How the heck do I afford marketing???

You’ve put your business plan together. You have sold a few widgets so you know people like and want your product. You have your supply chain figured out, and have ironed the kinks out of your service model. Things are going pretty smoothly.


But you need more customers.


So, you think to yourself, “I know, I need to get some marketing together”. And you call up a marketing company (like ourselves), or do some research on how to do-it-yourself… and discover that you need a bit more cash for marketing than you have just lying around, even for low-cost marketing help like us. So what do you do?

We’ve already talked (many times, in fact) about how important marketing is to your business. But at the end of the day, the reality is that you do need money to get anything from your marketing strategy. Even if you’re doing it all yourself, promotion — getting the word out to people beyond your immediate circle — takes cash, paid directly to vendors like Google, Facebook, LinkedIn, and such. And while the temptation is to keep marketing expenses as low as possible to preserve profitability right out of the gate, that can be a dangerous gamble.

Spend too little, and you’re not going to have any results because you’re simply not getting in front of enough people. The strategy described in the film Field Of Dreams – “If you build it, they will come” really only applies to massive skyscrapers and amusement parks.

How do you plan to pay for marketing then? What happens if your product margin doesn’t have enough room in it to pay for the marketing you need to do? The good news is that there are options. Here are a few tactics that we advise:

How to find the funds to pay for marketing:

  1. Build marketing expenses into the cost of your goods (or services). This may seem obvious, but a lot of businesses set their pricing without a good sense of how much it will take in marketing spend to get people in the door. A good rule of thumb is to add between 5-10% of the cost of goods (or services) to your base cost assumptions. One of the benefits of this approach is also that as your sales increase, your marketing funds increase (and vice versa.) It’s an easy way to keep expenses in check and to keep your marketing team (or agency) focused on driving revenue, too. The downside is that it requires constant monitoring and adjusting your marketing plans on a regular basis to stay ahead of sales trends and keep from over or underspending.

  2. Build a base marketing budget into your plan on a monthly basis. Think of marketing as no different than any other monthly overhead cost (like your rent). You can tie this to your revenue forecasts as well — you’re really just taking a flat % and applying it to your sales goals on a monthly basis (and, remember, you can build backward from your overhead costs — marketing as well as location, payroll, etc — to where you need to price your product). It’s very simple to keep track of your spending, as your targeted spend never moves from day to day. The downside is that if you miss your revenue, and still spend the total marketing budget, your bottom line suffers accordingly.

  3. Bonus: Establish a “co-op” marketing fund with your vendors. If you’re buying products from vendors and selling them at a markup, you can often build the cost of marketing into your purchase agreements. You simply ask your vendors to provide a specific % of your purchases back to you in the form of a marketing fund. The downside of this approach is that you’ll need to keep an eye on your cost of goods and make sure your vendors aren’t building more than the agreed-upon percentage into your purchases. This approach also works with service providers as well – call it a “referral” fee in that case.

 In any event, it’s still important to make sure you’re tracking the results of your marketing efforts and reconciling your spend at the end of every month to make sure your efforts are delivering what you need them to deliverBut we’ve written about that, too.

Happy marketing (and budgeting!),
Theron & Katie

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