• May 2014

How Much Should You Spend on Your Ad Campaign?

Which of these perspectives on advertising do you subscribe to?

“Advertising is the rattling of a stick inside a swill bucket,” suggested the dystopian novelist George Orwell.

Mark Twain thought otherwise: “Many a small thing has been made large by the right kind of advertising.”

If you are an entrepreneur in a small business, you’ll want to take a page from Twain’s playbook. Learn how to put down the stick and pick up the tricks that will flip the switch that brings customers to your door.

How much should you spend on an ad campaign, and what do entrepreneurs of small and mid-size businesses need to know about crafting an ideal ad campaign for their budgets?

In PR Rules: The Playbook, we share insights from six advertising execs and five entrepreneurs who have executed highly successful ad campaigns. Also take advantage of advice in past issues of Be Inkandescent magazine, including:

  • A list of questions to ask before you advertise on TV from Erin Hood, an Emmy Award-winning producer, writer, and director at WJLA-TV ABC-7 & News Channel 8 in Washington, DC, since 2003 (April 2014 issue). Click here for her advice.

And here’s the big question for every small-business owner: How much money should you spend on an ad campaign?

In this issue, we bring you thoughts from Darren Slaughter, who gets the money question a lot. Scroll down for his ideas.


From “PR Rules: The Playbook—The Entrepreneur’s Guide to Supersizing Your Small Business,” available in April 2014

By Hope Katz Gibbs, with Kathleen McCarthy
Authors
PR Rules: The Playbook

Advertising Insights from Darren Slaughter

“Small-business owners want guidelines to follow, but the only person able to answer this question is the one writing the check,” says Darren Slaughter, founder of the Philadelphia-based boutique digital ad agency that focuses on website design, social media management, and reputation management in the home improvement industry.

A great place to start, Slaughter believes, is by figuring out how much you want to make. “If you want to just get by, then a minimal marketing budget with a solid referral business will do. If you have bigger ambitions, like being the industry leader in your market, then you’re going to need to spend a lot more than the guy who just wants to get by. Either option requires a budget.”

So what are the numbers?

  1. While it’s estimated that two-thirds of small businesses close their doors within five years, that number is even higher in the home-improvement industry. “Most contractors start out with some business cards, tools, and a desire to do great work. But many don’t set aside any cash to tell the world about how great of a plumber or electrician they are.”
  2. Most small businesses can get away with spending 5 percent to 10 percent of gross sales on advertising; construction marketing is no different.
  3. Know that many of the high fliers in the trades spend between 12 percent to 15 percent of their sales on marketing their businesses.
  4. Some contractors out there will tell you they haven’t spent a dime on marketing in years, living solely from referrals. Well, that’s great for them, but bad advice for you—especially if your contracting company is less than five years old.
  5. New businesses need more care and feeding. If your business is five years old or less, you are still a start-up in the trades. Take a page from the super-successful start-ups and for the next three years, plan on spending 15 percent of gross sales on advertising.
  6. If you think that 15 percent of gross sales is too much, you have to re-think that and understand that your budget can’t be too limited if you want to make an impact.
  7. The closer you are to the five-year mark, the more important it is that you keep getting your name out there. This is especially true if the economy is shaky and you’re in a business that is dependent on a strong economy.
  8. Know the cardinal rule about advertising and marketing. One thing I know for sure is that the more you put into marketing efforts for your company, the more money you will make. Just be sure your ad campaign is done properly.

Learn more at www.darrenslaughter.com.

Click here to buy PR Rules: The Playbook.