Creating a Marketing Budget

Budgeting your marketing efforts is extremely important. There are different theories on how a budget should be established. You can break down the balance sheet from your previous fiscal year and use a percentage of your retained earnings. Or, you can budget a percentage of each sale to go towards your marketing. There is a simple method I use when creating a marketing budget for the first time. Take your revenue from your last year, apply a 10% growth rate and set that as your goal for the current year. Take 7.5% of that number and voila, you have created your budget.

$1,000,000 * 1.10 = 1,100,000 * 0.075 = $82,500

In the above example, I believe that a business doing a million dollars in sales, should spend $82,500 on marketing and advertising for their next year – and that is conservative! Usually smaller businesses spend between 15% and 20% of their previous years revenues. However, with word of mouth marketing and the recurring nature of your patients, anywhere between 7.5% and 15% should be enough.