My good friend and client Lyn Mettler of Step Ahead Web Strategies wrote a great article on her blog last week. Called “Sometimes It’s About Doing What’s Right,” the article encouraged businesses to sometimes think more about the good one can do by supporting a particular event or organization rather than focusing merely on numbers and budgets.
I had the flip side of this discussion with a client last week. This client made more than half of company marketing decisions based upon organizations asking for money or support for an event or cause. When I pressed for specific return on investment information, my client indicated that it was negligible. Often, people are “guilted” into supporting causes or organizations because they do not like to say no.
Because we help clients so much with balancing cash flow and return on investment at POSITUS, we wanted to follow up on Lyn’s insightful article with some specific financial benchmarks for supporting causes that may not provide a revenue return. We will also give some tips for saying no when it must be done.
Depending upon the industry, business can allocate anywhere from 5 – 15% of total revenues to advertising and marketing expenditures, with the national average sitting around 8%. If your small business generates $100,000 per year in revenue, let’s say that you decide to allocate 10% of that to advertising and marketing costs. Therefore, you have $10,000 to spend on print and internet advertising, public relations, advertising specialties, special event sponsorships and the like. While this may seem like a lot of money, it can evaporate quickly. However, it could be reasonable and appropriate to allocate between 5% to 10% of this budget to cause sponsorship if that matters to you as a small business owner. In doing this, you will have to make sure that everything else you decide to invest in for advertising purposes provides a return, meaning that you may be forced to cut things that you have traditionally done that have yielded no new business.
Let’s stipulate that you have several causes that you really care about, like a cure for cancer, an organization that helps underpriviledged children or an emergency relief group. Using the scenario above, you could allocate anywhere from $500 to $1,000 on combined sponsorships for these group events. Alternatively, you could decide to devote all of the funds to making a larger impact with one group this year and rotate to another group with a large sponsorship next year. Even better, you could commit to sponsor one event for 3 years or more in a row and ask for a discount for this commitment, helping the rest of your feel good sponsorship funds go further while giving the benefiting organization a chance to focus on raising funds for other events. We can evaluate your numbers and causes and provide several good options for you.
One of the fabulous things about a budget is this: it gives you the ability to say no. When your business has spent its allocated budgetary funds in a particular area, it is completely justifiable to say no to further requests for that line item. While your budget may be depleted for this year, you can certainly ask someone to provide information about their request so that you can evaluate it and possibly consider it for the budget for next year. Instead of saying no outright, you’ve said maybe later.
Every business situation is different, and our example above may not apply to your specific set of circumstances. We give small business owners good information on general outlines for expenditures for their particular industry, and we even make recommendations for professionals to help with marketing and public relations where appropriate.
Check out Lyn’s article “Sometimes It’s About Doing What’s Right” by clicking here.