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This sample marketing plan was created with Marketing Plan Pro software.

Our plan calls for sales of nearly $600,000 this year growing to $1.2 million by 2009, on marketing expenses of slightly more than $200,000, which is about 35% of sales. By the last year in the plan, our marketing expenses of $480,000 will be only 25% of sales.

The plan assumes two important trends:

First, a steady decline in cost of sales and growth in gross margin percentage as we build more of our resources, as full-time personnel and fixed costs instead of contractors and outside consultants. That means that as we grow we take on more risk -- if the plan is implemented. Step by step we'll have to watch the growth of sales relationships that imply the advisability of taking on more people as partners and employees, instead of as contractors.

Second, a decline in marketing expenses as a percent of sales. The 35% figure we project for the first year is quite high, unacceptably high except that we are building a reputation and marketing without the leverage of past marketing, starting from zero. By the fifth year of the plan, we should be spending 25% of sales on marketing. This is a better figure.

Break-even Analysis

For consultants, we have an unusually high variable cost of 30% of sales. This makes sense for us at this point, because turning to experts on a per-job basis, as long as these are the people we know and trust, reduces the risk of fixed costs.

This break-even is a reflection of our first year, in which we are building our fulfillment based on variable cost people instead of fixed-cost people. The risk profile should look very different by the last year.

Fixed Costs

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Fixed Costs
  
Cost 
Rent or Lease$4,500
Professional Services$1,000
Payroll$30,000
Interest Payments$0
Utilities & Telephone$1,000
Non-discretionary Marketing Expenses$0
Other$1,000
Total Fixed Costs$37,500

Break-even Analysis

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Break-even Analysis
  
Monthly Revenue Break-even$51,270
  
Assumptions: 
Average Percent Variable Cost27%
Estimated Monthly Fixed Cost$37,500

Sales Forecast

Our sales for this start-up period grow from $10,000 per month at the beginning -- retainer business from our founding partner, with existing clients -- to $90,000 next fall. The sales forecast is aggressive, assuming financing for our marketing expense and bringing on partners and staff as planned.

We intend to continue to increase billings throughout the forecast period, reaching annual totals increasing from less than $600,000 in the first year to $1.825 million in the fifth.

Sales Forecast

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Sales Forecast
 20062007200820092010
Sales     
Retainer Consulting$200,000$350,000$425,000$500,000$550,000
Project Consulting$270,000$325,000$350,000$400,000$450,000
Market Research$122,000$150,000$200,000$250,000$300,000
Strategic Reports$0$50,000$125,000$250,000$375,000
Other$0$25,000$50,000$100,000$150,000
Total Sales$592,000$900,000$1,150,000$1,500,000$1,825,000
      
Direct Cost of Sales20062007200820092010
Retainer Consulting$30,000$20,000$15,000$10,000$10,000
Project Consulting$45,000$20,000$15,000$10,000$10,000
Market Research$84,000$86,000$88,000$90,000$92,000
Strategic Reports$0$20,000$25,000$32,500$40,000
Other$0$10,000$10,000$10,000$10,000
Subtotal Direct Cost of Sales$159,000$156,000$153,000$152,500$162,000

Sales by Partner

As the projection shows, we expect our billing to come from all three of our main partners first. The partners have relationships that should create these billings at that level.

Later on, we expect the billing to come from additional resources and additional partners, so the billings attributed to the main three go down as a percentage of the total.

The detail for this table is included in the appendices.

Sales Breakdown by Partner

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Sales by: Partner
 20062007200820092010
Sales     
Hernandez$210,000$250,000$350,000$450,000$600,000
Wong$175,000$200,000$250,000$350,000$450,000
Anderson$67,000$175,000$200,000$250,000$350,000
Other$140,000$275,000$350,000$450,000$425,000
Total$592,000$900,000$1,150,000$1,500,000$1,825,000
Average$148,000$225,000$287,500$375,000$456,250

Sales by Segment

We expect to focus more on the mainline hardware this first year, but the growth in our industry is in communications and Internet-related business, so during the five years our projection shows a continual trend towards the other segment.

The detail for this table is included in the appendices.

Sales Breakdown by Segment

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Sales by: Segment
 20062007200820092010
Sales     
Mainline Hardware$300,000$350,000$450,000$500,000$550,000
Communications$235,000$450,000$600,000$900,000$1,175,000
Other$57,000$100,000$100,000$100,000$100,000
Total$592,000$900,000$1,150,000$1,500,000$1,825,000
Average$197,333$300,000$383,333$500,000$608,333

Sales by Region

In our regional billings, we expect to see the market in Europe growing much more quickly than in the United States, although the U.S. market starts out much bigger, so that in five years we are billing in equal portions in the United States and Europe.

The forecast isn't a reflection of total market directly. It also assumes that we are doing what we have to do to take advantage of the growth potential in Europe. This includes marketing, developing the practice, and developing the repeat business.

Sales Breakdown by Region

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Sales by: Region
 20062007200820092010
Sales     
US$410,000$525,000$600,000$725,000$800,000
Europe$110,000$250,000$400,000$600,000$800,000
Other$72,000$125,000$150,000$175,000$225,000
Total$592,000$900,000$1,150,000$1,500,000$1,825,000
Average$197,333$300,000$383,333$500,000$608,333

Expense Forecast

Overall we project sales and marketing expenses to more than double from $215,000 this first year to $480,000 in the fifth year. This compares to sales increasing threefold during the same period. We believe that effective marketing requires a very high percentage of sales and marketing expenses to sales during the early years, and that over time we can bring that percentage down to more acceptable levels.

