How much should you spend on marketing?

Wouldn't it be great if there was an easy answer to that question?  The reality is that what you spend on marketing has so many variables.  Too often the biggest part of that decision is how much money is left over after you pay your employees, rent, utilities and loan payments.   [Hopefully you are also paying yourself in there somewhere!]

While there are industry norms for the "biggie" expenses like labor costs and rent, the percentage of sales that should be spent on marketing is all over the board.  I've heard of some poor souls spending over $200,000 on marketing during startup and also see businesses spend nothing on marketing.  [Neither is a good idea.]   I read a statistic on a spa consultant's website advising that your rent and marketing expenses together shouldn't exceed 10%.  Since that seemed illogical to me, I asked the opinion of an expert.  Wellness Capital Management does budgeting, bookkeeping and real estate services for wellness businesses.  Monte Zwang, principal at Wellness Capital Management, had this to say about that 10% statistic:

Rent and marketing have little to do with each other.  I suppose if you have a  location that you pay nothing for, you have to advertise the heck out of it to get someone to find you.  So, I guess what they are saying is that you pay top dollar for a class one retail space, you won’t have to advertise as much. 

However, in our industry especially, it is difficult to find a space that is going to rent for less than 15% of gross sales if you are signing a new lease. So, let’s do the math; 2000 square foot space, $35/square foot rent equals $5,800 per month rent. No advertising and you will automatically do $60,000 per month?  Probably have to spend at least an additional $1,000 per month to bring in that level of business. Hmm.  Fat chance, I don’t believe in advertising anyway.

Thanks Monte! I have to agree with him about the advertising...the success of your ads are nearly impossible to measure and rarely pay for themselves in sales (much less profits).  [You can read more about that in the e-book you'll receive when you sign up for my weekly newsletter.]

How to set your marketing budget.  If you have one at all, you are ahead of the curve.  If not, don't worry as is it never too late to start!

1. How much have you spent on average per month for marketing?  Just tracking this can open your eyes to how much (or little) money is going out in order to bring in business. Marketing expenses include advertisements, signs, brochures, business cards, newsletters, post cards, customer appreciation events, graphic design and paid directories.
2. Calculate what 5 - 10% of sales would be per month.  This is your target range for marketing, but this can be too much for smaller practices. Monte advises, "$350-$500 (3%) per month should work for business doing less than $200K annually if there is a well defined program."
3. Set a target dollar amount to budget for marketing. Using the numbers in step two, pick a dollar amount that is right for your business. If you are starting out you may spend more, if you have established clientele you may spend less.  There is truly no right answer...only what is right for you.

Once you have a monthly budget for marketing, you can then start planning some regular marketing activities that fit that budget such as email newsletters or quarterly direct mailings.  It is much better to start with a plan and then know that you can easily say NO to any pushy magazine advertising sales people!