Last week, we talked about how small businesses can get their online and social media marketing rolling without paying someone else to do it. But, there comes a moment in every business owner’s life where time alone isn’t a sufficient enough investment to continue to grow your business via Facebook pages, Twitter feeds, blogging, and so on. Our article last week was for those who might jump the gun too quickly on hiring outside help, while this week is for those business owners who might hem and haw on hiring an Internet marketing firm for too long.
Generally speaking, there are two things that determine whether it makes sense to hire a marketing firm. The first is: How much is your time worth?
When you get new customers, it’s important to find out how they found you. This allows you to keep track of and evaluate all of your marketing and advertising efforts (this is something we’ve discussed previously in our “Should I advertise?” blog series). Obviously, you shouldn’t expect too much return on your time investment when you’re first getting started. But once you’ve settled into a groove, start looking at how much business you’ve taken in from people who found you on sites other than your own (Google, Facebook, etc.), and compare that with how much time you spend working on online stuff.
To do this, you first need to block off lengths of time: biweekly, every month, whatever unit of time works for you. For each of these blocks, add up how much revenue you took in from online leads, and divide it by the number of hours you spent. Let’s say that this week, you took in $400 from online leads, and you spent five hours that week marketing your business online:
$400 / 5 hours = $80 per hour
Depending on your line of work, this may be great, or not so much. If you run a small shop as a gardener, a barber, or a florist, then you probably should be extremely pleased with yourself. Unless you typically work for very high-end clients, you aren’t typically pulling down $80 an hour. In this case, your investment of time is absolutely justified. But if you’re a lawyer who bills $300 per hour, or you operate a large business with a lot of overhead, then you’re losing money. The ends are most definitely justifying the means. On the other hand, if you’re in a line of work where you expect to (or need to) generate revenue at that high of a rate, then you probably should have hired a full-service online marketing firm a long time ago.
Either way, what it all comes down to is: when you look at the return you’re getting for your efforts, are you pleased with it, and motivated to keep on working at it? If you run a one-man shop where you expect to make $15 an hour for your services, then getting $25 dollars an hour back on your online efforts is probably pretty good. But if you’re a masseuse who charges $50 an hour for massages, then $25 per hour won’t cut it.
If you are not making enough through your online work to justify your time, then it’s time to look at the second part of the equation…
Do you have the budget to hire an online marketer? Or, looking at it another way, how much additional business would you have to do to justify the cost of hiring a marketing firm?
Obviously, regardless of any other factors, you need to have the money to spare in order to hire a marketing firm. The problem is that too many businesses spend too little on their marketing services–either due to not having the money, or being tightfisted–which results in either seeing no improvement, or actually doing harm to your business. We’ve spoken to many business owners who couldn’t help but pass up a deal they found on Craigslist or Fiverr. There are countless offers on such sites for $99 per month packages for building backlinks, or people who will advertise your business to their umpteen million Facebook fans for five or ten dollars.
Unfortunately, the individuals and companies that market these offers never deliver on their promises. They literally can’t afford to. Could your business survive with a handful of customers paying you rock bottom rates for your services? For that company that has a $99 package, they have to have dozens (or evens hundreds) of monthly clients in order to stay out of the red. For that guy who promotes companies to his legions of Facebook fans, in order for him to make a paltry $30,000 per year, he has to have SIX THOUSAND one-time customers. Such marketing companies survive based on quantity of customers, not the quality of their work. When you see someone who offers rates that low, that alone is enough to know for you to know for certain that they’re a spammer, because they can’t afford to dedicate more than a few minutes to any one client. Thus, they have to resort to black hat techniques like building phony backlinks, spamming, and content spinning. And all of these are practices that will result in your business’s online presence being harmed. Badly.
Sometimes the damage can’t be reversed. We have had clients where we’ve had to literally sit down and tell them, “We have to burn down everything and start from scratch. You have so many bad backlinks built and other sketchy things done for your site by your last marketing company that we can never repair it all. You’ll never rank for anything unless you throw away everything you’ve ever done online, and start from square one. Even your domain name is irreversibly tainted.” That conversation isn’t a fun one for anyone involved.
If you don’t have the necessary minimum budget to hire a reputable marketing firm, don’t do it at all. All you’ll be doing is paying for the privilege of damaging your company’s online presence. But what exactly is “the necessary minimum budget?” That varies from place to place, and I suspect that you could ask that question of 100 different marketing firms and get 100 different answers. However, from our experience, the absolute minimum is in the neighborhood of $500 per month. You aren’t going to be able to hire a big firm with dozens of staff members, as their overhead requires their hourly rates to be in the 3 digit range. But if you can find a reputable and skilled one-man operation or small marketing company, then that figure is more likely to work.
But before you say, “I can’t afford to spend that,” you have to look at the nature of your business to determine your advertising budget.
We’ve noticed a curious contradiction during our years in the marketing business: the prospective clients who are most enthusiastic about hiring an Internet marketer are sometimes the least able to afford it, and vice versa. Here’s an example of the former category:
You sell widgets on your site, and each widget you sell gives you a profit of $5. Currently, your site is getting 500 visits a month, and you’re converting 3% of your visitors (which is pretty good), so you’re making a profit of: 15 customers x $5 a piece = $75. You want to generate more revenue, so you approach a marketing company that quotes you $500 per month for some basic services. Before you pull the trigger, you have to stop and do some math here. Spending money on marketing only makes sense if it begins to pay for itself relatively quickly. For you to break even on your $500 per month marketing expenditure, you need to be making $500 more per month, which would require you to sell 100 more widgets per month than you currently do. You need to go from selling 15 widgets per month, to 115 per month. That’s an increase of more than 650%. If an online marketer were going to focus strictly on getting more visitors to your site, while maintaining the same conversion rate, you would need to go from having 500 visitors per month to nearly 4,000 per month.
It’s not feasible in the short term. Not remotely. An honest and reputable marketing firm will recognize this and be up front in saying that they can’t take the job, because it wouldn’t be ethical. They could never generate enough additional revenue to justify hiring them in the first place. Even if you only hired them for six months at a total cost of $3,000, you would have to sell a total of 600 widgets before you broke even. Even if your sales rate immediately quadrupled to 60 sales per month and stayed absolutely consistent after the end of the contract, it would take more than a year to get back in the black. And chances are, it would fall off fairly quickly once your contract with the marketer ended–the Internet moves fast. Unfortunately, many marketers can’t say no to money, and will happily take jobs that they can never sufficiently deliver on.
Curiously enough, on the other hand, many companies seriously underestimate what they can afford to spend on marketing. We’ve spoke to contractors, builders, and high-end equipment dealers who generate more than ten or twenty thousand dollars in profit on a single sale, who haven’t so much as updated their website since 1997. Let’s say that a construction company makes $20,000 in profit per sale. They could spend $1,500 per month on Internet marketing, and if they made a single additional sale per year, their investment would have paid for itself, and generated an additional profit of $2,000. That’s from one sale. Assuming that the company has a decent financial foundation, it’s practically a risk-free investment.
Many business owners fall between these two extremes, between the entrepreneur selling items on their e-commerce site at $5 per pop, and the company that’s been around for a hundred years, only advertises in the Yellow Pages, and generates profit in the five digits on every sale. Every business owner’s circumstance is a little different. But it’s worth your while to sit down and do the math, and see if online marketing makes sense for your business. If it would be a squeeze, then hold off, and focus on some of the DIY marketing tips I mentioned on last week’s blog, and in previous blog entries. But if the math makes sense, then it’s time to take a serious look at hiring an online marketing company.