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What A $10MM Marketing Budget Looks Like

Marketing Budget
Early in my career, I thought I would perform a noble service for my clients by helping them minimize their advertising expenses.

Specifically, I was consulting with an $8MM sunroom and window company in Savannah, GA, and helping them manage a $100,000 a month advertising budget.

About 2 or 3 months into the relationship, I nipped and tucked different parts of the budget, and got it down to about $85,000. I was excited to have “saved” my client a significant amount of money.

At the end of the month, as I reviewed the results with my client, he saw the reduced budget number and went berserk.

And not in a good way.

“I have to spend the money to buy my leads!” he chastened me. “Every dollar you don’t spend means fewer leads and less sales. From now on, spend EVERY. SINGLE. DOLLAR.”

Point taken.

So with that as a backdrop, consider these 2 important points as you ponder growing your business to $10MM in sales (or more):

  1. You need to budget a bare minimum of 10% of sales to marketing. 12% would be better.
  2. You’re probably going to have to find new ways to spend that money.

The 10% rule is iron-clad. You can’t fudge on it. As you grow, you can’t say “we’re getting big enough now that we can scale back and pocket the savings.”

If you want to do $5MM next year, you need to plan AND SPEND $500,000.

If you want to do $10MM next year, you need to plan AND SPEND $1,000,000.

The problem is—lots of smaller companies are only spending 5% or less right now. They’re doing $2.3MM in sales on $9,240 in advertising a month. Or something like that.

I’ve seen it a thousand times. Invariably, those companies are relying heavily on repeat and referral business. There’s nothing wrong with repeat and referral; it’s just not scalable to $10MM a year. There’s a reason they’ve been in business for 33 years and haven’t ever cracked $3MM.

You have to spend money to make money. There’s no way around it.

I covered in an earlier post the urgent need to raise your prices. Your prices need to be high so you can afford to do things the right way (materials, people, business practices), and so you can afford to spend the necessary money on marketing.

Commit to it. If you can’t/won’t/don’t, we have no need for further discussion—you’re dismissed.

Assuming you’re still reading, now you have to figure out where to spend all that money.

Here is the answer, in order of importance:

  •  Your Bread And Butter: Whatever you are currently doing that is reliably generating leads at a reasonable cost… keep doing that. In fact, investigate if it’s possible to spend even more money on it. I don’t care what “it” is—if it’s working, keep doing it.
  • SEO: You should be spending $1,000 to $3,000 a month on SEO & online reputation management. It’s mandatory. If you’re not, you are willingly passing up juicy leads. Cheap, juicy leads.  Lots of them. Plus, you’ll bury negative reviews and remove buyer skepticism.
  • PPC: Spend every single cent you can on PPC—Every. Single. Cent. One of my big clients was spending PPC on a budget; in other words, $15,000 a month or something… then they’d run out of budget on the 15th or 20th of the month. That’s insane. Don’t spend a specific amount—spend as much as you possibly can every month! This is low-hanging fruit—people who want to buy RIGHT NOW! Get a good PPC company and buy every single lead they can give you.
  • TV And Radio: With very few exceptions, you’re not going to get to $10MM without TV and radio. I’ll cover this in more detail in a future email, but for now, trust me—it’s mandatory. And it’s a huge part of my upcoming 2-day seminar in Dallas (April 26 & 27).
  • Other Stuff: Try other stuff like direct mail, home shows, Val-Pak, and so forth. Set a budget to try things that, if they work, can become part of your bread and butter category.

That’s it—80% to 90% of your budget should go to the above categories—it will make 80% to 90% of the difference.

And if you want to nitpick with me about “well we did this or that and we grew to $10MM,” keep it to yourself. I’m not interested.

There are lots of factors in marketing. I’ve seen one company grow to $40MM with practically no TV and radio. And another grew to $30MM on the strength of direct mail. But guess what—they both came to me for TV and radio expertise to get them to $100MM. And guess what else? They were both in top 10 (size) markets. The scaling is a little different. But the principles remain true.

Here’s how you do it, practically speaking:

  1. Determine your budget using the 10% method. If your goal next year is $6MM, that’s $600,000 a year. If your business is seasonal, adjust the monthly spend accordingly. Don’t worry—if your prices are set correctly, you can afford this.
  2. Spend as much money as you can (profitably) on your bread and butter advertising.
  3. If you have money left over, spend it on SEO & online reputation management.
  4. If you have money left over, spend it on PPC.
  5. If you have money left over, start buying TV and/or radio with at least 50% of the extra money (80% would be better).
  6. If you have money left, spend it on other stuff. But you may just want to spend it on TV and radio.

