How to calculate your marketing budget & where to spend for best ROI

In this video, we're going to discuss what a budget looks like for local service businesses for marketing, and how you can spend that budget to be the most effective for your business. So the first thing we're going to look at is what should a budget look like and how should you allocate funds? And so we recommend and work off of what's called Profit First. It's a book by Mike Michalowicz, and basically what he recommends is to set up all of your revenue into different buckets. And so you can see here, based on the size of your business, the buckets that he recommends in his book, and which again we recommend. But this just helps give a visualization of how these buckets break down. And then we'll be able to discuss what other local service businesses are doing. So you can see that if you're 0 to $250,000, then that's 100% of your revenue, then 5% should go to profit. 50% owners pay tax, operating expenses. So you can see how this breaks down. So typically we work with Companies that are 1 to 5 million in reven revenue or a little bit more than that, but you can see how that breaks down here, 65% of your operating expense. What we recommend and what we found by working with a bunch of different local service businesses across the United States is that companies typically spend between 5 and 10% of their real revenue. Their revenue number on marketing. So let's say that you are doing a million dollars in revenue. Let's say you spend 5% of that, that's $50,000 a year. So you have about 4 or $5,000 every single month that that you can spend on marketing. And so you can see that if you want to push it up to 10%, then that's going to help you scale a lot faster if you're doing the right stuff. But a good baseline is 5%. And we have some companies that spend 3% of their of their revenue. So it just all depends, as you can see, once you get up to, you know, $5 million and you let's say you're doing 10% of your revenue going into marketing, that's a pretty big chunk of change. It's like, you know, $50,000 a year a month just on marketing. And so there's a lot of scale on this depending on your business. What you don't want is to be at a million dollars and trying to grow and not have any budget allocated for marketing. And same thing with 500,000. A lot of times companies will get to 500,000 without doing any spend. And so once you get to 500,000, if you've never spent money on marketing before, you don't really know where to go. And you kind of feel uncomfortable about spending $1,000 or $5,000 even a month because you're not really sure what's going to happen. And so once you get to around the 250 to $500,000 range, that's typically when you start to get the urge to spend some money on things. And we're going to go through where you can spend money, but that's a good way to look at it. Maybe even just start with 3% or 5% and just stick it into even another bank account. You can have a checking account, right? You can have profit account, tax account, operating expense, and then you have a marketing budget or whatever you decide to do. So that is how we look at it. Again, 5 to 10%. Some companies are down to 3. It just all depends on your business. But we would look in that scale. More than 10% is you're going to be pushing it. It just depends on your profit margins. But I would recommend staying within that range. So what can you spend money on? So the first thing that you can spend money on is to hire a company like Flash or like any other digital marketing company that's out there and they can put systems and processes into place from a search engine optimization, SEO perspective, just a general digital marketing perspective, or retargeting email marketing, text marketing. Right. There's a bunch of different things that you can do, but the first thing you can do is hire a company that knows what they're doing. And they'll also be able to set up campaigns. So for example, you could set up these. These are called Google local service ads. And the way that these work are you only pay for a lead when you click this button to call you as a lead. So we would Recommend maybe sticking 500 to $1000 over on these, just, you know, seeing what you get because you only pay when you get a lead. So it's pretty good. And Google, actually, if you, if you do google.com local service ads, they will tell you what the cost is of your leads. So that's a really good one. These right here are Google search ads. And these are pretty good for driving traffic to your website. But they're not full on leads like this is. So you want to make sure that the conversion stuff on your website will get people, when they come to your website to actually turn into A lead. So these are good, you know, you can maybe try again $500,000 on this. What I would recommend is if you're going to try these or even these working with someone that knows what they're doing. Because if you don't work with someone that knows what they're doing, you're going to be wasting your time. And you know, especially when you start to get up to 500,000, a million dollars in revenue, it doesn't make sense to tie up your time trying to do digital marketing. You should just focus on what you do best and hire people to do things. We have a saying who not how. It's a really good book. And so who can you hire to do this so that you don't have to, you can focus on what do best. So those are two good ways to do some ads. And then what I would recommend is to do a search like this. You know, whatever your service is, duct cleaning near me or carpet cleaning in Ann Arbor, Michigan or whatever. And then you can see your, if you have Google local service ads, run those, these ads here. You should pay someone to do this, which is called local SEO, so that you can rank here. You know, 50, 60% of clicks are happening in here. So that's a big push. Then you can look down here. So if you see not the first result, but the second result is Angie. So this is a secondary ad that I would probably recommend is to do maybe an Angie ad. Obviously you don't want to be trying to chase these people down, but what this is is the second position on Google. So you can pay for the first spot, you can pay for the second spot, you can do local SEO for the third spot, you can do what's called off site SEO for the fourth spot, and then you can do secondary ads for the fifth spot. So you're just taking up all this real estate on Google. The reason that I like Google a lot is because these people are bottom of the funnel. So they are looking for the product or service that you offer and they're asking Google for the best company. So we already know that these people want your service. It's not like you're trying to create demand out in the market. These are people that are searching for the best company and these are all the ways that you can show up to show Google that you're the best company. So those are good. Also there's other ones down here like Groupon, Thumbtack, Yelp, all those different ones. And so those are secondary ones, very bottom of the funnel. People that are ready to do duct cleaning or ready to clean their carpets. And so that's how we would spend our money. So first off, come up with a budget. It's coming up to the new year, right? So let's say that you're gonna hit $500,000. Let's say you're gonna stick 5% aside. So that's $25,000 for 20, 23 or whatever the year is. And then you take that money, and then you divvy it up every single month and put it on different things. And what this allows you to do is when you're making decisions from a marketing perspective, you know that you have this amount of money to play with, essentially, and so you can try this out for a couple months. Eh, that's not working. Let's move the budget over here. Okay, this is definitely working. And make sure that you're tracking your lead source of where your leads come from so that you can track a return on investment. And we have other videos about return on investment and how to calculate that and other things. But that's a quick overview of what your marketing budget should look like. If you have any questions, you can drop a comment below. Check out our website, flashconsulting. Com. If you like content about growing local service businesses, we post content every single week about that. And be sure to hit like and subscribe. We'll see you in the next video.