We work with a lot of start-ups and early stage companies. It’s our specialty. We love to launch things – we love to create high impact campaigns from the first spark of an idea! And we even pride ourselves on being so creative that we know we make a huge impact with a small marketing budget. But (there’s always a “but” when it comes to money, no?) that “small” marketing budget should be at its highest your launch year, not its lowest.

Breaking the marketing budget’s back

We’ve had two recent events that have been the straws breaking the marketing budget’s proverbial back and leading us to rant a little about budgets. One of our most beloved clients came to us to create a marketing plan for them for the next year as they launch a 2.0 version of their existing product. But they told us: “we want to get our first 10 customers with virtually no marketing budget so we can show our investors that we can do it, and then get approval for additional funds for marketing.”

This sets up a long-term failure plan. First, all of the development and operations team members are going to be pulled to help secure those magical “first 10” customers. As a start-up, this seems like the thing to do. After all, everyone is supposed to pull together during the early stages, right?

But here’s what the investor sees IF, by a long shot, this strategy works. “Well, they did all of this without a marketing, so let’s just replicate this process. We don’t need marketing.” So you have the operations and development team get the next 10, and the next and the next and… you never grow. You never scale. You never emerge from the cycle because you have no brand visibility, you have no offline engagement, you have no inbound digital strategy, and you have no expansion to your primary market as a whole to create inquiries. You are stuck and your ops and development team is miserable.

Another organization came to us and insisted that marketing should be, at the most, 20% of an organization’s budget and while that may be true in an established organization – this is untrue during launches!

Year one? Your marketing budget should be 50% of your budget. Years two-three, 50-35% (starting high and ending lower), years 4-5 around 35%, then you can drop to 20% when you hit the maintenance point.

A marketing budget starts high, ends low

We tell you this knowing it dramatically impacts our business “scaleability.” There’s an old adage in advertising that says “the moment you sign a client is the moment you start losing them.” That’s a cynic’s adage but, quite frankly, it should be your agency’s. When an agency does a great job for you, your marketing should have a huge impact at launch and in the year following. Then there should be some high-impact marketing years 2-5 that support additional product features or version releases. But a reputable agency should be looking to replace the business of any product they represent (letting you move to a “maintenance marketing budget”) around year five.

So that’s why you should always establish a marketing budget that is poised to ramp down, not one that is eking out a few early sales to ramp UP. That’s an upward spiral that can kill your business.

COMING SOON!

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