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Welcome to the prospecting show. For each week, we talk about tips, tricks and methods for growing an amazing small business pipeline.
I’m your host, Dr. Connor Robertson on this podcast, you can expect segments on communication, perceived value opportunity in closing.
Thank you everyone who’s been supporting my 100 episodes in the day school, I… Your 22 and Jorge.
Welcome back to The prospecting show. This episode is gonna be covering how much should you spend on marketing, and this is an interesting question to get this a lot of times from some of the people that we work with, there’s… Some of the people have a new product company that we’re about to work with there, just people in the field, we would go to a show, we will go to an event to meet to people and I always ask them, how much is it that you are gonna spend this year on marketing. And then they get the same answer every time.
I have no idea.
And then what the first ends up doing is they go back and we start counting in their head and they look at all the shows, the Facebook ads, the Instagram ads, all the other components of what they’re doing in their marketing process and try and count up… Oh, maybe I am spending X or maybe I’m spending in.
And the reason that’s super critical to know how much are actually spending is because that is gonna be a leading measure of success, it is gonna tell you exactly how well you’re gonna do based on your spending. Now, there are other factors involved. For sure, the one thing I can tell you is that people who don’t spend enough on marketing, it doesn’t matter how good they are at sales, they could always be doing better, so because of that, what we really focus on is, let’s evaluate the numbers first, figure out how that’s gonna fit into your total budget, where is the money allocated, what things are you actually doing, and then how can you adjust that budget as time goes on, just for reference for the listeners there… Most of the companies that we work with are under 5 million gross annual revenue. So these numbers apply mostly to that, but if you’re a bigger company, this kind of concept still applies, you just have to figure out what other methods you’re gonna need to do in order to be competitive across the whole landscape, so there’s some… In all the 5% rule, and the 5% rule talks about the portion of gross revenue that you should be spending on marketing every single year.
So just to give a simple example, a small business, maybe in the first five years of their business, let’s say they had a million dollars, which wouldn’t be that crazy, that would think that would be pretty average, especially there’s small people on the team, you’re sitting on a million dollars, that’s 50 000 per year.
And most marketing budgets, you should be splitting out per month because not every investment you’re making is gonna be a total for the whole year type of investment, and some of them are gonna be beyond a whole year investment.
And so what we like to do is use the 5% rule to say it’s 5000 a year. which breaks down to about 6000 a month. Now, those funds, we do not allocate any of those funds to operational things like websites and Facebook pages and all that, this is money that is being spent with the intent of generating prospects, business opportunities led and then ultimately going towards closing those deals.
Most of the people that are spending money on marketing do not do a good job track, so what I’m gonna do in this episode here is kind of breakdown where you should be spending your money, how… Firstly, you need to decide, do you have a consumer product, a B2B product, or do you have a combination of the two?
If the answer is that you have a combination of the two, we’ll talk about that in a little bit here, but let me first start with the consumer product, if you have a consumer-only product, meaning it’s usually low cost, it’s usually disposable, then you are gonna be spending most of your time on two different things, consumer trade shows, and then Facebook, Instagram, potentially YouTube, now, YouTube on those things. A lot of people are not spending money on marketing yet, but they’re gonna notice that that’s a very good consumer marketplace, you Minas, we’ll look at it and try and learn is you could spend the money there in the consumer marketing world to get anything effective… Don, for a smaller product, you need to be spending between 40 and 600 a month on Facebook and Instagram combine, and not all the viewers here also gonna understand that up front or no. upfront that Instagram is owned by Facebook, so when you’re spending money on Facebook, if you set up it, set it all up properly, you’re ultimately gonna be spending that money on Instagram as well, so I would say you should spend money on those two things, you spend it on Facebook and Instagram together, you gotta spend again, 4, 60, probably a pretty fair assessment, although I would say that there are definitely opportunities where you could spend less than that and probably make it make sense, and then beyond that, you’re gonna spend your money on direct spending, which is when you’re going to close a deal in this money to actually go there and pitch that one person or that one group of people, and then you’re gonna have your in-person spending or event spending and that’s gonna come back to your trade shows, or maybe like an in-service that you do with a small consumer group or maybe at a school or something like that.
If you have that kind of product where you’re selling to consumers, you should really focus on social media engagement and make sure that you know who your audience is.
