Use fourth quarter to evaluate budget decisions of past year, plan ahead
With the onset of fourth quarter, many businesses find themselves in the midst of reviewing the past nine months and budgeting for the coming year.
Where did the money go? What things worked, and what things didn’t? Obviously, the end product of the budgeting process is to look ahead, but a valuable byproduct is that it also causes you to re-examine what has already occurred. One opportunity is to learn from the successes and challenges of the past and plan accordingly.
If your small business is like many, you may not have a clear idea of what was spent this year on advertising. Maybe you started with a general idea of what you might spend, but then, representatives from every media outlet, high school yearbook and charitable fundraiser walked through your door.
Media representatives can be relentless and many are also quite likable — two ingredients that conspire to whittle away at your dollars. Sometimes your dollars go in big chunks, like when you sit through a TOMA (Top of Mind Awareness) Seminar and the presenter convinces you this radio station/television station/publication (fill in the blank) is the one and only answer to all your marketing challenges.
Incidentally, I’m a big fan of employing a custom-designed media mix to accomplish your goals.
Other times, your dollars trickle out more slowly. Five hundred to this “exclusive” sponsorship opportunity. Two hundred to that special insert. You can support the kids playing high school/middle school/grade school (insert sport) by spending just $1,500 to purchase mini footballs/basketballs/pom-poms.
It’s common to respond with a “yes” to all these solicitations, even if your reasons for doing so vary. And the charitable groups get involved too. The “opportunities” are endless.
I’m not saying don’t be charitable. I’m not saying don’t support the high school. I’m not even saying don’t buy advertising from your favorite media rep. (Just don’t buy it for that reason alone) Many business owners feel these investments in the community are simply a cost of doing business. I agree, but making sure that these expenditures make sense and don’t jeopardize profitability is an essential component.
That’s where the budget enters the picture. Using a well-thought-out budget, in conjunction with marketing and media plans, can not only succeed in keeping more dollars in your pocket, it can also increase the likelihood your advertising expenditures will be effective.
When we work with a business to allocate its advertising budget, the first step is figuring out how much will be spent. Sometimes this is based on a percentage of anticipated sales. Many times, for an established organization, it is developed in conjunction with an analysis of historical actions. Other business owners just shoot from the hip, throwing out numbers that may range over tens of thousands. This is certainly not the most effective way to select a marketing budget, but it does allow the conversation to begin. It immediately lets me know if the client’s expectations are realistic.
I prefer to develop a goals-based budget that utilizes a reasonable percentage of anticipated sales with attention paid to profitability. A newer business trying to establish itself may likely use a higher percentage than an established organization enjoying some brand equity. Keep in mind, equity was probably built not only on delivering a great service or product but also on the advertising that has been placed since the organization’s opening. Marketing expenditures made in the current year have residual impact for years to come.
Usually, I allocate about 80 to 90 percent of a client’s budget upfront, allowing me to focus on goals and the big picture while taking advantage of some placement economies. When possible, we work in the community-based extras that are automatic renewals. I then put the balance aside for things that might come up during the year. These might include more community opportunities or anything unexpected. I’m sure most of the roofing and siding contractors in town did not anticipate a hailstorm that would leave them wanting to advertise their availability for the boom of customers that followed. Planning ahead by not spending or allocating everything in the first quarter is a great way to stay on budget.
Another way to stay on budget is to follow it. It makes no sense to develop one if you are never going to look at it again. Besides, it’s a liberating solution to be able to tell a solicitor your budget is spent.
Now’s your chance to make 2007 a better year for marketing your business. Take some time to review 2006, set your goals and look ahead to the future. Put a plan in place, and then be a good steward of it. The return on your investment will be a good one. v
Lili Vianello is president of Visionworks Marketing & Communications, a mid-Missouri public relations and advertising firm offering creative services and media planning and placement. Contributions to this article were made by Visionworks staff members. Visit them online at www.visionworks.