How to Determine your advertising budget

... From Biz2Biz NWA April 2009

It’s not an easy question to answer... how much is enough? when it comes to setting your annual ad budget. Even seasoned CEOs scratch their heads and sigh. Marketing Budget Ratio, or MBR, uses a percentage of overall revenue to figure the amount. Other pundits say it depends solely on market factors:

• The type of business and length in business. New businesses requires an ad investment of as much as 20-30%; older businesses around 7-10%.

• The location of the business and how hard you have to work to get the customer in the door.

• Your competition and how much they spend to compete.

• What you can afford (or can’t afford not to), which means you may have to borrow to allocate appropriate funds.

• Whether you leverage volume or margin. Volume-driven companies tend to require a smaller percentage compared to margin-driven goods.