This formula can get you from $3MM to $10MM in less than 5 years.

And yes, you can get to $10MM using “Bread and Butter” and “Other Stuff”—in fact, that’s exactly what the typical remodeler does—and it’s why most of them max out at less than $5MM. But even those who do get to $10MM take 10 to 15 years to get there. Maybe longer. And maybe never.

But to get there FAST (2 to 4 years), you’ve got to start harnessing the magic power of TV and radio as soon as possible.

It’s the grand key to quick and sustainable growth.

Why?

It’s a combination of things: TV is the most credible medium, with radio a close second. It’s inexpensive in terms of reaching a TON of people at a reasonable cost. And it’s a great medium for communicating with power, precision, and passion.

Nothing beats TV. Nothing.

I’ll prove it to you in an upcoming post.

For info about the upcoming 2-day seminar called “Make the Jump to $10MM” click here.

Until then, happy marketing!

P.S. Before I get to TV, I’m going to circle back around and cover PPC and SEO in my next post. It’s a sure thing that you’re not getting the bang for your buck that you should—I’ll help you fix that.

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Click here to read more posts in my “Make The Jump” series:

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Flying Blind On The Radio

Don’t Be Fooled. That Sales Rep Just Might Be Selling You A Bag Of Magic Beans.

Don’t Be Fooled. That Sales Rep Just Might Be Selling You A Bag Of Magic Beans.

Sure The Sales Reps Are Friendly… And Sure They’ll Promise The Moon.

The Truth: They’re Counting On Your Ignorance So They Can Sell You A Bag Of Magic Beans.

By Rich Harshaw

Note: About once a month I answer questions that come to me via email or via one of my call-in webinars regarding different aspects of contractor marketing. If you have a question, please email it to me at rharshaw@mymonline.com.

Rich:

We are looking to start advertising on the radio soon, and have been talking to some of the local stations. They have all agreed to “waive” the 15% agency commissions for us, so that’s going to save us some money. I’ve attached proposals from three of the stations; they look pretty good to us, but we’d appreciate it if you would look them over and give us any advice or opinions. Any feedback would be great!

Robert

Hi Robert,

Thanks for giving us an opportunity to look over this and give you some guidance. Unfortunately, the proposals sent to you by these three stations are all trying to lure you into making uninformed decisions.

The fact that they are waiving the agency commission is a smokescreen—don’t let them fool you into thinking that they’re doing you any favors. In fact, there’s a 99% chance these schedules are TERRIBLE.
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When It Comes To Advertising, Bigger Is Definitely Better.

Going Big In Marketing Gives A Contractor More Visibility, More Room To Sell, And More Credibility…

Going Big In Marketing Gives A Contractor More Visibility, More Room To Sell, And More Credibility…

Tips, Tricks, & Advice For Determining What Size Ad To Go With.

My friend Chris got up at 5 AM, waited in line, and bought the new iPhone 6 on the first morning it was available for sale. I met with him for lunch later that day and held my suddenly-puny iPhone 5 next to his gargantuan new model… and was horrified. My scrawny phone was dwarfed by iPhone 6 awesomeness… so even though I’m not one of those “gotta have the latest and greatest gadget” kinds of guys, I determined right then and there I would upgrade as soon as possible.

But what about the iPhone 6 Plus?

Now that sucker is HUGE. I asked Chris why he chose the relatively tame 6 instead of its elder brother, and he replied that the iPhone Goliath was simply TOO BIG. I had seen pictures of course, but Chris reported that the real McCoy was too big to fit comfortably in his hand… or pocket for that matter. It’s just too big.

Or is it?
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Are You Flushing Your Advertising Dollars Down The Toilet?

Is Advertising A Good Investment… Or Just Flushing Money Down The Toilet?

Is Advertising A Good Investment… Or Just Flushing Money Down The Toilet?

Take A Few Minutes To Figure Out Your Numbers…
Then Spending Money Becomes Slightly Less Stressful.

Written by Rich Harshaw.

Give me the proverbial nickel for every time I’ve heard someone say, “This advertising costs too much!” and I could afford to buy my own Caribbean island.

Clients practically go into cardiac arrest when they find out it costs $32,000 a month to run six spots a week on the six o’clock news. It is pretty easy to get sticker shock when you see that a sixty-second radio commercial on a popular Los Angeles station could cost you a thousand bucks. Each. Or when you realize that a newspaper ad in your city barely bigger than a Hershey Bar will cost a couple thousand dollars. It’s easy to automatically think that’s a lot of money.

Now here’s the important question for you, the advertiser: Does the ad actually cost too much?
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