• April 2015

How Much Should You Spend on Your Ad Campaign?

Advertising is an investment in your business. So invest wisely!

Two men who founded their own ad agencies do just that, and share their knowledge in PR Rules: The Playbook, by Hope Katz Gibbs, founder and president of Inkandescent Public Relations.

Scroll down for an excerpt from “Pr Rules: The Playbook on “How Much Should You Spend on Your Ad Campaign?”


Darren Slaughter, founder, DarrenSlaughter.Com

Darren Slaughter gets the money question a lot.

“Small-business owners want guidelines to follow, but the only person able to answer this question is the one writing the check,” says the founder of a 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.”

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,” Slaughter says. “But many don’t set aside any cash to tell the world about how great of a plumber or electrician they are.”

So what are the numbers?

  1. Know what the norm is in your industry. Most small businesses can get away with spending 5 percent to 10 percent of gross sales on advertising; the construction industry is no different.
  2. Know that many of the high-fliers in the trades spend 12 percent to 15 percent of gross sales on marketing their businesses.
  3. Ignore marketing at your peril. There are contractors out there who will tell you they haven’t spent a dime on marketing in years, getting new business 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.
  4. 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 high fliers and for the next three years, plan on spending 15 percent of gross sales on advertising.
  5. Be realistic. If you think that 15 percent of gross sales is too much, you have to rethink that. Understand that your budget can’t be too limited if you want to make an impact.
  6. 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 — like contracting — that is dependent on a strong economy.
  7. Know the cardinal rule. 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


Andrew Smith, founder, Initiate-It

When Andrew Smith launched his Richmond-based ad agency, Initiate-It, in 2012, he’d already spent decades in the ad business. And he knew all too well why entrepreneurs have such a hard time investing in advertising.

“Every business owner I have met is confused about advertising,” he says. “Each year, they are typically approached by ad representatives from local newspapers, outdoor advertising companies, magazines, and radio stations — and each makes a case on how they are the leader in the market and that they will get you the best results in sales or brand awareness for your business. To say this can be overwhelming is clearly an understatement.”

To get the most bang for your advertising dollars, Smith advises:

  1. Sit down and determine exactly how much you are willing to invest. Be realistic, and know that what you want to spend initially might change as you define your short-term needs and long-term goals.
  2. Don’t be cheap. Realize that one ad will get you nowhere. If you are only going to run your ad once, then you might as well save your money and not run it at all. Repetition is what counts in the ad game.
  3. Determine what you hope to get back in return (notoriety, sales, or both). Having a grip on your goals is as important as knowing your budget. Without it, you won’t know how to track return on investment.
  4. Realize that advertising on TV and radio during prime time is ideal. This is when you’ll reach the most potential customers. It’s also the most expensive time to run your ad. Decide how valuable that is to your business.
  5. Quality ads are key. Hire a professional to help you. Trust their opinion, but trust your gut more.
  6. Provide your ad team with as much information as possible. Are you a T-shirt-and-jeans kind of company, or a black-tie outfit? Be sure your ads reflect your business.
  7. Think ahead. Get out your calendar and map out your ad plan for an entire year. Coordinate ads with specials, holidays, and other highlights that will drive customers to your business.
  8. Test your ad with a group of people who are your target customers, and take their feedback to heart. If the majority of the test group hates the ad, consider scrapping it. But ask them for ideas on what they’d like to see. And if 100 percent of them love it, be dubious — and ask a handful more for their opinion. 

Learn more at www.initiate-it.com


Order “PR Rules: The Playbook” from www.PRRulesPlaybook.com or send an email to hope@inkandescentpr.com. The book is 176 pages and available for $24.95. Bulk orders of 25 books or more receive a 10 percent discount.

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