How to calculate the ad budget

Calculating the Ad Budget

Calculating the Ad Budget The purpose of advertising is to increase the exposure of a business beyond what is provided by its physical location. An extremely high Cost of Occupancy (rent) for a prime location is often the least expensive advertising available. Businesses who save money by investing in weak locations always have to advertise much more heavily.

Calculating the Ad Budget

The advertising budget is based on a cost of exposure which falls between 10% and 12% Rent + Advertising = Cost of Exposure

Calculating the Ad Budget Step one…. Calculate the Ad Budget on a 10% Cost of Exposure… Projected Sales$1,000,000 x 10% (total cost of exposure –occupancy + advertising) x 10% = Budget for Total Cost of Exposure $ 100,000 Multiply by Average Markup(92%) x 92% Adjusted Budget for Total Cost of Exposure$ 92,000 Subtract Cost of Occupancy ($36,000) - $ 36,000 Ad Budget $ 56,000

Calculating the Ad Budget Step two…. Calculate the Ad Budget on a 12% Cost of Exposure… Projected Sales$1,000,000 x 12% (total cost of exposure –occupancy + advertising) x 12% = Budget for Total Cost of Exposure $ 120,000 Multiply by Average Markup(92%) x 92% Adjusted Budget for Total Cost of Exposure$ 110,400 Subtract Cost of Occupancy ($36,000) - $ 36,000 Ad Budget $ 74,400

Based on projected sales of $1,000,000 the ad budget falls between $56,000 and $74,400 10% Cost of Exposure $1,000,000 x 10% $ 100,000 x 92% $ 92,000 - $ 36,000 $ 56,000 12% Cost of Exposure $ 1,000,000 x 12% $ 120,000 x 92% $ 110,400 - $ 36,000 $ 74,4000 Calculating the Ad Budget

How to use the next slide Enter your estimated gross sales for the coming year at the top Turn the wheel to to correct % of markup Enter in your cost of exposure (Rent or Monthly mortgage payment) The bottom check mark will give you the correct ad budget