How Much Should I Spend on Marketing?

This is a really interesting and important question that people often ask! 

So, what are your goals? What do you want from having a business? 

• Is your goal to grow and make more money?  Or is your goal to shrink and go out of business? 
• How important is it to grow your income?
• Is it important to do it in a way that you can have free-time to enjoy it?

If your goal is true financial independence with free time to enjoy it, "word of mouth" is rarely enough by itself.  You need to grow a big enough base of customers to build a substantial base of Raving Fans first.  (Emphasis on “Raving Fans”.  Not just “satisfied customers”.)  If your goal is to grow your income, word of mouth from past customers rarely provides enough exposure to grow more than a minimal rate, and past customers often forget you if you don’t stay in touch on a regular basis. 

Some statistics on the internet indicate the average business spends around 4% of Revenue on Marketing.  But then, the average business goes out of business.  Other statistics indicate 96% of businesses never grow enough to reach $1Mill of Revenue.  That may be okay for a 3 to 5 person business, but limits the owner’s options when they want to retire.  And that limits their total income along the way.  Especially if they want free time from their business to enjoy it.  If they aren’t working - they aren’t making money.  So, if your goal is to make a lot of money, and you want to have free time to enjoy it, 4% is probably not a good enough number.  Unless you just love to have to be at work every day!

Benchmarks for growing a business quickly seem to range in the 10% to 15% range.  Some have said up to 20% in the early stages of a business.  Prospects can’t buy from you if they do not know you are there.  And few will buy from you if they don’t see what makes you different and better for them than their other choices.

It helps a lot if you have multiple offerings that support repeat business.  Depending on your industry, you may need to design your business differently to bring new opportunities for customers to buy.  But without diluting your brand (and distracting your time) into different markets.  And then you need to have a system to invite past customers back to buy those additional products or services. Repeat business is where the profit is.

It also helps a lot if you learn how to measure the effectiveness of your marketing so that you can tune it to perform better, including to find out which are the most profit-effective channels.  Yes – “profit-effective”.  Measured. Many people look at Marketing as an Expense.  And yes, that is where it sits on the P&L statement.  But if you think of it as an investment (that usually takes months to generate ROI), then you can treat it as an asset that produces ROI – and invest in or divest out to achieve a particular result.  That takes practice – but you have to start, and measure & test, in order to receive the benefits.  In short – know your numbers! I can help you with that skill if you would like.

The goal is to learn how to communicate with and educate your target market about factors that are important to them, and how to buy, in media channels they use.  That starts with learning how prospects perceive the problems that you can help them solve.  If you only focus on your product features & benefits, very few will trust that you can solve their problem.  If you focus on their real questions as well as solving their problem, they are far more likely to trust you. 

By the way, not all their questions are specific to the product or service you sell! They also have questions about; How to do business with you? ... What makes going with you a better decision? ... What are their other choices? ... Why is this choice the best for them? ... and so on.

Last thought to consider; many think that the secret to making more money is to cut expenses.  Cost efficiency is important.  But.  The true secret to making more money is selling more and gaining more repeat business – at appropriate price and profit levels.  (Note; the lowest price is not the secret to success either.)  In order to sell more – you will need to do more Marketing - effectively.    

Happy Selling! 

If you would like to talk about your specific situation, hit the “SCHEDULE A CALL” button, and let’s talk about your specific case.

Do you want to know your key focus area to help grow your business? Try our 3 min Assessment Quiz at https://stevechiama.nextlevelassessment.com/?source=LI_Event - 6Steps