I know for many math feels just as daunting as rocket science (and more painful than root canal), but when it comes to making investment decisions for your business it all comes down to numbers.
I often have the same chicken and egg discussion (I’m saving the egg jokes for later) with a client. It goes something like this:
GE: “What’s your budget?”
CLIENT: “I’m not sure…you tell me how much it will cost”.
GE: “Do you have a range? Marketing budgets can vary greatly depending on your revenue and needs”
CLIENT: “How ‘bout you just tell me how much it will cost?”
GE: “Ok, it will cost $X”
CLIENT: “WTF? That’s way too much, I was thinking of spending $1500”.
Ok, I may be exaggerating, but you get the point. And I’m not trying to be a math snob (yes, I did get a BA in Mathematics), but it’s really quite a simple equation. If you have certain goals for your business — grow revenue by 10%, get 1,000 new customers, increase site traffic by 20% — then, unless you are the rare but fortunate soul who comes up with some shocking and witty viral video, you most likely need to spend proportionately to reach your goals. So how much is that?
While everyone has different goals, and different measures for success, there are a few guidelines you can use to determine how much to spend and/or if you’re spending appropriately.
I came up with this handy dandy example to demonstrate. For the purpose of this illustration, I’ve made the assumption that “success” is a 4:1, or 400% ROI. This is based simply on what we’ve seen as an average expectation across the brands and businesses we’ve worked with.
Of course, you can adjust the revenue and/or the growth target and/or the ROI but the outcome is the same. You get what you pay for (I’m pretty sure my fellow good egg Lori said a version of that last month). Put another way, you get out what you put in. That may be money, or time, or resources. It may be hard costs like creative development, media space or swag, or the addition of a member of the team; but whatever it is, I can assure you you will not reached the promised land without some skin in the game.
Do you love math now too? If you want to play with the numbers just like me, send me an email and I’ll send you my handy dandy spreadsheet.