Expenses divide over four main categories: advertising, public relations, travel, and website. A smaller budget is included for Graphics and Printing expenses, and we also have a substantial additional budget for contingencies. A separate table has been included to tabulate the expenses. Totals have been brought forward to the Marketing Expense Budget table below.

Marketing Expense Budget

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Marketing Expense Budget
 20062007200820092010
Advertising$57,000$65,000$75,000$90,000$100,000
Graphics and Printing$10,500$15,000$20,000$25,000$30,000
Public Relations$40,000$50,000$55,000$60,000$65,000
Travel$45,000$55,000$60,000$75,000$100,000
Website Expenses$30,100$34,500$41,500$35,000$41,500
Other$12,000$25,000$40,000$50,000$60,000
 ------------------------------------------------------------
Total Sales and Marketing Expenses$194,600$244,500$291,500$335,000$396,500
Percent of Sales32.87%27.17%25.35%22.33%21.73%

Expense by Partner

As the table and chart shows -- with more information in the appendices -- most of our expenses are managed by marketing, not by the partners themselves. Each partner has some expense allocation to deal with specific client development programs, marketing of expertise, and related projects.

Expense Breakdown by Partner

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Expenses by Partner
 20062007200820092010
Expenses     
Hernandez$50,800$44,000$48,000$53,000$58,000
Wong$35,400$24,000$26,000$29,000$32,000
Anderson$26,800$24,000$26,000$29,000$32,000
Other$81,600$152,500$191,500$224,000$274,500
Total$194,600$244,500$291,500$335,000$396,500
Average$48,650$61,125$72,875$83,750$99,125

Expense by Segment

As with partners in the preceding topics, most of our expenses go towards general marketing expenses instead of tailored to a specific segment. This is particularly important for our development of the industry reputation we need even as the product structures and divisions change. We expect billings to shift towards communications, but with expenses we need to market our expertise and let the projects come in their appropriate segments.

Expense Breakdown by Segment

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Expenses by Segment
 20062007200820092010
Expenses     
Mainline Hardware$35,000$35,000$45,000$55,000$65,000
Communication$22,000$33,000$51,000$75,000$95,000
Other$137,600$176,500$195,500$205,000$236,500
Total$194,600$244,500$291,500$335,000$396,500
Average$64,867$81,500$97,167$111,667$132,167

Expense by Region

Although we don't see our expenses tagged a great deal to specific regions, the projection does call for an increasing level of expenses directed at the European market. The main bulk of expenses, however, goes to the "other" category that includes marketing programs directed at the general marketing of our specific expertise among high-tech companies worldwide.

Expense Breakdown by Region

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Expenses by Region
 20062007200820092010
Expenses     
US$87,600$43,000$51,000$63,000$75,000
Europe$34,000$65,000$90,000$110,000$150,000
Other$73,000$136,500$150,500$162,000$171,500
Total$194,600$244,500$291,500$335,000$396,500
Average$64,867$81,500$97,167$111,667$132,167

Linking Expenses to Strategy and Tactics

Where we see the strategic match in expenses to sales in the steady increase in relative spending for Europe and for the communications/Internet segments. These strategic shifts may be hidden somewhat because of the bulk of spending going into the non-specific areas, but they are still evident in the sales and expense breakdown by categories.

Our expenses and strategy seem very well matched because we are putting the bulk of marketing expenses into the key elements for building our leads: quotes in magazines, magazine articles, speaking engagements, and some very strategic advertising, including Internet advertising.

Contribution Margin

The contribution margin should increase steadily during the five year plan period, because of two factors:

  1. The cost of sales goes down as we develop the business and grow, bringing on the expertise we need to fulfill our promise with in-house partners and associates as employees, rather than contracting expertise. Risk goes up with the increased fixed costs, but the margins go up too, because cost of sales is less.

  2. Our sales and marketing expenses will stabilize. We don't expect to decrease the overall level of expenses, but they should decline in percentage terms as sales go up.

Given both factors, we project our contribution margin to increase from 36% the first year, to 63% the last year.

Contribution Margin

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Contribution Margin
 20062007200820092010
Sales$592,000$900,000$1,150,000$1,500,000$1,825,000
Direct Cost of Sales$159,000$156,000$153,000$152,500$162,000
Costs of Sales$6,000$12,000$25,000$35,000$50,000
 ------------------------------------------------------------
Total Cost of Sales$165,000$168,000$178,000$187,500$212,000
      
Gross Margin$427,000$732,000$972,000$1,312,500$1,613,000
Gross Margin %72.13%81.33%84.52%87.50%88.38%
      
Marketing Expense Budget20062007200820092010
Advertising$57,000$65,000$75,000$90,000$100,000
Graphics and Printing$10,500$15,000$20,000$25,000$30,000
Public Relations$40,000$50,000$55,000$60,000$65,000
Travel$45,000$55,000$60,000$75,000$100,000
Website Expenses$30,100$34,500$41,500$35,000$41,500
Other$12,000$25,000$40,000$50,000$60,000
 ------------------------------------------------------------
Total Sales and Marketing Expenses$194,600$244,500$291,500$335,000$396,500
Percent of Sales32.87%27.17%25.35%22.33%21.73%
      
Contribution Margin$232,400$487,500$680,500$977,500$1,216,500
Contribution Margin / Sales39.26%54.17%59.17%65.17%66.66%

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