This is an interesting formula that is finding great acceptance amongst retailers.
Step 1. Allocate between 10-12% of your gross sales towards exposure.
Step 2. Multiply this number by the store’s average markup.
Step 3. Deduct your cost of occupancy from this figure. The balance is your advertising budget.
Example: Total annual sales $500,000. Markup 92%. Cost of occupancy per month $2,000 per month.
$500,000 x 11% = $55,000
$55,000 x 92% = $50,600
$50,600 – $24,000 = $26,600
Thus $26,600 would be the annual advertising budget in this example.
From: Roy Williams, Secret Formulas of the Wizards of Ads