Are you a Small Business owner thinking about investing in marketing? I bet you feel like you don’t know where to invest or how much!
As a marketer of small businesses I speak to many business owners who want to promote their business, but feel scared of making the investment for several reasons;
- They think marketing will cost too much – and look at any money that needs to be spent as an expense (not an investment in growing their business)
- They are not sure what they want to say or what offers they want to advertise
- They are not sure what their budget is
- They are not sure how to set realistic goals
After seeing many clients who all felt the same way I realised that the best way for them to move forward with their marketing is to reflect back on their business so far. Knowing where to look can give them the answers they need to help them plan for marketing and growth.
So to help small business owners (like my clients) think about what they want to achieve with their marketing and what information they need I have come up with 5 tips to prepare for marketing.
Reflect on who your current clients are;
When you look at all your clients … Who is your perfect client? Perfect clients are profitable and don’t give you any grief. To find your perfect client ask yourself
- Do they come back to me for repeat business? (profitable)
- Are they easy to provide products/ or service to? (they are not difficult and appreciate your product or service)
- Do they refer you to others?
When you know who your perfect client is … you know you want more like them. To get more of your perfect client you should think about some offers or incentives that will appeal to them.
Perfect clients are profitable and don’t give you any grief.
Profile your perfect client;
Now you know who your perfect client is, you want to develop incentives and you will also need to know how to reach them so you can tell them about your incentives and offers. A marketer will obviously help you with the delivery of the message, but if you can provide a profile of your perfect client this will be even more effective, as it will help the marketer to target other people like your perfect client. Even if you cannot directly ask the perfect client these questions answer the following;
- How old are they?
- Their gender
- Marital status/ sexual orientation
- Do they hang out online, at home infront of the TV, at the pub, in the backyard reading the paper?
- What interests do they have? EG animal lovers, the beach, fashion, food lovers, coffee lover
- Education level
- How much money do they have?
Once you have documented this information your marketer will target your advertising to the perfect client and similar people. It will also assist you in developing your products and incentives to appeal to them so don’t be scared that you are narrowing your options – targeted campaigns are much more effective than broad messages.
Targeted campaigns are much more effective than broad messages.
Look at your current client/customer list;
You might save yourself a whole heap of time and money if you try emailing or contacting your past perfect clients with a new offer. A past customer may have forgotten about you for the moment, but on seeing a new offer or service can become a client again.
This is often an area that gets overlooked. as most of the time and expense in marketing goes to acquiring new customers. But tapping into who you already have on your list has a much higher conversion rate and is a less expensive way to boost business quickly.
You might save yourself a whole heap of time and money if you try emailing or contacting your past perfect clients with a new offer.
Think about Scaling;
Scaling is the term used to balance your marketing and new business with your ability to provide the products or service you are offering. THIS IS EXTREMELY IMPORTANT as many businesses have fallen over by investing too much too quickly in marketing and not being able to meet the demands of the new business. Poor scaling can cause damage to your business that is difficult to bounce back from, such as;
- Bad word of mouth – caused by poor service due to overloaded staff.
- Incorrect pricing – that is resulting at a loss. If only you didn’t put an ad in every paper for 50% off until 2018! Now you have too many clients paying a discounted price and not covering your costs!
- Staff overload – your staff cannot keep up with the demands of the new business causing them too much stress and decreased performance. This will eventually lead to increased sick leave and even high staff turn over. Make sure you can hire help if you need to.
Once you have determined how you will scale your business you can set a realistic goal for how much new business to take on in a period of time. You might decide with your current resources you can increase new business by 25% in 6 months.
Poor scaling can cause damage to your business that is difficult to bounce back from.
Calculate how much you can and should invest in marketing (set a budget);
Go back to your client list and have a look at your past clients to calculate the Life Time Value (LTV) of your customers. This will help determine how much you should invest in marketing. To calculate LTV follow the below exercise.
- On Average, how many years do your old come back and use your service or purchase from you?
- In all that time, how much have they spent?
- Calculate the average of both
Your results might look like this;
Average years of a customer = 5 years
Average spend of a customer = $3500
So your LTV is = $3500 over 5 years
These figures help you to set a budget by combining your LTV with your goals and determine how much to spend on acquiring a new client. If you have a goal to increase your new business by 25% in 6 months this might mean 2 new clients per week. This means you will acquire $182,000 of revenue for your business over 5 years. I will show you the break down;
26 (6 months) x LTV $3500 x 2 (2 Clients) = $ 182,000 of revenue for your business.
If your profit margin is 35% ($63,700) then a 20% investment of this amount ($12,740) is usually a good ball park figure to budget toward your marketing in the next 6 months.
This means you have $12,740 to spend on marketing to grow by 2 clients per week. Of course this figure is much harder to calculate for new businesses and a lot of forecasting and modelling on similar businesses can be used to come up with an approximate LTV in this case. But for an established small business that wants to grow, you now have a clear goal and budget to work with.
Looking at your past clients you need to calculate the Life Time Value (LTV) of your customers.
Following these 5 Tips will equip you with the information you need to set realistic goals as well as allowing a reasonable budget. For a marketer this is often the most difficult thing to determine as they do not have the insights into your business that you do. Being armed with this information when you approach a marketer will enable them to do a better job for you more quickly so they can deliver the results you want.
Happy success to you and your business.
Hayley Pieplenbosch – Marketing Consultant
Hayley Pieplenbosch is a Marketing Consultant for Fitzpatrick Group. She works with Small Businesses to recommend marketing strategy and implement strategies into their business. Need help with marketing? Click here to get in touch.