In past years, planning a marketing budget was a bit more formulaic. In reviewing your financials for the year, a more clear-cut percentage could be assigned to marketing. But in more recent times, and within a volatile environment, deciding on how much to assign to advertising and promotional efforts has become challenging.

Some considerations come into play: Operational needs, labor and administration and overall function and risk. This is not to say marketing should be assigned any “left-over” budget but work within each parameter.

In planning your budget for the year, and based on cost reviews for past seasons, you should have a good idea of operational costs, or what it costs to produce your product or service. While there is some variability in inputs, operational expenses generally consume a large budget bite. Research should provide some factors related to the competition and how much advertising and promotion money you will require to advantageously position your product for maximum returns. This may mean streamlining some functions or making changes in how inputs are utilized.

Determining labor needs, dependent on many factors, can be a complex task – especially when trying to budget funds. Environmental issues throughout the year can cause serious changes to the amount of help required. This fluctuation can easily decrease the amount of funds available for marketing. Planning in advance for seasonal labor changes may relieve some of the pressure of redirecting funds midstream. The same relates to administrative costs of running your operation. Anticipating changes in administrative costs (office operations, equipment, hardware, software, etc.) sets parameters for how much is devoted to each line item under this category.

According to, “The risk analysis in your plan is to show that you have thought through risks, that you know how to plan for probable risks and that your plan can survive when things go wrong. Your plan can address several kinds of risk. You do not need to address every kind of risk in the book but pick the risk categories that are most relevant to your company. Market risk is the risk that the market will develop differently than expected. Sometimes markets take too long to develop, and cash runs out while a company is waiting for customers.” Once again, planning in advance for risk management allows more available dollars for marketing purposes.

Why is a marketing budget so important? Business analysts say it makes you prioritize promotional efforts, seeks out new customers and places an emphasis on return on investment. As an equal part of an overall budget, a marketing plan commits a certain percentage of your budget which is solely linked to increasing sales and profits. Without some direction of what you will spend on marketing, you have little by which to judge your performance at any given time throughout the year. Even in a volatile market environment, budgeting for promotional efforts and market share, should be a primary part of your overall business plan.

The above information is presented for educational purposes and should not be substituted for professional business and legal counseling.