Now, the one difficulty that you’re gonna have with some of these platforms like Facebook names, they’re algorithmic, meaning that the platforms themselves like Facebook or actually spending time to figure out how should we set up our algorithms so that it’s the best for our people using the ad platform, and that sounds great now, but the algorithm changes all the time, and sometimes it doesn’t make sense, or it’s substantially different than what you’re used to, and when that’s the case, you really have to look at, well, it seemed like a great idea to spend the money here, but now all of a sudden you have a different algorithm in place, which means you’re ads that used to be performing really well or no longer performing, and that can be a very frustrating situation if you’re trying to… You have your own business. You’re trying to run your own Facebook and Instagram ads.
That’s gonna be extremely challenging. So if you’re gonna do that and have a personal brand, the business brand and spend money on Facebook and Instagram to try and drive traffic, you should really look at understanding the platform, and if you’re not willing to take that step, then I would say you should probably find somebody to do it.
We don’t really spend a lot of time doing consumer marketing, there’s certainly are times that we do that in the healthcare space, but consumer marketing takes a very different mindset than business to business marketing, and we have this duality of some of the products that we work with where there’s a consumer focus on it, but then there’s also a clinician focus, and probably the easiest example I can give of that is probably see products, most CBD products that some of them will say, Oh well, we only do business with professionals characters, things like that, but here, the really interesting thing about that is, most of the time, they are re-selling through a physician, so that looks like they’re going out there, they’re taking their product, they’re selling it to a chiropractor, physical therapist of physiatrist, occupational therapist, and then that person’s re-selling it and there’s this to stop 100% mark up process, so companies manufacturing something put 10, they’re reselling it for 20 to the chiropractor and the carriers reselling it to… So 4 to the actual patient.
And if that’s the case, that’s totally okay, there’s nothing really wrong with that model, but just keep in mind that when you have a duality between a consumer and a business product, your marketing gets substantially more complicated because you have to be tailoring to both of those and then there’s also more decision-making that needs to be in place because you can, as a company, you can sit there and say, Well, would I rather go to one chiropractor, one physical therapist, who then can sell the many patients who are ultimately consumers, or would you rather just sell to the consumer yourself and take all that margin, there’s obviously substantially more margin when you’re selling directly to the end user, but there’s a lot of other steps that have to go in there to figure out, Well, does this make sense?
So again, you either have a consumer product or a business product, and in the business-to-business world, I always recommend you’re spending as per sales, but… So if you have… Back to our million dollar example there, if you’re a million dollar company and you have to spend 50-500 a year in 6K a month, I would recommend that it probably half that budget around… So you had five or six people, half that budget to an 3000 should be per sales rep, where you’re investing those funds directly with that rep to do business-to-business prospecting to people like the chiropractor or maybe a medical spa or that intermediary step where it’s not the actual end user of the product, and if you’re not allocating your funds based on sales reps, and then at the end of the year, you’re confused as to why your sales reps not perform or why the sales volumes down or why one region sucks. It’s because you didn’t spend the time to do the math to figure out where to actually spend your money, so instead of being silly, but I just actually go back, look your sales, we have to look at your past or earnings and figure out what markets did well, what Markus didn’t do well and the ones that did not perform put more money into those so that you can have better advertising, prospecting leads and sales opportunities in that market, just use the data to guide yourself and don’t sit there and wonder, Oh, why did this guy not do a good job. It must be the sales rams fault.
There are many times it is the sales reps fault and do not not follow up, but they’re not motivated or whatever it is, but a lot of it comes down to, Oh, you didn’t really actually spending the money there, you got a… Sales are from Montana, and you do a lot of sales on the East Coast.
I’m not spending money in a Montana ’cause it’s so big, and then that sales for doesn’t perform called the guys in the East Coast, and you wonder why… Well, it’s really quite simple, you just didn’t spend enough money for marketing exposure, branding, sales opportunities and pitches, you need to be doing demos, you need to be showing your product to people, and if you’re not going to spend the time to do that, then yeah, you’re gonna have a serious problem.
