How important is it to put a plan and budget together for your annual marketing and business development activities? As the old adage goes “Fail to plan, and plan to fail”.
Depending on the size of your company, and what your goals are for the year, your plan could be as simple as building a list of activities you want to do every day, week, month, quarter and year. For larger companies, it’s more important to set a budget that makes sense based on 1) your annual sales volume and 2) your expected rate of return on those marketing and business development dollars. So how do you put this plan together?
Let’s start with setting your budget. Industry averages for construction companies are between 5-10% of annual gross revenue. This means that if your business grosses $500,000 per year on average, you should set up a business development and marketing budget of between $25-50,000 per year. The more aggressive you all are in growing your business, the closer you'll want to be to the 10% mark. However, if your business generates $10 million dollars per year in gross sales, a $1 million marketing budget may be excessive, so you would want to set it somewhere closer to the 5% mark or $500,000 as a maximum.
The next step is to identify all the Marketing, Sales and Business Development activities that your company undertakes in a year. Try to capture all the different activities and related costs, such as:
- Membership dues for trade associations
- Trade & industry specific events, such as monthly networking opportunities
- Trade shows
- Golf tournaments, clay shoots, fishing tournaments, etc.
- Company branded clothing
- Branded promotional merchandise
Now assign a budgetary cost for each of these activities to begin determining how much money you'll be spending. These projected costs may be based on historical data (“How much did we spend on company shirts last year?”), known values ("ABC dues are set at $2500/year"), educated projections, or quotes for materials and services.
Next you will want to identify Marketing and Business Development (M&BD) supporting personnel, activities and costs such as:
- M&BD employee salaries and related expenses (travel, per diem, company cars, etc.)
- Third party design services
- Printing costs for marketing materials
- Digital advertising costs (ad placement, PPC advertising, etc.)
- CRM & marketing software costs
- Trade show booths
- Website design and updates
- SEO services
- Promotional events
- Marketing and advertising agencies
- Potential client nurturing activities, such as ‘Lunch and Learns’
- Existing client retention activities, such as meals, entertainment and group activities
Again, you want to assign known values where possible, and calculate budgetary values for those unknowns. You might want to set monthly limits on spending for items such as online advertising and SEO. You might also set individual project or special event budgets for tradeshows and third party contractors.
Once you have all of these activities, personnel and costs identified, you can build a budget to total all of these costs. To help you out, we've created a M&BD budget worksheet you can use:
Once this is completed, compare your projected spending against the marketing budget we calculated at the beginning. How does your projected spending look against your budget?
If your projected spending exceeds your budget, a few questions you might ask are:
- Is my budget too low?
- Have I over projected my spending for any of these activities?
- What are the most valuable activities we perform? (i.e.: which ones lead to sales most often?)
- What activities do not produce measurable results?
- What would be the most valuable activities for our organization?
- Which activities lead directly to sales?
This will give you a great context for discovering where you should and shouldn’t be spending your marketing dollars. The goal is always to spend money on activities that have a measurable return on investment. If you don’t know if an activity is generating or leading to new business, take the time to investigate before you invest in it. Some things are really nice to have, but don’t provide any return. For example: trade shows can be a great way to network with peers and gain visibilty, but if you're a residential contractor and your target clientele doesn't attend trade shows then this is not a good investment of your marketing dollars.
If your projected spending is under your budget, a few questions you might ask are:
- Did I set my budget too high?
- Are there additional activities where I could be spending marketing money that would provide measurable results?
- Could I increase my spending on existing activities and get better results?
- Is there something new I’ve been wanting to try and didn’t think I had the money available to fund it?
- Could I upgrade something I already have to get better results? (i.e.: website, marketing materials, merchandise)
Ultimately, you want your marketing budget and your projected spending to be close, but still leave you some cushion (contingency) in the budget for new opportunities or unexpected costs that may show up throughout the year. For example, you want to keep a reserve fund for unexpected client meals, networking opportunities, or out-of-state trips to entertain a new project opportunity. Existing clients may ask you to sponsor them in golf tournaments, take them to ball games, etc. Maybe you’ll need to unexpectedly buy sporting equipment or event tickets, which could be purchased from this contingency in the marketing and business development budget.
As a side note, Marketing and Business Development expenses are currently tax-deductible business expenses and should be run through the company if they are legitimate costs (the tax deduction for meals and entertainment may only be 50% depending on the activity). Be sure to check with your accountant or tax professional to confirm legitimate business deductions.
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