How to Establish Your Advertising Budget - dummies

How to Establish Your Advertising Budget

By Gary Dahl

When you open your new business, set an advertising budget at the outset; your business needs enough working capital to afford to tell the world about what your business offers. Most small businesses spend between 2 and 7 percent of their gross sales on advertising, though some allocate as much as 10 percent.

Percent of gross is a very helpful budgeting tool, but it can leave a start-up business with inadequate exposure. Start-ups often must budget a percentage of projected gross, overspending in the introduction of your business to build business to a profitable level.

Each business is unique. What works for one company may not work for another. When in doubt, follow this simple rule: Spend as much money on advertising as it takes to make and sustain an impact in the marketplace, but don’t spend so much that you run the risk of putting your business into financial jeopardy.

You can begin the process of setting a budget by trying to come up with some answers to the following questions:

  • How big is your business?

  • How much yearly income does your business generate?

  • What do you want to accomplish with your advertising, and how much will that cost?

  • What is your competition spending?

If your budget is too limited to make an impact in the market on a daily or weekly basis, stash your cash until you’re having some special event or sale and then attack the media full-force. In advertising, you’re better off having a big voice once in a while than a weak voice every day.