One of the most frequent questions we are asked is: "what should my budget be for SEO or online marketing services?". After helping many business owners work through this question we've developed a framework for finding the right budget.
Start by asking the right questions.
When people ask us to calculate a budget for online marketing it is a difficult question because it is not really the right question. The question that we should be asking is: what are the areas where we can get the most return on our investment and exactly what is that ROI? To do that, we start by looking at the products and services we are selling. What are the margins? What is the required minimum return on every dollar of ad spend in order to generate a profit? Once we have that information, we go into each sales channel and figure out how much business we can generate that will meet those minimum requirements and what it will cost to generate it. We look at:
- Organic Search
- Paid Search
- Social Media Campaigns
- Other channel selling
After laying out the potential services, available flow of business that meets minimum ROI thresholds for each and the investment needed to get it, we then prioritize. Because cash flow is still a concern even with high ROI activities, we allocate what the business can afford as a starting monthly amount to the highest ROI activity first. Then, as we roll forward, each month we use the profits from the the previous month to increase the budget and go after more services until we can effectively cover all of the best performing campaigns.
Get out of the budget mindset and start thinking ROI.
When it comes to your ad campaigns, if you can put in a dollar and get ten dollars back, you'll probably be happy to buy all day. On the contrary, if you put in a dollar and only get 90 cents back you don't want to buy it at all. This is why backing up and prioritizing activities based on ROI will always benefit your business decisions. If you get into a set budget mindset you are probably missing a lot of opportunities for growth.