you spend. This could be as simple as figuring out how much it costs to acquire a customer or a sale, or as complex as working out longer term value of a customer, particularly if they are likely to be repeat buyers or long term clients.
REMEMBER: your budget is dictated by how much you can spend, but it should also consider what you might gain.
What areas do you want to spend money on?
Once you have calculated the amount available to spend, you’ll need to organise how you intend to spend it. There are 3 areas to consider: –
- The size of your budget – adjust your activity according to the amount of money available.
- Targeting the right market – what marketing channels are the right ones for you to reach you target audience? Have a detailed description of who your target customers are, and then think about what media would be best suited to attract their attention. If you are considering a new marketing market, only use a small amount of your funds as this channel may not work for you.
- Past experiences – what activities worked for you in the past?
How do I document my budget?
Keep it simple by using tools such as Excel to start a budgeting spreadsheet – click here to request an Excel template from Broadwing Accountancy.
Most cloud based packages such as Quickbooks Online and Xero, and other more traditional accounting packages provide an export feature of your profit and loss to Excel. This makes it easier to recall what your business expenditure is from previous months.
Check your calculations
Finally, once your budget has been created, it is important it is checked by an accountant, such as Broadwing Accountancy. An expert will check for inaccuracies and any false assumptions as well as ask “thought evoking” questions, such as whether your budget has taken into consideration any seasonal declines or growth.
Checks on your performance against your budget should occur regularly, making any adjustments to your habits if necessary.
Comparing past performance to the current performance after marketing the product or service is essential. Has the revenue increased, decreased or remained the same? Which marketing activity was most successful? Ideally, you’ll be able to tie increased income to the individual marketing campaign.
If you would like further information or have any questions relating to setting your budget, or any other accounting topic, please contact Brian Munjanja at Broadwing Accountancy on 01604 328328 or by email [email protected].
