Calculating Your Annual Advertising Budget

In order to logically budget for advertising you must take into consideration the markup on your average sale and your rent. Presence that comes with rent is one of the best advertising your money can buy and should be taken into account in determining the budget.

  • The more time you spend on the road, the more you should spend on vinyl vehicle lettering.
  • The more inaccessible your location the more you should spend buying web traffic.Spend as much as you can on buying traffic! Margins may stay same or decrease but the only thing that matters is volume. Analyze conversion rates and adjust targeted demographics accordingly 30+ purchases for ever 1,000 visitors and you are on track.  $10K in marketing/month and $5K in profit. Cut the marketing to increase margins? NO! Spend as much as you can spend  until your business can afford to spend $10K/week and still profit $5K/week.

Assume that my business is projected to do:

  • $400,000 in sales this year  (value A)
  • a profit margin of 48% (value B)
  • my rent is $20,000 per year (value C)
  1. Calculate 9% and 10% of your projected annual gross sales (A x .09 = X) and (B x .10 = Y) [ X= $36,000 and Y= $40,000]
  2. Gross Profits: [A x B =Z] [400, 000 x 48% = $192,000]
  3. Markup %: [Z / (A – Z) = M] [192,000 / (400,000 – 192,000) = 0.9230 or 92.3%]
  4. Multiply X and Y by the markup % [X x M=X1] and [Y x M=Y1]  [36,000 x 0.923 = 33,228] and [40,000 x 0.923 = 36,920]
  5. Low figure: [X1 – C = L] [33,228 – 20,000 = $13,228]
  6. High figure: [Y1 – C = H] [36,920 – 20,000 = $16,920]

If you are currently a customer we can provide all of the figures above for you and assist you in your calculations of your annual advertising budget. If you are not currently a customer we would still love to hear from you!

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