Mid-sized businesses get to dance a line whenever a new marketing project pops up; do I hire in-house or do I outsource? It can be challenging to know when to make the transition when you start having higher-budget needs. Chances are if you are reading this article you have done a fair bit of reading already; maybe your company has been growing quickly, maybe it’s been making some big changes, or maybe you’ve recently been tasked with a new project you’ll need vendors to complete. Wherever you stand, this article will provide you with the tools you’ll need to answer the big question: “How should I pay for this?”.
Here is what we are covering today:
- How much can you afford?
- Is there a minimum?
- % of revenue towards marketing
- When to prioritize marketing
- What things take precedence over marketing?
- What things does marketing take precedence over?
- 3 Ways to Pay
- Upfront out of pocket
- Payment plan through TwentyThree.Five
- Business loan
How much can you afford?
There are copious amounts of information and services out there in the world of marketing and it can be hard to know where to start. Starting too big can leave your budget dry without much to show for it, so knowing how much you should spend and where you should spend it can be invaluable to your success. Marketing services are the best way to add new potential clients to your digital marketing funnel, your budget can play a key role in determining which services might benefit your company the most.
Is there such a thing as too small of a marketing budget? In short, yes! Let me explain.
As a consumer, think back on a time you saw an ad that caught your eye. Maybe it was a billboard or a building, or maybe an advertisement interrupting your level on Candy Crush; something about this ad caught your attention, but not enough to make you purchase. The next day you see the ad again, and again a couple days later. Soon enough you have found yourself inching closer to a purchase until eventually you bought the item.
That transaction didn’t happen instantly, it took time to build your trust in the brand and your interest in the product. Your marketing budget has to meet this reality. If your marketing budget isn’t a big enough part of your overall budget, you won’t make a big enough splash for your potential customers to notice you. Seeing that ad a second, even third time, is a great example of a company fully utilizing a local marketing firm and professional ads management. A partnership between your company and a local agency will multiply positive experiences like this for your company.
In general, your marketing budget should be between 8% – 15% of your revenue. For companies seeking more rapid growth, a higher percentage of revenue should be allocated to marketing efforts. However, a higher budget does not necessarily mean you’ll make a bigger splash. Prioritize a strong marketing strategy to make the most out of your budget.
A marketing retainer with TwentyThree.Five is rooted in strategy. During the discovery phase we like to explore your company history, your future goals, and your current efforts to create a strategy that provides the most value to your company. Regular discussion will be held to ensure this strategy is always evolving and growing with you. As a digital marketing agency in Utah, we love to meet with our clients in-person when possible to facilitate a more in-depth understanding of your company needs.
As a marketing professional in sales, the number one reason I hear for a client reducing or stopping their marketing efforts is to make room for something else in their budget. Almost always this decision is made at random, as more of a shot in the dark than anything, with hopes that the bottom line is positively affected.
Work with your creative agency to maximize your budget. Services such as digital advertising or web design and development seem easy enough to manage in-house with little experience, we often see office managers or interns given these tasks with minimal success due to that “shot in the dark” expertise. A good agency will work with you to determine where you can save money and where you can better use your budget.
Schedule your FREE marketing budget evaluation here.
When to prioritize marketing
So what should I prioritize over marketing, and what should marketing take priority over? With many services to choose from, from brand development to photography services, it can be confusing to decide what is right for your company. This will be different for each business, but you should always keep your bottom line in mind. If you have the option to continue advertising or use that money for new professional headshots for the team, I would ask myself which more positively affects my bottom line.
3 Ways to Pay
So you have researched marketing companies that fit your needs, you have determined what services and projects you will benefit from, and you are ready to get started. How do medium-sized companies pay for marketing? Here are three easy ways to pay for a business expense like marketing: cash up-front, a payment plan, or through a business loan. Each option has its pros and cons, let’s explore them.
Upfront out of pocket
Cash up-front is a favorite among agency owners because it mitigates their risk of not getting paid. This will almost always be the first option you encounter when paying for a service, and there are some perks to come with it. Paying with Cash often removes potential fees or interest, saving you money in the long run; some marketing firms like TwentyThree.Five offer a discount on their services for projects paid for in advance. Additionally, this payment option ensures your company is not tied to any one vendor or partner for an extended period of time. Some would argue that as a client there is value in holding on to the money for other projects, especially if you are in a period of rapid growth. Paying upfront puts all your eggs in one basket, so to speak. Try to keep a diverse array of marketing activities within your budget, this improves the percentage of your market you reach by increasing the channels through which your clients can be exposed to your brand, product, or service.
If your budget does not allow you to pay for multiple projects upfront, the following options provide solutions to maintain a diverse marketing strategy.
Payment plan through TwentyThree.Five
TwentyThree.Five understands the needs of medium-sized businesses, breaking a project into smaller payments over time can be crucial to maintaining an array of marketing activities. Payment plans facilitated through an agreement with your creative agency are the simplest way to make paying for creative services more manageable. Unlike a business loan, agency-facilitated payment plans often have little to no interest if paid on-time. The plans with TwentyThree.Five are flexible to your budget, breaking projects into three, six, or twelve monthly payments. Lengthier payment plans may be available depending on your agency’s policy and your relationship with their team. One of the strongest benefits of financing your projects through a payment plan is the relationship you develop with your agency; these relationships can expand to supplement your other creative or business needs, lower costs through economies of scale, and garner strategic relationships with vendors and industry experts. To save additional money, talk to your agency about special pricing for an ongoing agreement like a retainer. One-time projects might be less attractive to many agencies due to the brief nature of the relationship, and often, your project fee will be higher than that of the same services completed under an ongoing contract.
Not every agency will offer a payment plan due to company policy or financial capability. If this is the case, a business loan may be your next best option.
Business loans can take many forms, each with their own complexities and benefits, but to keep it simple we will discuss three options: Small Business Administration Loans, Revenue-Based Financing, and Venture Capital.
Small Business Administration (SBA) Loans are federally guaranteed and assisted loans of up to 5 million dollars and up to 10 years for working capital (marketing expenses). There are several types of SBA Loans, use the SBA website, https://www.sba.gov/funding-programs/loans, for further information and assistance with this type of loan.
Revenue-Based Financing is a great option for medium-sized businesses with a strong revenue stream. These types of loans can be obtained through many large and recognizable companies such as Stripe or Shopify, making this a convenient option. Fomo.com explains this loan option simply, saying: “With revenue-based financing, investors provide you with a certain amount of upfront capital and receive a percentage of your company’s ongoing gross revenues. The investors keep getting a share of your company’s revenues until you have paid them a predetermined amount of money.” To learn more about revenue-based financing, there are many online resources and finance professionals available to get you started.
Venture capital is likely what you think of when you think of an investor. In a VC engagement your company receives capital upfront to pay for things like marketing in exchange for a percent stake in your company. The terms of a VC agreement vary by company. I recently met a gentleman whose company provides a full team of experts and seasoned consultants for 24 months in exchange for equity instead of providing capital. So keep your mind open when looking at this option, you may find an option perfect for your unique situation.
Please consult a specialist when deciding on an option right for you and your company.
If you would like to explore the project you have in mind with a member of our team to understand the options TwentyThree.Five has to help, please click HERE.