Investing In Your Business

(from GetGist) First, you calculate the low end and the high end of what you should be spending. These two numbers are 10 and 12 percent of your projected annual gross sales. That’s not so hard — if you predict you’ll make $1 million, then 10 percent is $100,000, and 12 percent is $120,000. Next, you multiply each of these two numbers by the markup you earn on the average transaction. This means gross markup above cost, expressed as a percentage of cost. So if you spend $100 on each widget but sell them for $150, your markup is 33 percent. (Your margin is $50, which is the number most business owners focus on.) Next, you divide the gross profits by cost. Using the example above, your gross profits are $333,000, which you would divide by $666,000 (the amount you spend to buy or create the widgets you’re selling.) This leaves you with “0.5” on the calculator, or 50 percent. This means that your 33 percent margin represents a markup of 50 percent. Then you multiply the markup percentage by $100,000 and $120,000, which gives you $50,000 and $60,000. From there, you subtract what you pay on a year in rent (say $25,000) leaving you with your final spending range of between $25,000 and $35,000 on marketing. Read more at Gist: How Much Should a Small Business Spend on Marketing    Fill this out to see what your investment is worth based on how much you want to grow. If you don’t want your business to grow 25% or more why are you in business?

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