How Much Should I Be Spending On Winning New Business?
A big question as we all want to win new business by not spending a penny! If only life were that simple!
Generally speaking, winning new work will either cost you time or money. And, if something costs you “just” time, it’s costing you money anyway. You have to put a price on your time. Joel and I talk about this a lot. The website you’ve built yourself in Wix might not have cost you anything in cash, but it will have taken a fair chunk of your time.
Could that time have been spent more profitably? If you’d paid a web designer, so you could get on with marketing your business – via networking, social media, door-knocking, whatever – which option would have been better for your business?
Maybe you’re a tech genius and you knocked out your new website in a day. Fair enough. Or did it take you hours and hours and hours of soul-zapping joy…? Plus the end product doesn’t actually represent you as professionally as you’d like?
The fact is, every successful business out there pays to advertise. Maybe some of them launched with no money and had to hustle 24/7 and call in every favour under the sun. Great at the time but isn’t sustainable. You can’t scale a business that way. You can’t scale a business for free.
If your cunning plan is to grow your business without paying for advertising, you might still reach your destination… but it’s likely to take you a damn sight longer. And you may end up burnt out and not having enjoyed the journey.
This doesn’t mean you can chuck money about like the Wolf of Wall Street. You have to do your due diligence and test a budget on the channels you think could work best for you. That could be (virtual) networking. PR. Leaflets. Pay per Click. In an ideal world, you’d spread the risk and have a number of marketing pillars supporting your business. But favour a few. There will always be a couple that lead the way for you, and you focus more on them. It ain’t rocket science.
But be prepared to lose an amount of money. A harsh reality of business. Not everything you invest in will come up trumps. But successful entrepreneurs who learn off the right sources will make more good investments than bad ones. The question is – are you OK with that?
Even successful social media ad campaigns may take time, i.e. you won’t see a profit from Day One. Sometimes they’re out of the blocks as soon as the gun fires; other times, they take a little while… and then they snowball.
Same with press ads. Can you really expect one night in the newspaper to skyrocket your fortunes? But if you’re there (with a decent creative) week-in week-out… then you’ll build up familiarity and trust.
To cut to the chase on the original question – you should be prepared to spend 10% of your revenue on your marketing. Or, if you want to get more detailed, 10% of the average lifetime value of a customer. So not just what you’re earning “off” someone now but in the future.
If you’re a gym, say, and membership sells for £50 a month and members stay for two years, that is £50 x 24 = £1,200. So you’d need to be cool with spending £120 to bring a new member onboard. How many new members do you want this month? 20? So this month you need to spend £2,400.
You test and measure. Where you can.
Some marketing will be more accountable than others. A Facebook conversion ad will tell you how much it has cost you to get a new lead or sale. A piece of PR won’t. But a piece of PR could be the thing that kickstarts someone’s interest in you, or acts as the final prompt to get in touch. There will always be marketing that you can’t pin an immediate direct return on.
As ever, if you’d like to know more about marketing that sells, book a Discovery Call with myself or Joel.
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