Wednesday, May 27, 2015

How Much Should I Allocate To Advertising

Advertising budgets depend on your particular business goals and sales.


The amount allocated to advertising costs in your business is entirely your own decision as a business owner. You can easily determine balance this expense based upon your business needs. The amount also depends on your prospective budget and other business goals you set for the future. Calculate all your business details so your advertising budget is realistic and successful.


Percentage of Sales


Determine the percentage of your sales in your business as a guide in creating an advertising budget. Through this method, your advertising budget stays consistent with how much you sell. The use of this process is different from calculating an advertising budget based on profits; profit determination is too diffuse a guide. Past, present and projected future sales are directly connected to what you do in advertising. If sale percentages are down, your advertising budget will decrease proportionately.


Unit of Sales


This alternative to percentage of sales is useful for those selling specialty items. Examples of specialty items include cars or household appliances. They also include items affected by uncontrollable events, such as weather. Use the unit-of-sales method by calculating the amount it typically takes to sell one item. Adjust your advertising budget based on your experience selling that particular item and the uncontrollable factors involved.


Advertising Objectives


Analyze particular objectives and business goals for advertising in your business. This means a determination of an advertising budget based on a selling proposal or business plan. Make this work by considering the realities of your budget and your country's economic conditions. A small business must think smaller in terms of advertising goals and reaching that goal within a set period of time.


Be Aware of Competition


Study what other businesses are doing in the way of advertising. Consider spending the same budget as a competitor if the same advertising method is working well for that competitor. Be careful, however, not to directly copy what your competitor is doing. Factor in your own business situation and financial condition to suit your own advertising needs.


Choice of Media


"Inc." points out that the type of media you choose for advertising makes a difference in your advertising budget. Newspapers and print media are generally cheaper than television commercials. But "Inc." also reminds to focus on selecting the right media outlet reaching the largest segment of your target audience. This might include advertising only on the Internet.

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