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Entrepreneurship

How to Establish an Advertising Budget

Every effective advertising campaign starts with establishing a proper budget. Would you ask a home builder to build you a home without providing a budget? Of course not. The same goes for advertising.


This guide will help you establish a reasonable budget for a long-term campaign strategy. These principles don’t necessarily apply to short-term promotional budgets.


What is the average in your industry?

Providing a one-size-fits-all guide to establishing a budget wouldn’t be much help. Every industry is different and a quick Google search of your industry’s advertising trends is the first step to getting it right.

For example, according to Statista McDonald’s spent about 1.5 billion dollars on advertising media in 2017 and had 23 billion in revenue. That’s a 6.5% advertising budget.

However, statistics show that the industry average for restaurants is only 2% of sales. Why such a big disparity between what McDonald’s spends and the industry average? Just like the big global brands, there are many variables to consider when establishing a budget that may put your business below, at or above your industry’s average.

How competitive is your marketplace?

One reason McDonald’s budget is higher than the national average is because of heavy competition. Maintaining or increasing market share in a crowded market of heavy-hitting competitors requires more effort and thus, more money.

In contrast to the fast food industry, when Chipotle arrived on the “fast casual” dining scene, it was relatively free of direct competitors. They used to be almost arrogant about how little they advertised. Those were the good old days when margins were high and competition was low. Since the explosion of new fast-casual concepts over the last decade or so, things have soured for Chipotle and it’s not just about E-coli problems. As a result, guess who’s spending more on advertising now? You guessed it. Chipotle.

While establishing a benchmark for your budget that is based on the industry average is helpful, don’t forget important variables like market competition.


Where are you in the business life cycle?

Are you a new player in the market? You will likely have to go above and beyond the average to achieve enough market share to survive. It’s no wonder that one of the reasons why new businesses fail so often is because they run out of cash before they reach a sustainable revenue level.


On the other hand, what if you’re a well-established brand in your market? Doesn’t that mean you can spend less? In some cases, sure. However, McDonald’s has “awareness” gushing out of their golden arches, but they still spend much more than average to ensure they hold on to what they’ve got.


Generally speaking, if you have a well-known business, revenue is growing steadily and competition isn’t fierce, you are probably safe in sticking with the industry average. Be careful not to rest on your laurels though. There will eventually be someone who sets their sights on your share of the market pie and you don’t want to be caught off guard.

Conclusion

Establishing a budget for a long-term advertising campaign is not optional. At least it’s not optional if you want to enjoy any kind of lasting success. The budget is absolutely essential if you want to achieve your goals.


There’s also something very satisfying about creating a budget, planning a campaign based on that budget and letting the process play out. It’s much less scary than trying a little bit of this and a little bit of that.


I’ve worked with many businesses over the last fifteen years. The ones who have budgets ALWAYS end up more satisfied. The ones who haven’t had budgets usually stop or significantly reduce their advertising efforts because “it just doesn’t work.”

Interested in getting more information about creating an advertising budget for your business? Feel free to contact us. We’d be happy to help!

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Entrepreneurship

Is being your own boss all it’s cracked up to be?


being your own boss

Through my own experiences and working with many other entrepreneurs over the years, I’ve concluded that being your own boss
can be all it’s cracked up to be depending on motives and expectations. I love being my own boss but I’ve had to endure more proverbial donkey kicks to the groin than I would like to admit. Is it worth it? Read on to find out…

Entrepreneurial Motives

First off, you really have to evaluate your reasons for starting a business. If you do it for the right reasons, you will embrace the struggle with dignity and have the courage to persevere through difficult times. Do it for the wrong reasons and you will likely end up another sad statistic.

For me, I just needed to escape cubicle life in the big corporations at all costs. Although I made a very good living working for a national media conglomerate in Columbus, Ohio it wasn’t enough.

Every morning before work I reluctantly dragged myself out of bed filled with dread for the upcoming day. I would ask myself questions like how many idiotic meetings will I have to attend today? How many times will I have to clap for things that don’t justify applause in said meetings? How long will it be until I can sneak out on a “sales call” and go home for a much needed nap? Obviously, I was not cut out for corporate life.

Reasons why you should be your own boss

• Demand for your product or services –  If people are willing to pay you for what you do, that’s the first start to any successful business.

• Self Determination Whether you succeed or fail, it will be mostly, if not completely your fault. If you’re willing to carry around that type of responsibility, it can be very satisfying when things go well.

• Building a company from the ground up – Imagine what it’s like to be Jeff Bezos of Amazon. He went from working out of his garage in 1995 to running the second most valuable company in the world 23 years later! What aspiring entrepreneur doesn’t dream of building such a company?

• Flexibility – Being your own boss affords you the luxury of being able to work when and where you choose. I’m okay with working as many hours as it takes to succeed but I can’t do 9 to 5. Never could, never will. Nights and weekends are actually my favorite times to work, mostly because there are less distractions. In fact, I’m writing this sentence at 10:42 on a Sunday night. That’s the way I like it.

• Pursuing your Passion This is what it’s all about, right? If you start a business that’s driven by a passion, you are more likely to succeed. Running a business takes stamina and nothing energizes you like passion.

 

What should you expect from being your own boss?

• Making money takes time – From my experience, it takes a LOT of time to make any decent money. There have been many times I didn’t take a paycheck so I could pay my employees and/or bills. I’m not exactly Steve Jobs though, so maybe I’m just an underachiever. Maybe not. According to a recent Fundera study, 86.3% of small business owners make less than 100k. What’s more, 30% take no salary at all! Could you strike it rich with one big idea, hard work and a lucky break or two? You sure can, but the odds are not good.

• Be ready to put in a lot of hours – Being the boss means it’s all on you. If something needs to get done and there’s nobody else to do it, you’re on the clock. During the first five years I was in business, I literally worked quite a few 24 hour days to meet deadlines. Occasionally I got to go on vacation but you know what else went on vacation with me? Work.

• Running a business is hard – It requires high tolerance for risk, stress and pressure. According to the Bureau of Labor Statistics about 50% of businesses don’t survive past their fifth year. That’s pretty scary stuff! To see the reasons why businesses fail on full display, make time to watch “The Profit” on CNBC. The great thing about that show is you get to see the reasons for failure and how to fix them.

• You think you’re in control, but you’re not – Are you really your own boss when you run a business? I can hire and fire employees, create my own schedule and make executive decisions. Sounds like a boss to me, but not so fast! What if my employees quit and my clients kick me to the curb? There won’t be much left to be the boss of if that happens. So yes, I am the boss, but I better make sure the decisions I make are in the best interest of my business, my employees and my customers or I will be the boss of nothing. 

Conclusion

So, is being your own boss all it’s cracked up to be? It’s more difficult than I can clearly articulate but I can’t imagine anything else at this point. I embrace the challenges and the sleepless nights that come with the job. I’m truly grateful for everything I’ve learned along the way and feel better prepared to succeed in the future.

Being your own boss isn’t for everybody but if you do it for the right reasons and set your expectations appropriately, it can be a deeply fulfilling pursuit.

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