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The most common budgeting problem for small business owners is having no budget at all. The second most common problem is relying on a reactive, sloppy excuse for a budget. Marketing is as much a cost of doing business as rent or payroll. It isn't something to cut at the first sign of a sales slump, or to reduce to boost profits for a month or two. You have to have a budget-unless you want to waste money and forgo improvements in sales and profit.

Anyone can set a budget. Setting a budget worth following requires skill. One common method of setting a marketing budget is to allocate a fixed percentage of forecast sales on a calendar basis. If you don't have trade figures available, ask for them from your business counselor, accountant, banker, or other financial experts such as editors of trade magazines. Or ask other successful business owners. These trade averages will provide some useful guidelines.  

More than advertising and public relations come out of your marketing budget. You also need to look at costs such as sales and sales training, window displays, sales support, and sales presentation pieces. Your marketing budget has to reflect your business, not someone else's.

Look at your marketing, sales, and profit goals and try to figure out what it will cost to reach them. If it is more than you can afford, that forces you to make some choices. You need a marketing budget that you can live with, one that helps you reach your goals and doesn't tie you to the past or to a formula that can't be adjusted to sudden shifts.

The best marketing budgets have two parts: a fixed monthly amount to meet ongoing, monthly marketing expenses, and a contingency or project budget to help you meet unexpected marketing needs. A new market may open up, or a competitor retires, or a new competitor appears. How you respond to these opportunities and challenges is heavily influenced by your budget.

Incomplete campaigns eat profits. Make sure you have enough money to finish your marketing campaigns. You will get tired of your advertisements just about when your markets first take notice of them. That's a problem you can easily deal with. But running out of money is another matter.

To set up your budgets, use your resources. Your accountant or financial advisers can help you put dollar costs to your goals more efficiently than you can. However, you can provide estimates, based on your goals and prior experience in your business. Start by creating preliminary budget estimates. List the marketing actions you plan to take, noting when they will happen and how much they will cost.