If I had a dollar for every time an advisor asked me over the last four years, “How much should I spend on marketing?” I’d be able to buy a great pair of shoes — and a designer handbag. Being a firm believer in the old adage, “you have to spend money to make money,” I think that advisors should be spending as much as they can on marketing. Easy for me to say, I know, since it’s not my money that’s being spent. Hear me out though; marketing tends to drive more revenue than the reverse in most small businesses. So, why wouldn’t you spend money on it?
The U.S. Small Business Administration recommends spending 7–8% of your gross revenue on marketing and advertising budget if you’re doing less than $5MM in sales and your NET profit margin after expenses is between 10% and 12%. Some experts recommend allocating 2–3% of revenue on marketing and advertising, up to 20% if you’re in a competitive industry. My recommendation is to decide on a marketing budget that is comfortable for you — keeping in mind that the budget should ebb and flow with your production.
Pieces of the Budget Puzzle
Now that we’ve covered how much your budget should be, we need to discuss what to spend your money on. Based on a recent Forbes article, you should consider the following six items when putting together your marketing spend. Remember, putting all of your eggs in one marketing basket (i.e., radio, TV, or seminars) can spell disaster.
- Know your pipeline
Where are your leads coming from? If well maintained, your CRM system will be able to generate a report telling you where every single one of your leads came from. You will also be able to know how many of those leads have converted to opportunities, closed sales, and what your average case size is. All important things to know when planning your marketing spend and activities. Don’t have a CRM system? Refer back to these blogs covering that topic.
- What are your operational costs?
- Do you need to hire additional staff to handle additional workload that can come from increased marketing?
- What would it cost to hire an agency to do all of this for you?
- If you sat back and changed nothing about your marketing, what would it cost to sit still? Keep in mind fluctuations in the market that can affect your business.
- Think about your goals, THEN set your marketing budget (measure twice, cut once)
Examine your business goals by quarter, one year, and three years into the future. How many prospects need to be delivered with enough revenue to impact those goals?
- Invest in your business!
Your marketing dollars should never be viewed as a cost but rather an investment in the future of our business. Don’t just look at last year’s marketing spend and adjust which buckets to move money to; treat your budget as an investment that is quantifiable and certain to produce a return on that investment over time.
- Are you a planner or a grower?
Take a step back and look at your business, are you in growth mode or planning mode? Growth-mode companies generally need to grow top-line revenue quickly; look for “quick win” investments such as website updates. If you’re in planning mode, you’re looking for strategies for growth and should look to long-term strategies that include growing your brand through media. Generating inbound content is helpful for those in planning mode.
- Be aware of trends
Work with your Impact marketing manager to get an understanding of what other advisors are doing as part of their marketing mix and how it can work for you. Social media, email marketing, and Search Engine Optimization (SEO) are big trends right now; adopt these strategies and use them to their fullest potential to set you apart from your competition.
Remember, your marketing budget needs to include a mix of traditional and emerging trends. Your Impact team is here to help you be successful in your marketing efforts, so if you have any questions on how to develop or refine your budget, contact your marketing manager today!