BY: Dave Hiebeler | June 8, 2023
Disclosure: The following article was authored 100% by a human with experience in the category; it includes proper sourcing and fact-checking.
If you feel your business is in real growth mode and you wonder how much you should spend with a marketing agency per month, I have your answer. This article will give you an agency owner's view on what it will take to get started.
I will assume you are already in pure messaging mode, which means you have done all the heavy lifting to build a website/brand that asks prospects to do something and nudges them along to consider you a viable option. And like many businesses right now, you are not looking to increase your overhead; you are instead looking at where you can make cuts.
The other assumption is that you have a solid Google footprint, which means prospects like what they see when they do a direct search. Will Google change this due to their own A.I. adaptations? Yes, and it’s coming soon.
Start at $1,600 to $3,000 per month.
It's funny because I don't get asked this question often when we are in the discovery phase with clients, but I know it is at the top of their minds. And understandably, you may think you need help to afford the counsel of a marketing agency. Eventually, everything comes down to how much. And soon after that, it's either a "yes" or "no" decision.
As a business owner, you may budget for Web hosting, high-speed Internet, tax advisors, employees, and insurance. Sure, marketing is a deductible expense; a better way to consider it is as a monthly utility, like electricity, heat, and water. Marketing should not be any different.
Commit to a starting agency marketing budget like this for six months or more.
Why that much per month?
The $1,600 to $3,000 monthly agency spend level is the opinion of this agency after working on thousands of campaigns over the years. This minimum level gives your marketing agency the resources they need to get the momentum started. When you begin, you will have less profit to play with; your gross revenues are not yet significant. You could be in the friends and family funded or in a pre-venture capital pitch stage. And when budgets get more extensive, your agency can add more channels and frequency to get things buzzing for you.
In a recent Forbes article about "How Much You Should Spend On Marketing," Thomas Minieri recommends that businesses have two advertising-level budgets: "If you want to maintain your current sales level, then do 5 to 10% of gross revenue. If you want rapid growth, then 20% or more, depending on your industry and type of business." I agree with his budget advice.
When your business is in its early years, your goal will be more ambitious to grow your brand. Or, if you are an established company launching a new product or service initiative, your budget could be much larger than $3,000 per month.
Why start at this budget if things are tight for you?
You'll get a more actionable critical mass of data from your agency campaigns on how prospects are relating/reacting to your most viable product (MVP). This data is precious to you, the failures especially. It puts time on your side to build demand generation in one channel, maybe two, if you are very efficient.
Proper marketing involves trial and error. Trial and error require time. Every one of us hates the error part, especially. We have found that the most successful marketers identify their audience patch, soak it, and own it over their competition. We have an East Coast luxury auto franchise we work with that advertises to local "auto intender" residents by local counties with email blasts once per month, every month since 2014. They 'soak their patch.'
An agency budget of $1,600 to $3,000 per month will allow you to use channels like Permission-Based Email or Instagram with some modest frequency. Larger monthly budgets above $3,000 enable your agency to add channels you could be unfamiliar with, like Podcasts, YouTube, and Connected TV (CTV).
You will be happier doing marketing yourself if:
Unfortunately, there is this expectation that marketing is easy, "Just spray and pray to an audience, set it, and forget it." There are also numerous sexy rags-to-riches articles. These are tales of significant revenue gains that occur overnight. What gets omitted from the story is how long it took said owner to succeed; those details are boring, aren't they?
In my morning Flipboard app regimen of reading many articles (a pleasure and a curse), I see them too. One would think, "If only I could find the same magic elixir they have found; it seemed clear how they were successful."
But as business founders, we pride ourselves, especially on DIY actions; it's how you built your thing, sweat, brains, dark days, and grit. You are my sisters and brothers. I love you. It is also sometimes hard to gauge whether your current upward trend in revenue will sustain itself, gulp. If so, hold on investing in agency expertise; you will be putting too much short-term results pressure on yourself and your agency. Stand-down.
Marketing effectively is challenging and time-consuming. It is hard. What worked so great last quarter could have worked better this quarter. Is it my competition? Is it the economy? Did the audience channel lose its mojo? Did I over-fish the pond I've been in?
The sexy stories you see can cause quick-fire judgments on what works and does not. Too often, time gets removed from the equation when the only goal is lead generation over demand generation.
Do marketing yourself in-house if a committed agency budget makes you nervous and your team has a fair amount of time. Your current revenue and cash flow may not support a dedicated budget with an agency's expertise. It's a ‘nice to have’ down the road for you.
Are your expectations of what marketing can do realistic?
