This week we are going to talk about how much you should spend on advertising.
What’s up Fish Fans! My name is Marcus. You’re watching Marketing Madness, the Blue Fish vlog!
Without a doubt, the question I get the most when discussing business with anyone is how much should they be spending on Advertising. If you are like most business owners, money is a finite commodity. And there are a ton of things pulling at the purse strings.
Henry Ford once said “Stopping advertising to save money is like stopping your watch to save time.”
Most people that are involved in sales have heard the term Sales Funnel before. And advertising and marketing are the activities that bring prospects into the top of that funnel. I only state this to help you make sense of why advertising is so important to a business.
But answer the question already, right?
Most consultants will tell you 5% of gross revenue is a good number to be spending on advertising. The Small Business Administration used to say that businesses under $5 million should spend 7-8% of their gross revenues on advertising
To make sure we are speaking the same language, your advertising budget refers to all costs for things like Google AdWords, social media management, custom photos, print ads, sponsorships, videos, brochures, billboards, etc etc.
If you are currently spending 0% then 7-8% can seem insurmountable. What I typically tell people is that if they are below 5%, they need to figure out where they are and then increase the percentage a bit. If you are at 0% then you have to come up with a reasonable budget. 0% is just not going to cut it.
There are times when you will have to go beyond your standard expenditure. One of the biggest reasons would be the costs for a new website or other infrastructure. Those pieces are investments in your business that should net a trackable return.
Let me share a different perspective with you. If you can get to a point where you know your cost per acquisition, lifetime value and some other metrics for your business, you will understand how much you need to spend in order to achieve revenue goals. Advertising should be viewed as an investment not an expense. If your advertising is not generating revenue you are either not spending enough or not spending it in the right places.
Well, that’s a wrap for this week! I want to thank you for checking in. Make sure to hit that like button. And if you have any questions or comments leave them down below. If you want to talk about how Blue Fish can help you grow your business just send us a message and we’ll get the conversation started.