Year-end financial questions.

[Greg Gomon]

Well, its year-end and after reviewing our financials I have been agonizing over a few general questions which y'all may or may not wish to help me with.
First, is there a rule of thumb for Advertising Expense as a percentage of Sales. Ours last year was 2% including Yellow Pages. Our growth is strong, but in hind-sight this percent seems low to me.
Second, Question regarding materials cost as a percent of sales. Is there a rule of thumb as to what is an industry standard. Maybe I am asking the wrong question. Last year, the cost of materials (every material associated in the production of a completed frame project) was 36% of our total sales. Care to share with me whether this is high/low/average. I am sure it is not prudent for us to share sales figures, but generalites would be appreciated. Very few fellow past framers in the SCORE program to ask pertinent questions. Attending Jay Goltz workshop in Las Vegas really was enlightening and just kindled my curiosity for MORE.
Any advise would be appreciated.

[framer]

I'm the last one that should answer this but I like to see my COG under 25%. If you are doing a lot of your own cutting of mouldings then closer to 20%, These % do not include any shipping costs as that is considered an expense.

I'm in my 1st year of a new store so I planned to spend extra this year on ads. I told myself I was going to do 100K the 1st year so I estimated that $200 per week would be about 10%. I've stuck to that and I going to be close to my estimate. Of the successful shops I've looked at, they spend money on name recognition, it works. I want a small ad in every local paper each week. Sales ads don't work.

Every ad I run has a picture in it and says something special I do. All ads point to my web site. Yesterday an ad hit and my website had 60 different new users, on a day without an ad running, users average 3- 5. I can see the spikes when ads runs. I love it when they come in holding a picture that they printed off the web site.

framer

[TADPORTER]

I have budgeted 10% of total sales for advertising. I have done some research and 10% is a bit on the high side. 5-7% is more standard (this is still agressive as many firms hardly advertise at all). I am spending 10% as I am still fairly new and want to grow my business quite a bit.

Many people use 30% COG as a base or general figure. Larson says that their "Partners" should hover around 25% COG. My COG figures for 2000 were higher as I ran some coupons early on to entice customers into my new shop.
I expect my COG may be a little higher this year also as I am selling alot of super highend stuff where the markups are not as much.
I would say that 30% is a good centerpoint though.

---Mike