How to set your marketing budget for 2024

All right, in this video, we're going to discuss how to set your marketing budget up for the year to come. If you're in business and you have been going back and forth about what should my marketing budget be, how should I allocate my funds, what's my customer acquisition cost, my cost per lead, how do I actually reach my goals with my marketing budget? In this video, I'm going to break down two different ways to calculate your marketing budget. I'm going to give you a very succinct one that businesses use when they're really looking to scale. And. And then I'll also just give you a basic one that people use when they're trying to just establish what the number should be for their marketing budget. Real quick. I'm Phil Rischer. I'm the owner of Flash Consulting, and we work with local service businesses to help them increase their sales and keep their schedules full. And on this channel, we share strategies and ideas to help you grow your business. All right, so let's get right into this. So we're going to look at the first way, which is to start with your goal. And this is a very popular one for companies that are really looking to grow their business. And, and they're not scared to spend money. They just don't know how much to spend or how to calculate their numbers. So in this example, let's say that you want to hit $5 million in revenue, and your average ticket is $1,000. And you can plug in a lot of these numbers. Most of the times when we talk with businesses, they don't know their average ticket, but you can get the gist of it, whether it's 1,000, 2,500, 200, whatever. And then you can figure out, okay, if I do this many jobs at this price point, then it's going to help me reach this goal. So, you know, if in this scenario, if you did a thousand, if you did 5,000 jobs at a thousand dollars each, you're going to hit $5 million. It's just math. Then you can back up and say, okay, well, if I need to do 5,000 jobs, how many sales opportunities do I need to do? If you're closing at around 30%, then you know that you need 15,000 sales opportunities to hit $5,000 jobs. 5,000 jobs completed. And if you are converting your leads, like your calls or your web forms into at 50% into actual sales opportunities, then you know that you can work backwards into this number. So what does this mean is that if this is your Goals. And this is your numbers. You have 30,000 leads. You, you book half of those into sales opportunities, and I got 15,000 sales opportunities. And then you convert 30% of those into jobs. And at this price point, this is what's going to be. So then you can say, okay, well, with these numbers, then I'm going to need $2,500 lead, 2,500 leads per month. And so there's a million ways that you can get leads, right? You could pay thumbtack, you could do SEO, you could set parameters for your digital marketing company to hit certain thresholds and certain lead counts. And so you're really trying to just generate leads. And then you know that if you generate these leads, take quality aside, then you can start to figure out your numbers onto what is the actual numbers into this. But this allows you to back into how many leads are you much, how many leads do you need per month? And more importantly, how much it's going to cost. I'm going to give you the cost in one second, but just work backwards into this. So once you get to this point, now this is one piece that a lot of people miss, this number right here. But I'm going to give you some benchmark numbers, and that is your customer acquisition cost. And so what you can look at to figure this number out is how much money did you spend on advertising last month or last year? And then how many new customers came into your business? And you can figure out your customer acquisition cost like that. So you could say, I spent $10,000 last year and I generated 100 customers. So that was 10, you know, $10 a lead or whatever the numbers are, and you can figure out, okay, so I need to spend a hundred dollars for a new customer. So that tells me that If I want 5,000 new customers, I have to spend X amount of dollars. The other thing that you can look at on this is your cost per lead. And I'm going to give you a good benchmark for this. So if you go over here to Google local service ads, and I'm not saying that you have to run Google local service ads, because I know that they're very competitive in a lot of markets. But what I am saying is that if you wanted to see how much should a lead cost you in your industry, if you were to go here, and let's just look at carpet cleaning, for example, this is telling us that on Google a lead cost 23 to 35 dollars. So let's just take 35 dollars in this instance and let's say we needed 2,500 leads. If we did 2,500 times 35, 2500 times 35 dollars, that would be $87,000 that we would need to spend to get that many leads. Now, I'm not saying that that should be your marketing budget, but what I am saying is that if all, all of your marketing is based off of just paying for leads, that's what you're going to have to look at. Now, one thing on this, these numbers, I just picked these numbers. A lot of businesses, they're going to be tighter than this. They're going to be better than this. So for example, lead to sales opportunity, it should be a little better than, better than 50%. What we've seen is that it should be around like 60, 70% into this number. So then you won't need as many leads. Right? Same thing with your sales opportunity to your job completion or your job's complete. This number should really be around 40 or 50%. So this number can be tighter. So let's just, let's just do this math together. So you need 5,000 jobs. Let's say that you actually convert half of the opportunities into sales. And let's say that you typically convert these better than half. So let's say that you, you do around 15,000. So at 15,000 leads in the entire year, then you're going to need about whatever that is, like about a thousand leads per month. Now, a thousand leads per month may sound like a lot of leads, but if you look at all of the different channels that you're bringing in leads from, this could be reoccurring, returning business. This could be new customers coming in. Right. With a $5 million, it's going to be a pretty large business. So let's look at this for a smaller company. Let's say that you're doing a million dollars and you're looking at $500 on your average ticket. That means that you need to complete 2,000 jobs. Let's say that you typically when you go out to a job, you're going to convert it almost 100% of the time. So let's just call it 2000 sales opportunities. This is more like your typical carpet cleaning company that you go out, you sell it every single time, and it's usually around 500 bucks. And then typically a lead to close, you're about, let's say 80%. So let's just call this 3,000 leads. So let's say that you need 3,000 leads. Let's do 3,000 divided by 12, that's going to be 250 leads per month. 250. 250 leads per month. And let's take that same example of Google local service ads. 250 times $35, that would be $8,000 budget. With that being said, if you were to set your marketing budget at $8,000 and you generate this many leads, and this is just off new customers, we're not even counting returning customers for this carbon cleaning example. And so this is how you can start to work backwards into what should your actual marketing budget be? And more importantly, how can you tighten up these numbers? Now, I'm going to give you one other very simple way to do this, which is if your goal revenue is a million dollars, or even if your current revenue is a million dollars or whatever it is, what we found is that most companies are spending 3 to 10% of their revenue on marketing. So in that example that I just gave you, with the $8,750 in ad spend or marketing budget, at a million dollars in your revenue, that's little less than 10% off of those numbers. So if we times this by 12, that's $105,000 and you're at a million dollars. So you're right at the 10% mark. And so that's, that's high. That's going to be like a high. A large growth, very targeted growth company is going to spend about 10%. There's companies that we work with that spend about 3, 4, or 5%. And the reason is because they have such a solid brand that when we look at growing the business, they're not necessarily paying for leads. And we made videos about this before, but the lead volume is, it's not, you don't want to focus on the lead pay per lead model. You want to focus on building a solid brand. But when you're trying to figure out how many leads do I need per month, what's my marketing budget, and how can I figure out these numbers in order to reach my goal? That's how you do it. So if you want to check out some other videos on our channel, we talk about how to get more leads in your business. That's not just pay per leads. Some really quick examples are like building out your Google business profile, getting reviews, getting organic search online for local SEO, going to local networking groups, which is going to just build your brand even bigger. And so that's the whole point is to, and then the last one is to build your reoccurring and retargeting to bring customers back in the door because a returning customer is going to decrease your customer acquisition costs significantly. Because it's going to be all branded searches or branded things coming in. It's not going to cost you as much to bring that customer in. And same thing with referrals, not going to cost you as much to bring in new customers because you have such raving good raving fans. So if you have a question about your your marketing budget, or maybe you have some ideas about what you're currently spending on, drop a comment below. Or if you have other ideas for videos that you're interested in that maybe piqued your interest off of this video, definitely drop a comment below and be sure to hit like and subscribe and we'll see you in the next video.