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The importance of marketing provision within a company’s budget was established in 1954 by accountants at international household products giant Proctor and Gamble, who specified that all promotional and other advertising costs should be viewed as fixed costs.

Budgeting for marketing costs is one of the trickiest aspects of starting a business. Due to oversight or choice, quite often the entire start-up budget is eaten up with traditional fixed costs with no allocation for marketing. This is not the way to start a business!

For example, if you’re starting a new restaurant with an initial budget of 100k; premises, staff and materials should to be taken into account but you also need to factor in the cost of establishing yourself within the marketplace. Restaurants and retail businesses in particular require a larger marketing budget due to the highly competitive market and the need for promotions and publicity.

Regardless of size, every new business needs to allocate sufficient funds of around 7 or 8 per cent of the overall budget to the launch. Once you are up and running, as a rule of thumb, monthly marketing activity should also be calculated at 7 or 8 per cent of sales (sometimes up to 30 per cent), to raise awareness, communicate your USPs, build your brand and motivate your target audience to buy into your product or service, which requires an initial capital investment and subsequent monthly expenditure. The amount will depend upon on location, footfall and competition. Start-up ventures need to calculate monthly marketing spending based on sales forecasts.

Sticking with the restaurant theme, a regular budget allows for more consistent and creative engagement. For example, photographs of a busy dining room featuring attractive models is more appealing than an empty restaurant, as you are selling a lifestyle and aspirations, not just gastronomy. Similarly, if you are promoting live entertainment then it should be marketed as a fun and engaging activity, like videos, audio clips, photos and interviews etc.
On a fundamental level, marketing costs can be compared to renting a telephone line that needs to be paid monthly in order to keep the lines of communication open. Any interruption to the service will prevent you from reaching your audience and vice versa. If you aren’t prepared to go the extra mile, customers will be lost to your competitors who are willing to make the effort.

Consider marketing as another running cost alongside premises and power. It should not only be ‘thought’ about each week, you need to ‘do’ something about it too!


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