Many clients approach me in their initial development stages of opening the business and writing their plans, and the same question is always asked, "How do I figure out my initial marketing budget & strategy for my business plan?" Well there are many ways, so many in fact, that the countless options actually make this task counter productive. My initial approach when working with clients in this business brainstorming and planning stage is simple and practical.
In reality entrepreneurs need multiple plans and budgets based on the use of it, whether it's for internal purposes, presenting to potential business partners and for investors. Though many of the concepts can be applied to all business plans, I will focus my tips on your current or actual status, not on the assumption that funding that you don't have will come.
Before you even start your plan, ask yourself this: 'Am I dedicated to launching this business?' This will be a long journey before the money comes rolling in and undoubtedly there will be moments of weakness and thoughts of quitting. If you answered yes, read on.
So let's look at 3 key areas: 1)Who is your target audience, 2) How much money do you have or expect to have shortly to budget for marketing 3) What sales do you forecast. This will be the start of your marketing section of the business plan.
Figure out how much money you have at this very moment to invest in the business and how much you need to set aside personally. How long will it hold you over without any income and how much can you personally invest in your idea? Like most new entrepreneurs you will probably feel you don't have any extra cash and this will be the end point for most, but those that are determined will not let a financial challenge get in their way. Focus on looking for grants, funding from friends or your University at the opportunities that are there. You'll get an idea of what's available and use it as your starting point capital.
Next start drafting up a list of all the elements that are needed to get your business going. You should breakdown these costs into startup needs, by month in the first year and estimated annual costs through to year 5. Once you understand what kind of money you need to run your business you can determine the sales needed to cover your business needs. Don't forget to set a goal for the % profit margin that you are looking to achieve. At the moment the expenses don't include marketing expenses, so remember that you will have to go back and add it in later on, but it's a good starting point.
Based on that estimated revenue number determine how many sales or customers you need to get those amount of sales. For example if my sales goals for year 1 was $50,000 and my product costs $500, then I need 100 customers. If you have several revenue stream, then you will need to first estimate the percentage breakdown of sales for each. For example 70% of sales is from Product A, 15% from Product B, and 15% of Product C. Developing a business plan is based on educated assumptions, but make sure to note your assumptions so when you go to market and you will be able to access the actual figures and adjust accordingly.
Based on your number of customers, you have to estimate how many people you have to 'contact' to get that number. Once again using educated assumptions, you can estimate how many you need to contactbased on your own experience in the industry, watching the competition or conducting a survey of potential customers. If I find out that approximately for every 25 people that I get in contact buy from me, then I must contact 2500 people to make my sales goals for the year.
Now to figure out the marketing strategy to contact 2500 people! Do you understand what your competition is doing and understand how your target customers buy and live? It can be as simple as a list of trends that you identified or gathering a few potential customers and chatting with them which is called a focus group. This will develop a targeted strategy that speaks to your target audience. Many people feel that placing an ad in a newspaper, or setting up a website will drive in the customers, but if you aren't reaching them properly, and they dont know you exist, you will have no sales. For example if you are a flower shop and your main product are bouquets for parties and celebrations, but you are based in an industrial park and only have a sign out front, you probably won't achieve your sales targets. However if you start selling online for deliveries and linking yourself with party venues, you'll be 'speaking' with your potential customers.
Once you determined ways to reach your audience, you have to measure the expected success of each strategy, For example if I find out that there is an industry trades how that my potential customers go to annually and 500 people are do to attend, then I just secured 500 of the 2500 I am aiming for. Or if I am that flower shop and I partner with catering venues that offer my service and they show their venue to 10 people per week, that is another 520 potential customers.
Integrate your marketing plan to different avenues including direct promotions, publications, radio, online, direct mailers and many more alternative marketing. Integrated plans are inline with how people live today, but remember to only explore avenues that speak to your potential customers and fit with your brand image. For example a skater brand should not advertise with AARP but perhaps sponsor the local extreme sporting event.
It is also important not to compete directly with the larger organisations head on in terms of marketing and advertising. Back in June I heard Mike Indursky, President of Bliss Cosmetics do a talk on his brand and how he has grown it, taking a small bit of the market away from the big players. 'Do it differently' was his key point and it hold true for most start ups. Be clever with your small budget, keeping your target very narrow and tapping into their lifestyles.
Once you develop a few items that you feel fit your brand and hit the number of customers you need, you can explore the costs for these items and create a marketing mix that works for your brand, your target audience and the budget you have. The total cost of the mix you choose is your Initial Marketing budget.
Good luck!
Jessie
For more tips follow us @tsocreative1 & @jessiemariehall
PS:
Create a plan to present to investors, grants and fund raising showing them that you have thought of how to hit those sales goals and how you would handle the money if they were to assist, but also create one for yourself. The internal plan should be set up in stages based on your personal investment, and if you don't receive funding assistance. Create smaller goals and stages of growth to help show when to move to the next stage to help with cash flow.
