ForResidentialPros.com Online Exclusive

Your Most Important Number, Part II

Last Week: Finding your ‘Most Important Number’

This Week: How to get the marketing budget to make it happen, and how to spend the budget

 

Last blog posting I challenged you to set a goal using my “Most Important Number” method.

In a nutshell, your Most Important Number is the number of sales per month you need to get in your bread & butter product category that would get you where you want to be, financially speaking.

So if you’re currently selling an average of 8 window jobs a month (assuming windows is your “main” product), would 20 jobs per month get you where you want to be? What about 25? Or 50?

Whatever that number is, that’s your Most Important Number. Go back and read the posting again to fully absorb the concept.

This week’s challenge is more formidable: to figure out how to get the money to create the marketing budget to get to your most important number. While we’re doing that, we’ll also cover how to spend the money.

Let’s face it: it’s easy to SAY that if you were selling 25 window jobs a month at $8,000 ($4,000 gross profit) that you’d allocate 15% of sales--$1,200 per sale—to a marketing budget. But when you realize that would require a total budget of $30,000—or $20,000+ more than you’re already spending—you automatically deem it impossible.

It’s the classic ‘chicken and egg’ conundrum.

So let’s start with the egg—how to get the $30,000 marketing budget you’ll need to get the 25 sales.

The short answer is PATIENCE.

Here’s the formula:

  • Determine how much money you’re ALREADY spending on marketing to get the 8 sales.
  • If 8 sales = $64,000 in revenue, then let’s say you’re already spending 15% of that, or $9,600.
  • That means you need to generate an extra $20,400 in marketing budget somehow.
  • Next, determine how much extra money you can afford to spend RIGHT NOW, on a monthly basis—taking cash flow into consideration—even if the extra money doesn’t necessarily bring an immediate positive return on investment. Some faith will be required here.
  • This is where patience comes in: I’m asking you to spend money now that might otherwise be spent on something else—like putting in your pockets, for instance.
  • Now take that amount and invest it strictly on marketing… and focus on highly aggressive tactics that are likely to yield the most immediate returns. Things like canvassing, guerilla marketing, past customer marketing, telemarketing, events/shows, and direct-response advertising.
  • The goal here—believe it or not—is NOT necessarily to make your IDEAL return-on-investment (15% marketing-to-sales in the example, although that would be nice). The goal here is to make back enough money to pay for the advertising, THEN invest the lion’s share of any incremental revenue you’re your marketing budget as well.
  • For example:
    • You determine you can afford to spend an EXTRA $5,000 a month on advertising on highly aggressive tactics, per above.
    • The first month you get 2 extra sales for a total of $16,000 ($8,000 of gross profit)
    • That means you made BACK your $5,000, PLUS an extra $3,000
    • Your accountant will tell you that’s terrible and to stop it. But don’t. Instead, double down:
    • Allocate 75% of the extra money to marketing, and 25% to overhead.
    • This gives you an EXTRA $2,250 in marketing budget ON TOP of the $5,000 you already committed to. Total extra marketing budget is now $7,250 for month 2.
    • Note: If the extra money you spent does NOT bring in enough extra sales to cover its cost, continue to invest that minimum amount each month until you find something aggressive that DOES work. Remember, this is an amount you said you could weather.
    • Repeat this cycle, BUT spend 50% to 80% of every incremental marketing dollar on LONG-TERM ADVERTISING, not the ultra-aggressive stuff. I’m talking about things like radio, television, and direct mail campaigns that are designed to nurture prospects over a long period of time. Essentially, you’re nurturing your 2014, 2015, and 2016 customers RIGHT NOW.
    • This is how the big get big—they INVEST in advertising… and how the small stay small—They DON’T.
    • Keep this process up until you reach (in the example—adjust your numbers) the $20,400 in extra budget you decided you would need to hit your goal of 25 sales.
    • IMPORTANT: Continue to spend the extra $20,400 a month in marketing, EVEN if you are only breaking even on it. The long-term nurturing advertising, by definition, is going to take a while to really start working. People need to see/hear your ads over an extended period of time that they know who you are, they know what you stand for, and they have confidence in your ability to perform.
    • Over time, you will see the number of monthly sales slowly climb, while your advertising budget stays static. Eventually—12 to 36 months, you will hit your Most Important Number. And you’ll hit it with a marketing budget that’s acceptable—15% or less.

The key here is to be willing to invest in future business right now, but to do it in an intelligent, responsible way. The best way to start is on the radio—it’s relatively cheap, easy to target, and fast & easy to produce ads. There are probably 2 to 6 stations in your market right now that are a great fit. How to negotiate with them and how to write the ads—that’s a topic for yet another day.

For now, calculate your Most Important Number, and go to work calculating your available marketing budget to get there. Patience will pay off… but you’ve got to have faith, which by definition, can be unnerving. But stick it out and you’ll soon find yourself exactly where you want to be, financially speaking.

Loading