So that’s kind of my take on the business to business world, just to break that back down, if you have a consumer product, you should be doing Facebook and Instagram, YouTube, if you’re gonna get created, that’s a pretty cost-effective space to get started right now. It’s coming here in the end of 2019 here, but if you’re B2B, you should be focusing on things like LinkedIn, email marketing, utilizing your CRM and having call points doing 50-60 dials a day per sales rep, those kind of things, and then also your direct spending, which would be things like travel or going to a school to sell the product or whatever it is that intermediary, and then you have your in-person, like you go to a trade show, an actual event, and you have to spend to be there… Most trade shows, you could cash out 30 to 500 to be there for a one-time thing, and then if you go to another event like a network marketing or just some kind of marketing business to business type event that there’s gonna be some spend associated with that, so that’s kind I recommendation there.
Now, back to the sales team, regardless of if you’re consumer-focused or if your business focus, you should still be looking at breaking down your spending by sales, I meaning that if you have a team of 100 people, you need to look at how can you make your spending, go across a 100 different people, don’t look at it like, Oh, I gotta spend more money, you look at at it as You’re gonna lose opportunity if you don’t spend that money, because if you’re already paying sales rep regardless of their 1099 or W-2, they’re still spending their time and effort to go out there and prospects, so might as well support that.
Now, if you’re exclusive in the 1099 world, I would say more so than ever, you should be spending money on marketing, because you’re not spending money on salary like the W2 situation, and you don’t have payroll tax, you don’t have benefits and all this. So you’re spending 30% less anyways, and you’re only paying when deals are done, so it makes tons of sense to honestly just sit there and say, Well, this person is not… This person’s really not costing that much money, so why not put a bunch of… Bunch of IT into marketing, and if that’s a business-to-business relationship, I’d say 100% go all the online email and then your trade shows, if it makes sense for your product, the smaller your product is, the harder it’s gonna be to show a positive ROI, but that’s why you need to have a relationship-driven marketing plan and not just a one-to-one sales plan, if all of your marketing around I spend X dollars and get by result, you’re probably gonna lose because you’re not able to track that very well and not able to track it very well over time, and so especially with consumables, something like a CD product or a page for a Bandra or something like that, there’s small products with small margins, but you’re trying to win on getting multiple sales over time and having that go back out to the marketplace, have the chiropractor order 100 of them a month. 12 months of the years. You get 120 sales out of them.
That’s where you wanna focus and have the mindset of, This is how we’re gonna grow. Don’t have the mindset of, Oh, all the steel. We only made 30 on it right now. Well, that’s okay, because it’s gonna be a recurring revenue type opportunity.
Just to switch gears here a little bit, I wanna talk about growth strategy with marketing in the first five years, so when you have a business that’s just starting off, a lot of the groups we work with, our small business entrepreneur run a lot of healthcare CEO, CTO co-ops, and because of that, their business acumen is not as much focused around finances, but more folks are in clinical results, which is… Till they makes sense, because that’s really the primary way that people look at things when they’ve been a clinician for so long, but at the end of the day, you need to look at re-investment opportunities in the first five years, so if you’re climbing your first year you do 100 and the next year, maybe you do 250, then maybe do 500, and then you maybe do 78-800, and then you do a million. That kind of progression should be looking at ensuring that you’re spending at least 5% in the first five years, you should be spending more than 5%, ideally to be successful. So somewhere around 10% is what I like to see.
But if you can’t afford that because you have other payroll and you have a bunch of W-2 people and things like that, and that’s totally okay, it makes sense.
But I would still, I urge you to consider reinvesting those funds instead of taking a distribution or dividend or increasing salaries at the top level, at the founder ship level, put that money back into your reps and also put some of that money into getting additional people for additional regions, or go the 99 route where you’re gonna get 40 to 50 people and you’re gonna end up turning 10 to 150 per ton of those people per year because they’re not always focused and motivated by your product or whatever the situation is.
So I would say re-invest a minimum of 5% every single year until you get to the number you’re looking for, and really push that to 10%, if you’re a very new company and you’re self-funded or whatever the situation is. I would recommend starting with probably 10 to 15 sales reps, Metropolis areas only regardless of if it’s consumer or business, make sure you have 10 to 15 people, pay them 1099 and paid them really well, try and get them to 30 to 40%, if possible, so that they’re killers and they wanna stay, and then look at that and say, Well, I haven’t spent any money until I make money, so you’re gonna spend close to 10% out of the gate on marketing, and that’s like a pretty good gauge, so if you wanna say, Alright, well, I wanna make a million dollars, and I wanna spend 10%… Well, 10%, 100K, which means you’re gonna be spending somewhere around 8000 a month or more, so if you wanna crush it the gate, you better be prepared to spend a 000 a month for three to four months and be able to cash drop that yourself or have investor ship, that’s gonna make that make sense?
