How much of your gross sales are set aside to fund your marketing strategy? Is it one percent? Maybe it's 5 or 10 percent. Have you calculated the percentage, or do you just cross your fingers and hope that you are staying within an imaginary budget?

Many of us practice the latter, but after you review the attached sample budget, you will be able to look at your marketing efforts within a three-step approach:

• Reviewing the strategies currently in use to close the sale,

• Calculating and recording how much is being spent throughout the year, and

• Evaluating what's working and how to update and streamline the marketing plan.

In the end, you will understand what works and what doesn't in your efforts to reach more prospects and clients while keeping more profit in your pocket.

Gross sales and net sales are important terms to know as you create a marketing budget. Gross sales represents all revenue received (income) during a given time period.

Net sales are gross sales minus expenses for the same period of time. If expenses outweigh sales, a loss occurs for that period.

All businesses designate a certain percentage of their gross sales for marketing, whether done through an organized plan or by default (withdrawing money from your income account to purchase marketing products).

For example, grocery stores allocate 1.1 percent of sales per year for marketing purposes. This is a low amount, but supermarkets know that consumers must shop for food several times each month. Store marketing is used mainly to alert consumers to sale items in addition to other products targeted for high-volume turnover.

Caterers, who find themselves in heavy competition against each other and other food sources, spend an average 4.4 percent per year on marketing. Pharmaceutical firms lead all statistics by allocating 35 percent of gross sales for marketing. Because of the population's requirement for a wide variety of medicines, the pharmaceutical industry invests heavily in research and marketing.

The average amount of gross sales that industries spend as a whole on marketing is between 3 and 5 percent a year. In dollar terms, that translates to roughly $5,000 or less per company. This percentage is within most solo business owners' budgets.

 

Are you ready to create your own marketing chart? First, review the sample on the next page. It belongs to Sarah H. (last name omitted for anonymity), a Colorado-based retail store owner, who closely monitors how her marketing dollars are spent in proportion to gross sales.