Entrepreneurs involved in startup who don't think they have to allocate funds for marketing had better think again if they want to succeed. That's the message in a provocative essay from Steve McKee,
president of McKee Wallwork Cleveland, an ad agency specializing in working with fast-growth companies and businesses whose ad budgets are under $10 million. "As crazy as it may seem, it's common for
entrepreneurs to overlook the need for major marketing investment from day one," McKee writes. " 'We're just starting up,' they think. 'We need to get on our feet and then we'll have the money to
invest in things like marketing and advertising.' But whether it's old-fashioned meatloaf or brand new technology, no matter how good your product or service is, it won't sell itself. If you can't
afford a marketing budget you can't afford to open your doors." McKee said his company did a study of startups and found that among those that established a marketing budget, most followed the
percent-of-sales approach, devoting some percentage of their revenue to the marketing function. The amount they spent ranged from 1 percent on the low end to 12 percent or more on the high end. He
said there is no magic number as to what percent of budget a startup should spend on marketing, but there are guidelines. "The first is to determine whether your company will be margin-driven or
volume-driven," he says. "Volume-driven businesses like supermarkets and hospitals spend a very small percentage of sales on marketing because their sales are high and margins low. By contrast,
margin-driven companies like those in high tech and specialty retail have a smaller revenue base but more flexibility to build a higher percentage into their margins.
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