Posts Tagged ‘advertising’
How big should your ad budget be?
Ever hear of the Advertising to Sales Ratios?
Every business plan guideline suggests that some amount of money be set aside for an advertising and promotion budget. Once you know WHO you want to reach then you can plan the HOW. Great! And do they have any suggestions concerning how much? Not necessarily. Usually they say something about setting aside some % of revenues. And what %? Pray tell.
That’s where the Advertising to Sales Ratios come in handy. Believe it or not there is a company out there that has been collecting this data for years. They’ve got a long list of industries and company types. And they’ve identified how much these different types of companies spend on advertising… on average. Some spend more. Others spend less. But it’s a clue.
If the Advertising to Sales Ratio is .6 then 6% of revenues is spent on advertising. So, if you’re expecting to see $100,000 is revenue, then $6,000 would be the ad budget.
Here are two different sites where you can see the Advertising to Sales Ratio:
http://company.news-record.com/advertising/advertising/ratio.html
http://www.seattletimescompany.com/advertise/adtosales.htm
This is really useful information when you’re getting bids for advertising, when you’re seeking assistance from professionals, when you’re talking to advertising sales people. Instead of letting a advertising person convince you to shoot for the stars, you tell them HOW MUCH you’re prepared to spend.
