Pulling growth levers: Budgets
In 1990, Linda Evangelista told Vogue she and Christy Turlington wouldn’t wake up for less than $10,000 a day. The heyday of the supermodel and Evangelista’s ill-advised words ignited a firestorm of criticism over the excess in budgets used for fashion at the time.
A few weeks ago, I shared my thoughts on lessons learned during our first year in business at Growth Guild and I mentioned how 2019 would be a year of taking those lessons and reinvesting them back into the business to keep learning. It’s a lot like the experimentation process we use to quickly iterate growth initiatives for our clients.
In the last seven days, the first huge epiphany of 2019 hit us like a lightning strike: Budgets!
Budgets are the currency of agency life. And when it comes to growth, the right budget can make or break a campaign.
We spent the better part of our first year of business fine-tuning our perfect client profile, our vetting process and the way we pitch and prospect new accounts. We were successful enough that we’ve been considering adding to our team in two big areas: social media management and demand gen.
Extra available hands will allow us time to grow the business and focus on more strategic, high-level account initiatives and we look forward to adding to our team during this calendar year. But that’s not the epiphany. We sent out a series of RFPs to meet and interview with potential candidates interested in contracting for us in both categories.
We were looking for senior-level professionals willing to contract out to us and we quickly discovered our social media services are so underpriced we can’t hire anybody else to come in and help out on a daily basis without quickly going underwater. So we decided to hold off on the hire and re-evaluate our social media management services (both in scope and pricing) for future clients.
Our budget was wrong, and our inability to properly estimate the cost of this service is hindering our own growth as an agency.
Then came the double whammy. We met with a Google Ads expert with the idea of having him consult for us. And during our conversations, the subject of ad budgets came up. He, like Linda Evangelista, has a specific amount under which he won’t even entertain taking the client. Let’s just say his amount and ours were very far apart and he could eat our average budget for breakfast.
Once again, an anemic budget is hindering growth.
The idea is not that you have to spend tens of thousands of dollars in campaign work. Per the Google Ads expert, our ROI in Facebook is impressive for our e-commerce clients, but because we’re limited in budget we’ve been unable to prove if doubling or tripling the budget will double or triple the ROI. We’re doing very well, but in our thriftiness we might have been shorting our clients potential growth!
Similarly, in our eagerness to help clients centralize services, we’ve allowed for certain contracts to expand in scope without properly expanding in revenue (budget); short-changing our own ability to grow by not charging enough to allow us to hire additional help for those areas.
It was like a dollar shaped apple fell from a tree and hit us right on the head: sometimes you have to be in the position to spend money to make money. So we’re going back to the drawing board on both the hiring and the ad budgets and we’ve put together some budget information you might find helpful in your own growth journey.
There is not a magic dollar amount. Sorry. When it comes to budgets, your mileage may vary. From the price of your product/service, to the size of your company, your monthly recurring revenue, your churn, these are all unique factors that will influence how much money you’re willing to spend to get ONE customer. However, you should know all those things I just mentioned: the price of your product, your MRR, your churn rate, your cost to acquire one new account, your cost to retain an existing client; and take them all into consideration when you’re deciding how much to invest in marketing/growth.
Everyone talks about having success with minimal investment. Of course we’re about proving an idea at the lowest cost possible. But once you’ve found success pulling one lever, it makes sense to invest more to make more and find the sweet spot of investment where you’re getting the most bang for your buck, literally. If a geotargeted campaign is delivering exponentially more foot traffic to your location at an investment of $10/day, try elevating that budget to $15/day for a week and see if 50% more investment is delivering 50% more foot traffic. It might also be that if you elevate that daily budget to $20/day you’re not going to see a 100% increase over the $10/day budget, in which case $20/day is too much to spend on your campaign.
Allocate your dollars smartly. Is it better to have a junior level in-house hire making $4,500 a month? Or is it better to have three senior professionals working part time for you for a total of $4,500 monthly? The answer is not clear cut. Will there be a senior team member available to teach the junior-level employee everything they need to know? Do you need high-level strategy or just implementation? Analyze the pros and cons of every scenario and always look at the potential ROI of any decision.
The days of one channel growth are over. This is 2019. The web is saturated with all types of regurgitated content. Email marketing, Facebook ads or Google ads aren’t going to make your company or product the next big success story, so your budget shouldn’t t be allocated to just one channel. You should be investing in a mix of paid ads, content, SEO, conversion rate optimization, email marketing and OTHER search engines. Consider YouTube for your next media buy, take a hard look at LinkedIn, explore reddit or other niche online communities. If your budget doesn’t allow to try all of those channels at once, you should be investing in at least three.
You should know what your funnel looks like. Everyone on your team, from sales to customer service, should understand what the customer journey looks like for your product/service and not only that, but they should know how their day-to-day fits within that funnel. When everyone is working toward the same goal (pushing clients down the funnel), it’s easier to make every dollar count.
Want to chat budgets? Reach out to us. We would love to hear your experience and provide you with a space to brainstorm about how you can use budgets to further your growth agenda.