This blog looks at:
- Why have a marketing budget?
- How to help your cash flow
- Methods to budget setting and price setting
- Pricing today
Why have a budget?
Setting your pricing and your marketing budget should be part of your marketing plan which in turn should be part of your overall business plan. Strategic planning and budgeting go hand in hand. To make plans though, you need to have resource and money to back up these plans.
Once you have set your budget, stick to it and review it regularly. Review your budget and maybe do a new forecast, if necessary. Not easy at this time especially, but try not to go over your budget each month. It may be tempting to try and do anything and everything in terms of marketing, but hold fire before acting and only do what is going to be cost effective and only what will give you a return on your investment. Always remember ROI. Return on Investment. If something doesn’t produce a return, don’t continue with it.
How to help your cash flow
- Look at your costs and outgoings and economise where you can.
- Buy in bulk if you can, to save in the long term.
- Review memberships and subscriptions
- Shop around amongst your suppliers.
- Shorten your payment terms if you can to bring in cash quicker.
- Lengthen your supplier’s payment terms if you can to help your cash flow.
- Seek advice from your bookkeeper or accountant.
The Methods to budget setting/setting pricing
As with everything in marketing, there are many ways to do the same thing. Each method has its own pros and cons and can sometimes be purely down to personal preference and experience. Here are some of the options
- Historical – looking at previous budgets and previous costs
- Zero based – looking at your activities and trading off depending on financial constraints
- Activity related – looking at your activities and the costs and the resulting ROI
- Fixed – looking at a figure and sticking with it
- Sales vs Spend – looking at Sales vs Spend or in other words, income vs expenditure
Always seek advice from a financial professional before taking action.
Your pricing should ensure your cover your costs/break even and then make some profit too. If you use a tool like Quickbooks then you can get easy to understand graphs and stats to show you the financial health of your business when it comes to expenses and sales. Always seek advice from a financial professional before taking action!
Depending on your industry, company circumstances and so on, now may or may not be the time to review your pricing. For most of us, a price increase would not be well received so I would avoid this. Customers will remember how you act now. But equally that isn’t saying you cannot charge either nor can you make a profit.
I have had questions asked to me whether companies should discount products and services at this time. There are pros and cons. Without sounding heartless then most of our businesses need to make money so we can keep afloat and pay our personal bills or staff, therefore I don’t see a need to offer everything for free or discounted just because of the current situation. If you wish to offer a free call or free advice or free products, this is optional and a kind gesture and only do so if it won’t harm your business short or long term, But you shouldn’t feel pressured to do so. Such as offer would be well received I’m sure though by your customers and prospects. One way round this ethical/financial dilemma, might be to discount or add offers, but only for set periods of time to its clear when it ends and therefore its easy to manage and to measure.
Now isn’t also a normal trading time for many businesses, so profits and sales are not truly representative currently either. Note that too when it comes to reviewing prices and your marketing.
I hope that is useful. I am certainly not a financial expert and would always recommend you seek advice from such experts before making decisions.
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