How much of your operating costs should be devoted to your marketing budget?

While there’s no magic formula, here are a few guidelines to consider next time you’re preparing a marketing budget.

Often, small businesses estimate their revenue, expenses and then gross profit. Anything left over at this point is considered available for marketing support. This is NOT the best method for determining your marketing budget.

A more practical approach for determining your marketing budget is to estimate what other competitors in your market spend for marketing support and then try to at least match that amount. If you are the new to the marketplace, you will have to spend more aggressively to establish your market share objective.

Another popular method is to allocate a small percentage of gross sales for the most recent year. This usually amounts to about two percent for an existing business. However, if you are planning to launch a new product or business, you may want to increase your marketing budget figure to as much as 10 percent of your expected gross sales.

You should always plan to devote more money to marketing if you are new to the market or are introducing a new product.

Expenses that fall under your marketing budget include advertising (print and radio), promotions, special events, public relations, direct mail and market research.

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