MAD Contributor-Freak Chris Coffee is back and he’s talking budgets.
You’ve invested a lot of time, effort and sweat into getting your new business off-the-ground. You established a budget, and found the best location with the best rent to fit that budget. Then you used your budget to plan out construction, order fixtures and inventory, and hire employees.
Now that you’re open for business, how are people going to find out about you? Most businesses don’t include branding and advertising as part of their start-up budget, and that can be a mistake fatal to the longevity of your new business. A name on the building and an “open for business” sign on the door won’t bring in customers.
Despite its size, McDonald’s will not open a new restaurant without including advertising in the budget. Coca Cola doesn’t introduce a new product without having an advertising plan in place. Your business probably doesn’t have an advertising budget the size of McDonald’s, and that’s fine — you don’t have to in order to be successful. The important thing is that you do establish an advertising budget.
There are a few ways for a business to calculate its advertising budget, but we’re focusing on the Percentage of Total Budget Method. It’s the easiest, yet proven, budgeting method. Simply put, a new business should allocate an average of 25 percent of its total annual budget to branding and advertising.
If your annual budget is $300,000 then your annual advertising budget would be $75,000 for the first 2 to 3 years. This budget allows you to trim back during the off-season and then go stronger during your seasonal period and holidays.
Also, put some thought into what your advertising plan will look like. Consider your options — radio, TV, billboard, print, digital — and the costs for each. Doing your homework in advance can make the first few years of owning your business a bit easier.
Whether you’re starting up a new business or need help re-branding your existing business, we’re here for you. If you have questions or would like our help, feel free to contact us today.