So you can get it out the door.
You don’t wanna be that aggressive again, that 5% rule is really gonna be conservative, but also probably practical for most people, and that’s okay, if 5% really all you can do, there’s really no issues with that, but don’t… Drop a little bit, don’t be a 1-2% spender and say, Oh, I don’t wanna do trade shows and I don’t wanna do a Facebook, I don’t do Instagram, and I don’t wanna do YouTube, and Oh, I’m not sure how this works. Or how that works?
That’s totally not excuse at all, you need to be spending the money to actually make money, and then the last part of it is… Well, people come to us to say, Oh, I don’t know how to do it.
That’s totally fine as a small business owner, especially if your healthcare entrepreneur, you already have a clinical background, you already spent million years in school and you’ve already spent a lot of time developing a great product, hire somebody who knows what they’re doing, whether that’s an internal employee or you wanna contract that out, it doesn’t really matter, but hire somebody who’s gonna manage this for you, manage your social media, manage your advertising manager, trade shows, get a booth set up, get a nice display, get some opportunities that you guys can put your sales people on so that you guys can grow, and if you look at it, honestly, in a small business environment, it’s a lot better to outsource that because of payroll tax, so if you’re gonna spend your 50 to 60K a year in a million dollar business I… That 50 year, I’m real that cover a marketing person’s salary, and then you gotta put all that money into advertising spend, so my recommendation there is really simple, outsource the work and get a retainer going four or five, 6 700 a month.
Say that to a marketing team, someone that small, don’t go to a huge organization, go to a small group, someone who’s got under 20 employees and say, Let’s not give you X number of dollars, what can I expect for that?
And hopefully, if they’re good at their healthcare marketing, they’re gonna look at things like talk in a market, her sales rep, how can I market to region, how can I split the difference across multiple platforms, and then if it’s a business product and they’re selling on Facebook, you’re out of your mind.
And the reason I say that is because if you’re selling to a physiatrist orthopedic surgeon, there is on a 0% chance they’re spending any of their valuable time on Facebook waiting to be served in an… However, they are on LinkedIn, they do check their email, they do take in-person appointments, they do have physician liaison that you can talk to and a few other things that can be done that would make tons of sense for you, so don’t worry so much about who your audience is, other than the fact, Are they consume or are they a business and Taylor, all of your marketing around them in year two and three, when you start growing, it might make sense to bring someone on part-time, maybe even full-time as W2 employee in your business, but most of the time, there’s gonna be two co-founders or maybe just one founder of the business, and then this kind of fringe 99 Salesforce or maybe a couple of the sales people, which is totally fine, but you have to be super cautious about how you do that because you need to have marketing going, it’s kind of like putting gas in the car, everybody understands that if you don’t put gas in the car, the car eventually stops working, but in business people don’t put gas in the engine for some areas, and they sit there and go, I like, maybe this month, I don’t have to spend as much on gas. Okay, well, or if you plan on driving less, that’s true, but at the end of the day, you probably wanna put money in that, and there’s actually a difference between the different levels of gas you get putting in premium is gonna be a little bit better than putting in 87.So at the end of the day, think about not only where you spend your money, but how you spend your money and focus on outsourcing that opportunity to other people, so you can focus on selling it, especially if you’re still sitting in the clinic.
Some of the groups that we work with to have great entrepreneurs that had a great product or service that they’re selling to the healthcare space or some other market, but they’re still in their practice or in their full-time job or whatever it is that they do.
And at the end of the day, that’s totally impractical to be spending all their own time on it.
The last piece, advice I’ll give is look at what you’re doing as a business, if you’re making 100 Nour is the owner marketing in the cost of 30 an hour for a person, just outsource that, There’s no way if I told you today, you give me 30… I’ll give you 100 back.
You do it every single day.
So why do you not do that with your marketing?
You should always be willing to trade that kind of mount and don’t look at it like, Oh, it’s 30 or less they have what kind it does that 70 that you say,
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