Determining how much money to spend on advertising your small business is the conundrum faced by all entrepreneurs; you must get your name and product or service out in front of consumers but you must balance the books at the end of the day, as well. As a small business owner myself I constantly reevaluate my advertising budget to insure that it is accomplishing the goals I have set for it and not breaking the bank in the process. Knowing your target market and the cyclical nature of your product's or service's demand are the keys to establishing a workable budget for advertising.

Business experts agree that 3-5% of gross sales spent on advertising and marketing is the "sweet spot" for achieving brand recognition appropriate to your business' overall budget. Since most small businesses operate close to the break-even point during the first five years of operations, a single serious miscalculation in where and how to spend that 3-5% could spell certain death for your enterprise.

Researching and being intimately familiar with your target market is essential to determine how best to reach them with your company's message. Who is your customer? What does your customer want or need? How can your product or service exactly fill your customer's want or need? And perhaps most importantly, how is your customer most likely to hear about your business (the news radio station or the country music one? the major newspaper in your area or the local gossip rag?)? Once these traits are defined, you can better decide the best direction to pursue in reaching your potential customers. In addition, there are ways to lessen your cost while increasing your exposure by piggybacking your advertising with a complimentary business that has a larger advertising budget (i.e. your plus-size women's consignment store with a Curves exercise center; as women lose weight, they need to sell clothes that are too big and buy a new, smaller wardrobe).

Every business will have good months and bad months, and if you track them long enough (or track them in other businesses in the same field as yours), you'll see a pattern to these highs and lows. Fighting the natural cycle of your industry by spending lots of advertising dollars in the slow months is a losing battle. If your customer is not in the market for your widget in January, no amount of trying to convince him otherwise will be successful. However, if everyone seems to want your widget in June, that's the month to get your company name out everywhere and give yourself a boost off the natural desire for your widget.

Figuring out how much money to spend on advertising your small business is both art and science. There are many factors to consider in the decision-making process, including both the cold, hard percentages from the experts and the temperament of your potential clientele. Researching both angles and acting on that information will help you along the road to success in your entrepreneurial adventure.

Learn more about this author, Tara Bren.
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