Your expectations of marketing's proper role and effectiveness are crucial. If you think an agency will drive immediate conversions to sales for your business, you need to be more realistic. On average, only 3% of your best prospects are buying right now. We call that a low-funnel conversion.
Your agency will guide you to the correct demand generation strategy to move the 40% that are just starting to look for what you got. That takes time. Your agency is responsible for the top of the sales funnel; your business is responsible for mid and low-funnel conversions to sales. Fewer businesses want to own this, but it's true.
What defines an emerging business?
It can be a start-up in its 3rd year, an early-stage company that just got a second round of funding, or an existing business with a new product or service to grow market share. Any business with a unique market opportunity with new funding for expansion or a time-sensitive event that needs to get the word out is in the emerging category.
You could have a familiarity problem.
Low familiarity is widespread, especially with emerging businesses; if you ask them what they wish they could have more of in their business, they would say: "If only more of our best prospects knew about the unique service or product we offer and how it will solve their problem."
More brand familiarity is a legitimate desire and lament. It speaks to why anyone markets and advertises anything. Mike Higgins, Co-Founder of Align2Compete and my business partner said it best: "There are more people in the world not on your website right now than those on it." A cold and undeniable truth.
In a client discovery meeting, we will ask, "OK, with 1 being the lowest and 10 being the highest, where do you think your company ranks on the familiarity Index with your best prospects?" The client pauses and fires back, "I think we are a 2". We then ask, "Where do you want that number to be in two years?" If you say, "I want to be at a 7 or an 8 ". That is an ambitious goal, and we all have extensive work to do. That work requires money, resources, and an equivalent measure of expertise. But everyone wants easy, correct? Growing brand familiarity requires time and consistent, agile actions; there is no easy way around this.
Getting the word out the right way.
Getting the word out the right way requires disciplined audience message repetition that a talented agency is ready to handle, just like you know how to run your business like no one else. Agencies have channel, audience, and messaging cadence expertise you most likely need.
A one-time or annual big event could be coming up, or you have to nail a limited time frame open enrollment period as a success. I call that significant short-term pressure.
Allow me to share a story of when I was in the newspaper industry decades ago. A local air show featured the famous UNITED STATES NAVY Blue Angels flying their jets. Excellent stuff, yeah. The problem was that I was an Ad Director for a chain of suburban papers that was temporarily understaffed. We promised The Air Show leadership a 16-page section published to our audience on a particular date, which meant we had to sell 12 advertising pages to meet our advertising/editorial profit matrix. If there are not enough ads, then there could be no section.
Time was short, and my team needed to move the needle. I had to step up and sell 10 of the 12 pages myself. The Air Show folks loved our section. I didn't sleep well for those two weeks; that was real pressure.
If you need to turn up the messaging flame fast, then a monthly budget does not make sense, but a more extensive project budget does. In this case, your agency can do many good things for you on a $4,000 to $10,000 budget. You may not remember what you spent on marketing. However, you will remember if your event was a complete dud and people got fired.
Use an agency if you lack in-house expertise.
As an owner or senior leader of an emerging business, marketing is a hat you should not be wearing any longer. It's a total time-suck; the detailed work necessary can be overwhelming. Your work-life balance could be suffering as well.
Some owners are good at marketing; they built their business cost-effectively as a low-cost provider. I call you "consciously competent." We love talking to you because you know the power of a well-executed campaign and have a feel for channels that work well for your business.
But if you have fished every "word-of-mouth" fishing hole, and marketing is starting to crush you from a time and energy dimension, there is trouble brewing. You don't file your corporate tax returns without a tax advisor, do you? You hire experts to save you time, avoid costly errors, and give you an edge.
Hire an agency and give them a monthly budget to support the resources to get the job done right.
Key takeaways:
One of Warren Buffett's, Chairman and CEO of Berkshire Hathaway, advice tips for any business is to reinvest profits back into the enterprise to fuel its growth. This is a hard pill for owners to swallow, especially when the money starts to flow.
When I have an electrical or plumbing issue at home, I pay a professional to fix the problem. I believe they will do it right, and I will save time. I will gladly pay for their expertise and experience. A marketing agency can do much the same for your enterprise. They know the right tools and when and how to use them.
As a metaphor, the great agencies will tell you when you only need a bolt tightened, and they will charge you for the minimum service call today, or they will also tell you that your water heater is about to blow because someday, very soon, it will flood your home with 3 feet of water.
Dave Hiebeler is an Agency Principal at Align2Compete, LLC. He writes about small business marketing, audience strategy, and demand generation. Based in Colorado, Align2Compete is a specialized marketing agency that helps emerging businesses turn strangers into customers. He is also a freelance writer.
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