Who needs a budget? You do!

A week or so ago I was sitting at my desk staring at the 80 or so emails sitting in my inbox thinking how I could use a nap, when a new email popped up, I clicked on it and it was someone I had just met from one of the marketing groups I belonged to on LinkedIn asking about purchasing data and conducting an email marketing campaign, now normally I would have forwarded this email to sales and let them handle it, but since I had a dialogue with this person earlier in the week I didn’t want them to think I was blowing them off by shuffling them off to someone else, so I replied to the email and I asked them a few questions like some of the specifics on targeting the list and information about the product/service being sold and what their budget was.

They replied to my email quickly, less than five minutes later I was reading their response which gave me the specifics I was looking for, but no mention of a budget, so I replied again asking them what type of volume they were looking for and what was their budget and sent it whirling through cyber space back to them.

I guess there was not much traffic on the super information highway that day, because faster than I could start day dreaming about a fantasy vacation on the Love Boat with the Pussy Cat Dolls I had a response.  They answer wasn’t quite what I was looking for, he told me he was looking to email as many people as possible and didn’t really have a budget.  I’d like to be able to say that this was not a typical response, but I would be lying.

I find it frustrating that people do not know what their budget is, and it is really difficult to give someone a quote without knowing how much they have to spend.  In this case he really gave me very little to work on, not only did he not give me a budget but he didn’t tell me what kind of volume he was looking for so I had no idea where to start because his particular product was being marketed to general consumers over 25,  anywhere in the U.S., so the variable in cost, based on volume was tremendous, the cost could be anywhere from a few hundred dollars to several thousands of dollars because we have access to over 70 million consumers in the U.S.

In the post graduate classes I teach part time to MBA students one of the things I emphasize is that every company needs a budget, regardless of size.  I always tell them if you were in the market to purchase a new car and you had $30,000 to spend you wouldn’t go out and look at an $80,000 Lexus or a $100,000 sports car would you?  No of course not, why waste your time, when that is not what you can afford.  Marketing isn’t any different; you are not going to call Fox about advertising in Prime time during the broadcast of American Idol if your budget is $10,000 for this quarter, because that’s not enough for even one night.

In all the years that I have been in business and have done consulting I have heard more excuses for not having a budget than you can shake a stick at. “I can’t afford much” “things are slow right now” “My budget depends on how good the marketing program is”  “I believe in word of mouth or network marketing” I often have the desire to reach across my desk and grab the person by the collar and start to shake them until either their eyeballs pop out of their heads or they start yelling, “ok, ok, I’ll get a budget”.

“Every company, even a one-person consultancy, should have a defined marketing budget. You absolutely, positively will misspend, overspend and/or wrongly spend if you do not have a budget” (theladders.com).

Marketing is such a large world, it really is impossible to plan or execute any type of successful advertising without having a budget. I have seen small businesses waste so much money in advertising because they did not have a plan or a budget and they spent on the first thing that looked good.  A good rule of thumb for small businesses under $1 million is to dedicate 10% to marketing.  This percentage will decrease as profits increase.

According to a press release put out by ImageWorks in 2007 (prweb.com) the following is a breakdown of how much a company should be spending on marketing:

  • If revenue is under $5 million, then the marketing budget is usually 7-8%.
  • If revenue is $5-10 million, then the marketing budget is usually 6-7%.
  • If revenue is $10-50 million, then the marketing budget is usually 5-6%.
  • If revenue is $50-100 million, then the marketing budget is usually 4-5%.
  • If revenue is over $100 million, then the marketing budget is usually 2-3%.

 

It is actually possible to spend more money than you wanted or could afford if you do not have a budget, because you are not tracking every penny as you would be with a budget.  A good budget and marketing plan will allow you to track what you are spending and where and the results from those efforts.

So winging it simply just doesn’t work, every company of every size should have and needs to have a budget to ensure long term growth and profitability.

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About Joe Melle

Joe Melle has founded and ran several successful businesses, and has had an interesting career in direct contact media, call center operations, sales operations, customer service operations, customer retention, and quality assurance; he has written over 140 business articles, previously served as a part time adjunct professor for a university teaching business, marketing, and management courses to both graduate and post graduate students.Email Me