Most small-business owners use seat-of-their-pants spending for their media presence. They see or hear of a new place to advertise, so they try it once and mentally write off the cost. The best approach is to set a spending limit and spread it across the most productive areas of your target markets. But how do you determine how much to spend?
A lot of it depends on your goals for the business and what you want to accomplish. What gross sales levels and amount of profit do you want to accomplish? Will more advertising result in these numbers?
You can also consider what your competition is spending in your target market. (By target market, I mean where and who you want to sell to.) If you have a hot-dog stand in North Cleveland, you don’t want to spend money advertising in Cincinnati or even in South Cleveland. You want to advertise only where it will do the most good and reach the people most likely to buy from you.
If your direct competition is advertising like crazy, you may have to do the same, but be as selective on the media as you can and use every dollar effectively. A general rule of thumb for an advertising budget for small businesses is from 2 to 8 percent of gross sales, but you need to fine-tune those numbers to fit your own situation.
Promoting a new product will require more advertising dollars initially to get the product off the ground. Be prepared to make this investment when considering a new product or service. You may have the greatest thing since sliced bread, but it won’t sell if no one knows about it. Monitor your results, and you may be able to get more exposure for your dollars than your competitors are by selecting the best media and the best timing.
And don’t let your media salesperson talk you into a long-term contract before you see the results of a few ads. The salesperson’s job is to tie you in for as long as possible with no guarantee of the outcome. Test before you commit, even if the cost is lower for a longer contract. You can still get that deal after you try a few ads. Don’t get talked into a long contract at the beginning, or you’ll risk being stuck with poor results and a contract you can’t get out of.