New Jersey Entrepreneur

Often, when I meet with entrepreneurs, we run into a common roadblock to their advertising and marketing success. There’s always that pesky budget question.

Dedicating money to invest in branding, advertising and promotions seems to take a back seat. And yet they tend to want a logo with the power of Nike, the branding power of Coke and the influence of Microsoft.

Naturally, a start up, or even a company in its formative years, won’t have the kind of money it takes to create that level of impact. Nonetheless, budgeting for these mission-critical efforts should be a crucial part of a business plan and should be detailed in a marketing strategy, regardless of a company’s size or age.

With a marketing budget in place, a start-up looking for funding can better project its actual costs. It shows investors you’ve explored all the needs associated with creating a business. Certainly those needs involve branding, creating an identity and establishing your collateral sales tools.

Seasoned businesses also benefit by thinking through a marketing strategy. With a budget in place, you can make more strategic decisions when opportunities arise, better evaluate existing opportunities and project what results should be expected from a particular program.

Certainly, when you partner with a marketing communication firm, a budget helps you establish expectations and avoid misunderstandings. After all, I can suggest a number of creative ways to approach a client’s issue when I assume he has $500,000 to spend. But I have to be even more creative, even more innovative and more crafty when your budget is only $7,500.

Whether you work with a marketing communications professional or do the work yourself, a budget helps you address production values, quantities, frequency and other reality checks that impact the results you expect.

While there are literally hundreds of ways to set spending, marketing communication budgets typically are developed using one of 6 approaches. As you’ll see, not all are created equal.

• Base your budget on a percentage of the previous year’s sales or a percentage of this year’s sales forecast. Research shows the average budget using this approach is 2.2%. That’s a percentage based on the average of all industries in the U.S.; certain industries spend significantly more.
• Keep up with the Joneses. Some people establish budgets based on their estimates of what competitors are spending.
• Task-based funding occurs when you write a laundry list of tactical programs you need to accomplish and then write a corresponding dollar value to fund each effort.
• Let history be your guide. Look at what you spent last year, and increase the amount to match inflation to establish this year’s budget.
• Use what you can afford. In this case, you develop a budget after seeing what’s left over after all other expenses.
• Guess. Business owners tend to arbitrarily guess what their upcoming marketing needs may be; however, the dollars they dedicate may or may not be appropriate.

Obviously, the six scenarios above are broad generalizations at the "10,000-foot level" business view. In each case, you need to drill down to an understanding of what you’re hoping to spend and what you’re hoping to achieve from your marketing efforts. If you’re expectations in a given situation are to generate $10,000 in gross revenue, it may not make sense to spend $15,000 on advertising. Similarly, if you expect to generate $150,000 through a campaign, that same $15,000 budget may not be so bad. It’s about establishing strategy, expectations and priorities. You must decide what is most important for you to do while promoting the business or building on your brand.

Which approach is best for you is based on many factors. The dollar amount may also be immaterial because you can only invest a certain amount. So if you use the percentage of sales approach and you generated $500,000 in revenue last year, spend $11,000 (at 2.2%) this year. It won’t let you compete with the big players, but it will let you start branding your business and it will put you in the framework to create annual budgets that grow as your business takes off.

The point is, select an approach and establish budget. The value comes in having a strategic plan to fund your marketing goals and to achieve your business objectives.

Roger A. Shapiro is the president/creative director of Mitchell Rose, LLC (www.mitchellrose.net). He founded the creative consultancy in 1997 to help clients improve the results they get from their marketing budgets. During the ensuing decade, Mitchell Rose has helped many clients achieve business goals through the strategic use of concepts, copy and design. In addition, Roger has authored a book, "Write Right, 26 Tips to Improve Your Writing. Dramatically," (