MBA1951 How Much Should You Spend on Paid Marketing?

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I want to begin today's lesson by addressing the elephant in the room. A lot of people wonder, do you really need to use paid advertising to grow your business? Can I just grow organically? Can I just use SEO? Can I just use word of mouth? What about just focusing on creating a great product or service and let the rest take care of itself? Let the customers promote. For me, I'm a big believer in organic marketing. I think content marketing has a huge, huge place in your marketing strategy. And I think organic growth is a real avenue for growing your business, but it's not going to do everything for you, okay? It's just one way it helps you grow your business, but you can't rely only on organic growth. Companies like Tesla that do zero paid advertising are an edge case, okay? They are the exception, not the rule. And by the way, it's kind of not true because they have a presence. You see Tesla everywhere in terms of their showrooms, their superchargers, and all that jazz that costs money. For you and I and 99.9% of all businesses, paid advertising is the easiest and fastest way to scale your business. This has just been the truth since the beginning of business, right? This is the beginning of time. This is why companies like Facebook and YouTube and Google are so powerful and so wealthy, because their whole business model is paid advertising. Now, there are a lot of ways to spend money on paid advertising. Not only digital ads, but you can be sponsoring events online, you could be hosting events in person, giving out T shirts and company swag is a form of paid advertising. But in my experience, and my advice to you is if you're new to paid advertising, then I think the best way to start is something that you can quantify, something that you can track, something that you can actually see your return on investment easily. And that is digital ads. That is Facebook, Facebook, Instagram, Google, YouTube, that type of advertising. Because you can see exactly how much it costs for you to convert a customer with a particular ad. And as they say, the data doesn't lie. This allows you to see in black and white how much it costs you to acquire a customer. The other types of paid advertising I mentioned are great avenues, are great options, but I think I would only recommend them to businesses that have been spending at least a year or 18 months running paid advertising, spending money on paid advertising, period, and getting a return on investment. So how much money should you be spending every single month on paid advertising? Well, I have a simple equation for you to follow. If you do a little bit of research on this, you'll see that a lot of marketing companies will Recommend Something between 5 and 12% of your revenue. This is your monthly revenue. So say, for example, you're making $10,000 a month, while 10% of that is $1,000. Now, I have my own recommendation, depending on where you are business, in terms of the growth of your business, because I've tried a lot of different things and in my experience, these are the numbers that actually help move the needle. Sometimes when you get into the advertising game, the paid advertising game, if you don't go in at a certain level, it's just not going to be worth your efforts. It's not going to be worth you putting these ads together and all that kind of stuff and even maybe getting somebody to help you put it together. So in my opinion, if you're making less than $100,000 a month in terms of revenue, this is your top line revenue, how much money you make every single month. If it's less than $100,000, I recommend spending up to 10%. This means if your business is making $100,000 in revenue a month or less, I recommend you go with at minimum 10% of that revenue. So for example, if you're making $50,000 in revenue every single month, you should be spending $5,000 in paid advertising, 10% of your revenue. Why? Because in your early stages, you want to be as aggressive as possible because you don't have that much of the market share yet. You're still new. But as your business grows and as your business takes on that market and you get more and more of a market share, you don't need to spend as much in relation to your revenue because you become the dominant player in the market. And your word of mouth marketing, your referrals, all that kind of stuff, kind of just snowballs. But in the beginning, you're just trying to get known and you need awareness, you need brand affinity, you need people to understand who you are and what you offer. You need to run ads so you can get people to go to your website and opt into your list so you can then nurture them and convert them into customers. And I have found that most new entrepreneurs that are making $100,000 a month or less, which is a lot of entrepreneurs, the majority, they are spending far less than they need to to grow their business. They're just not aggressive enough with their paid advertising. Now I need to make a disclaimer. I'm not telling you to drop 10% of your top line revenue into paid advertising tomorrow. Why? Because when you don't know what you're doing, that's a fast way to lose thousands of dollars. You want to ramp up to it. That's the goal. The goal is to hit. So you may want to start at 5 and then maybe 6 and 7%. But the goal is that you should be hitting 10% in the next six months. This might mean running your own ads yourself and learning how to do that. Whether you're just going to focus on Facebook or YouTube ads or Google or whatever it is, or you having somebody on the team get trained up, or you hiring an agency to take care of it for you. Marketing and advertising is the bloodline of bringing in new customers. It's a way for you to find the people you're meant to serve and show them what you got. Now, there's a little bit of an asterisk here. I say 10%, but if you have nailed your cost per acquisition, meaning you know it costs you x amount of dollars to acquire a customer and that amount is far less than your lifetime value of a customer, meaning how much money a customer spends with you in their lifetime. So say for example, the lifetime value of Your customer is $1,000 and it costs you $200 to acquire this customer. Okay? To acquire a customer costs you $200. And the average lifetime value of any random customer is $1,000. That means you're making $800 in profit for every $200 you spend to bring in a customer. This is a no brainer. You need to do this as much as possible. You need to spend more than 10% because you're basically printing money here. Okay? You're putting in $20 and getting $100 back. Now obviously you need to figure out your own ltv lifetime value of the customer and the cost per acquisition once you start running some paid advertising. So there are companies that go to 12 to 15% for some massive aggressive growth. Now, you might have some limits to how much you can spend based on your market. Your market might be small, it might be niched, and you just can't spend that much money on one particular platform. So you're gonna have to diversify your budget on different platforms. Spend some on Facebook, spend some on Google, spend some on Quora, spend some on, you know, Google search display. You gotta find a way. But as long as you have your cost per acquisition nailed and your LTV is higher than that and you're making money on every customer you acquire, you gotta Made in the shade. Okay, now you might be thinking, well, until when, Omar, how much do I continue to spend? Do I spend $10,000 on marketing a month? $100,000, no matter how big my company gets? And the answer is yes. Let me give you a case study. Monday.com. it's a project management software, right? They've been growing aggressively over the years. I'm sure you've seen their ads on YouTube and Facebook and all that kind of stuff. They spend over $1.2 million on paid advertising every single month. But their monthly revenue exceeds 20 million a month. So they're not even hitting 10%. They're hitting 5%. But you guessed it, you're paying attention. You know, they're following the rule that I just mentioned, that as you grow, that percentage is going to get lower and lower because they're dominating the market. They've saturated their market. And just in the third quarter of this year, they made $83 million in revenue. So that is pretty impressive. But they attribute that growth to. To their paid advertising spend. They started with $30,000 a month and now they've scaled up to over a million dollars a month in ad spend. But you have to start where you're at. Ramp up to 10%, start with 5%, even if your revenue is very modest, even if you're making $2,000 a month. Spend $100 on paid advertising to learn how to run some ads on Facebook. Get some conversions. Get a conversion with paid ads. If you're running ads yourself, I highly recommend you use the app adespresso. It's a great app that helps you run your own Facebook and Google Ads. There are a ton of amazing and useful online courses on running paid advertising, whether it's Facebook or Google or YouTube. On Udemy. Udemy is a great place to learn for a very, very low cost price.

