By Frank Ryan

According to the 2009 Newspaper plan book that is widely used in the advertising industry you can get a gauge of how much to spend on your annual budget by doing a quick one minute self study of your business to get how much you should spend on advertising and promotion.   We offer two methods to consider.

Answer the following questions and you can get the base assumptions as a starting point in budgeting for the coming year.  Points to give to each of the following questions about your business & tally the following points.

• High traffic 1 point , Average traffic 2 points, low traffic 3 points.
• Client Awareness of your business in the market – High 1 point, Average 2 points, Low awareness 3 points.
• Amount of competition   Few competitors 1 point, Some competition 2 points, and Lots of competitors 3 points.
• Emphasis on price Little emphasis 1 point, moderate emphasis 2 points, and high emphasis on price 3 points.

To determine how much you might spend on advertising for a year if you had:

• 4 to 7 points you should spend 3 to 4 percent of gross
• 8-11 points you should spend 4 to 5 percent of gross
• 12 points you should spend 5 to 7 percent of gross

This is based on years of business survey and studies.  It is done by news related researchers, but is for application in all phases of advertising and promotion.  On new plans check similar businesses  to get reasonable gross $ estimates.

COST BASED METHOD

For contractors, real estate, appliance and other direct sell service and large ticket sellers who want a direct link from sales to expense based on units sold.

1. What is a unit cost or average sale of each item or service you offer.
2. What do you make from that sale
3. What dollar amount are you willing to give in order to get more sales
4. Take the answers from above, figure how many units of sales a month or a year and add up the $ for advertising.
5. Adjust accordingly by month.  If your goal was 100 units and your ad allowance was $ per unit and you sold 200 in a month you would then double your expense or spend $2000.  per month instead of what your allowance was for the previous month.  Also you need to have a reasonable minimum budget for advertising in order to be able to purchase advertising.  Thus if you had a goal of 50 units at $10 ad allowance and you spent $500.00 on ads and the sales were higher you would adjust upward. Likewise if you sold 30 units you would adjust downward.  If you had no sales you better take a look at your offer as it is possibly not exciting enough to get response.