Determining you marketing budget and timeline

Your marketing plan must account for the amount of money your are going to spend on advertising, publicity and promotion. Additionally, you should develop a timeline for when you are planning to spend it. Although you can look at trade figures for established businesses, that indicate advertising expenditures might be 5% of your total sales, you will be much wiser to itemize the expenditures in a "bottoms-up" approach. This is especially important if you are just starting out, since these expenses will be more for your business than for an established business whose name and products are already known.

The "bottoms-up" approach to developing a budget recognizes the individual advertising and promotion activities that your business will perform throughout the year. For instance, a start-up business might plan to place an advertisement in the phone book, run promotions through local newspapers, perform a targeted direct mailings, and conduct face-to-face sales calls. The budget for these activities could be broken down as follows:

Your advertising budget will implicitly incorporate the sales goals for your business. If you need to sell 100 units of product per month, to reach your end-of-year total sales goal of 1,200 units, then you must estimate the amount of advertising and selling effort that will be required to sell each unit. This is difficult for new businesses since they don't have any history; however, a little common sense can help. To sell 100 units every month, means that on average you need to sell 5 units every day (using a 20 workday month). If one in ten (10%) of your prospective customers makes a purchase, then you will have to interest 50 customers in what you have to sell every day.

It is important to remember that your advertising and promotion must be continuous, since there will be little direct correlation between a particular sale and your advertising. You cannot just start advertising to offset a decrease in sales, and stop advertising to maintain your profits. If you have identified your target market and selected the most appropriate media to reach your prospects, then developing a budget to meet your sales goals will be straightforward.