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If you're not used to spending money on paid advertising, now is the time. I mentioned in a few episodes ago that January is a great time to start running ads. It's a good time to spend money on ads because a lot of the larger companies haven't established their marketing budget for the year of 2022, for example, or their campaigns haven't fully kicked in yet. So the price per click and conversion is quite low on all the platforms. It's a good chance for you to start spending some money on bring bringing in new customers. Remember, make sure you're getting a return on investment with every dollar you spend. A lot of people ask me almost realistically should I start even if I'm spending only $200 a month on advertising? I give that example so you can start learning and start going. But month over month, I would say try to start with at least a $500 budget. This is going to allow you to have enough money to experiment enough to get the right number of conversions for your business and know what works and what doesn't. You're also going to learn what platforms in terms of where advertise work better for your audience. Where does your audience live? Where are they more likely to convert? Is it Facebook? Is it Instagram? Is it LinkedIn? And how expensive are those ads on those platforms for your audience? Thanks so much for listening to the $100 NBA show. Make sure you hit subscribe so you don't miss an episode on your favorite podcast app. Whatever you use to listen to podcasts, whether it's Apple Podcasts or Stitcher Radio or Spotify, we're on every single platform. Hit subscribe, follow whatever it says so you get the next episode automatically. Speaking of the next episode, tomorrow's episode is about how to sell your online course effectively and how to do it to kick off 2022, I'm going to walk you through the steps to make sure you know how to create a system to continually sell your online course. And then I'm also going to share with you how you can join our workshop on how to do it in January. Hit subscribe so you don't miss that episode. Before I go, I want to leave you with this. Paid advertising today is an absolute miracle, really. The way you can reach and target your specific customer with the technology we have today is really incredible. It's the most affordable it's ever been in my lifetime. You used to have to put up a billboard or a dinky ad in the yellow pages in the phone book, or save up thousands upon thousands of dollars for a local TV ad. Now you can get started with paid advertising with a very modest budget and it's only going to get better. Thanks so much for listening and I'll check you in tomorrow's episode. I'll see you then. Take.

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