6.09 – Projecting Expenses & Revenues
Effectively managing your marketing plan involves setting up processes, boundaries, timelines, and budgets. This includes:
- Estimating future sales, in units and dollars, for each product in your plan.
- Justifying these estimates, and if they’re hard to justify, creating worst-case versions.
- Drawing a timeline showing when your programme incurs costs and performs activities.
- Writing a monthly marketing budget that lists all the estimated costs of your programmes for each month of the coming year and breaks down sales by product or territory and by month.
While completing these tasks, it’s essential to consider economic trends and your own sales projections.
Preparing for Economic Influences
When preparing your marketing plan, factor in economic trends and issues over which you have no control. Monitor leading published economic indicators regularly. To stay on top of economic trends by cities, especially those in which you do the most business, refer to the Milken Institute’s Best Performing Cities annual list.
Coming Up with a Reasonable Budget
Allocate no more than 10 percent of your revenue toward marketing unless you have strong reasons (from past experience) to believe that the ROI will justify it. Avoid committing to a full year of expensive marketing; a first-quarter plan is more cautious, committing only a fourth of a year’s spending. Take it step by step.
Allocate dollars according to the percentage of revenue each sales channel provides. For example, if online sales account for 60 percent of your sales, consider allocating 60 percent of your budget to grow those sales, with the remaining 40 percent going to other channels that supplement your primary income.
Financial Organisation of Your Marketing Plan
If you’re part of a start-up or small business, consider doing all your projections on a cash basis, showing expenses in full when due versus spread across 12 months. Create forecasts that provide guidance on projecting sales and assigning resources.
Several helpful techniques for projecting sales include buildup forecasts, indicator forecasts, and time-period forecasts, detailed below.
Buildup Forecasts
Buildup forecasts predict sales from the specific to the general, or from the bottom up. If you have sales reps, ask them to project the next period’s sales for their territories and justify their projections based on any anticipated changes. Then combine all the sales force’s projections to get an overall figure.
If you are small enough, project per-customer purchases and build your forecast this way. Start with estimates for each channel and add them together.
Indicator Forecasts
Indicator forecasts link your projections to economic indicators that can cause sales variations. For example, in the construction business, past sales may correlate with the growth of the gross domestic product. Adjust your sales forecast up or down based on experts’ expectations of economic growth or decline over a given period.
Time-Period Forecasts
To use the time-period forecast method, work by week or by month, estimating the size of sales in each period, then add these estimates together for the entire year. This approach is helpful for businesses with inconsistent sales periods. For example, ski resorts use this method as they receive certain types of revenue only at specific times of the year. If your business is cyclical and you market more during certain seasons, this approach will work best.
By following these steps and techniques, you can effectively manage your marketing expenses and project revenues, ensuring that your plan is both realistic and adaptable to changing economic conditions.
