A guest post by Nicole Fende, the Numbers Whisperer™
We’re going to start by talking groceries.
Don’t worry, I’ll sneak in the finance. Since Tea is the Chef, groceries seem appropriate.
When you go to the grocery store you may be like me, and have a list. Big shout out to the Type As reading this. Or you may just “have an idea” of what you need, and for the most part it ends up in the cart. Type A, B, C… it doesn’t matter.
When someone walks into a grocery store, they have a rough idea of how much they’ll spend. Milk and bread? That’s about $6. A few things to round out dinner tonight? You should escape for under $30. A whole week’s worth of groceries? You know that’s going to cost you more than $100. (Unless you eat Ramen Noodles all the time, in which case you need to look at how much sodium is in one serving.)
I’ve never met someone who walks into the grocery store for milk and bread and walks out with $1,000 worth of random, expensive food.
Yet many business owners do this with their marketing budget, spending blindly without a clear vision or expected return.
Consider this question: What are the measurable goals you want to achieve with your marketing budget this year? Sell more, build my brand, and get noticed are not acceptable answers. Have you ever wandered into a grocery store with absolutely no idea of what you need or why?
For example, you wouldn’t go into Cub Foods to buy bolts of fabric. While Project Runway can have designers use plastic cups and nuts to create an outfit, that is not a business plan which screams success.
Step 1 – Set Three Clear Measurable Goals for Your Marketing
Alternate Title: I’m going to the store to buy eggs, Cheetos and pickles. How can you possibly plan and budget for something that is not even defined? Yes, you could make a dress out of garbage bags, but wouldn’t it be so much better to use some beautiful Thai Silk? Here are a few examples of measurable goals:
- (Re)design your business logo to better reflect your brand and speak to your target market
- Run a marketing campaign that generates at least 1,000 new touches / leads within your target market
- Rewrite a key sales page to increase conversion rate by 20%
In each case the goals have to have specific deliverables. Either you end up with a new logo or you don’t. Either you generate 1,000 new legitimate leads or you don’t. By the end of the year you can objectively confirm if they have been achieved.
Step 2 – What are your options? How much do they cost?
Alternate Title: El cheapo eggs or free range Amish farm eggs? Once you have your grocery list there are still many options available. Eggs — which all come from chickens in basically the same shape and color — are a great example. You could buy a dozen of the generic brand for $1.27, or you could spend more than $3 for free range eggs from an Amish farm.
Let’s consider redesigning your logo. Costs range from semi-custom online services for under $50, to $10,000+ for a Madison Avenue ad agency. Understanding the price and the difference in service or results is a crucial step in budgeting.
Step 3 – What will fit in your budget?
Alternate Title: I want five year aged Cheddar cheese, but I can only afford generic. How much did you spend last year? (To quote Judge Judy, “Um is not an answer!”). If you don’t know, find out. That’s a good starting point.
What are your estimated total sales for this year? If you plan to sell $100,000 worth of goods or services, then your marketing budget better not be $95,000. Your planned expenses need to be in line with your revenue goals. This varies widely by industry. To get market data for free, visit www.Bizstats.com. Tea’s also got this great short video on the topic here.
Step 4 – Be accountable to your budget.
Alternate Title: Do I have enough money in my wallet to pay for these groceries? Sounds easy, yet this is the step where I see even seasoned business owners fail. A budget is useless if you don’t follow it. If you’re at the grocery store and you only have $50 in cash, you won’t buy more than $50 in groceries.
Once you’ve set your budget, you need to hold yourself to it. If one expense runs higher than expected, cut somewhere else. There will always be great new ideas, services or solutions. If you buy them all, you will NEVER hit your profit goals. Instead choose the best tools and services for objectives and budget. Then zealously execute, wringing every last penny of value out of them. Now if you’ll excuse me, I need to go to the store to buy some aged Cheddar, pickles and a gallon of milk.