Our conversations with entrepreneurs over the years have revealed a common hesitation (or fear) in working with an outside marketing agency.

Will it be worth the investment?

Isn’t that the million dollar question (quite literally in some cases)!?

For many business owners, it can be a bit nerve-racking to go from paying next-to-nothing for marketing, to hiring a digital marketing agency.

“I think the number one hesitation is whether it’s going to be worth the investment…Nobody is given a guideline on what a reasonable budget would be for marketing and many times health practices aren’t even doing any marketing,” shared a local health & wellness business owner.

So, if you do make the move, how do you skew the odds in your favor?

We believe it comes down to three things:

1. Determining what is ‘worth the investment’ to you
2. Finding the right agency for your brand
3. Remaining flexible to optimize and iterate

Determining what is ‘worth the investment’ to you

Ultimately, you’re the only one that can determine what is ‘worth the investment’ to you. While agencies can share examples of costs and results, the return on investment varies greatly between brands and audiences. Not to mention, your expectations of success could be very different from the business’s next door.

There are three metrics to help you make the ‘is it worth it?’ determination.

1. Customer lifetime value (CLV) – this is the amount you expect to make from each customer over their lifetime with the brand, minus the costs to keep them as a customer. Look at historical data and lean on your experience to determine the average amount a customer pays, how often and for how long.

For example, you sell a wellness course where customers pay a one time fee of $1,000 with no recurring payments and no returning customers. The course is already created and automated so the cost to keep customers is only $30 for the software. In this case, the CLV would be $970.

In another example, you own a gym that charges a monthly $200 membership fee and most customers stay with you for 5 years. You pay $150 per year in staffing, rent and miscellaneous costs to keep each customer. The estimated CLV would be $11,250.

2. Customer acquisition cost (CAC) – This is calculated by taking the cost of sales & marketing and dividing it by the number of customers acquired during the period the money was spent. It is rare for a company to truly spend no money to acquire new customers. These costs would include sales, advertising, marketing, and any special offers or discounts provided.

The CLV is given greater meaning when you look at it in relation to your CAC. To remain profitable, you never want to spend more to acquire a customer than you actually earn from that customer.

3. The amount that would make you happy – With your CLV and CAC in mind, you can determine what you would be satisfied with.

For example, you may decide you only want to pay a CAC of 10% of CLV. Looking at the first wellness course example, this would mean you wouldn’t want to spend more than $97 to acquire a new customer.

Note: Your audience, market, competitors and other outside factors can often influence CAC as well.

When you make the investment in marketing, initially your CAC will go up quite a bit, but with a good marketing plan in place, you’ll be generating more customers more consistently and eventually lower the CAC again as you optimize your spend.

Creating your marketing goals & budget

Once you’ve determined these three metrics, you’ll want to establish your goals and budget.

Continuing with the wellness course example, you know that you want to get at least 20 customers per month to purchase your course. With a CAC of $97 (10% of CLV), to get 20 new customers per month and stay within your budget, you would create a marketing budget of $1,940 per month.

With the gym example, say you’re willing to spend up to $150 per new client and would like to get at least 10 new clients per month. In this case, you would want to budget for about $1,500 per month.

Finding the right agency for your brand

In addition to finding an agency you enjoy working with, you must first find an agency that can deliver the necessary services to help you reach your goals.

An agency that has experience in your industry and vertical will have a better understanding of your brand having worked with similar clients to achieve similar goals.

In an ideal partnership, you present the agency with your goals, budget and resources, and they present you with the plan to achieve them. Stay open-minded, as it is common for this to look different than what you may have originally imagined in terms of timeline, channels and messaging.

Remaining flexible to optimize and iterate

While the goal is to achieve your desired CAC, it is important to understand that if you’ve never done marketing or advertising before, there will be a bit of a learning curve to establish the most effective campaigns for your brand and audience.

(Pro Tip: Aligning with an agency that has experience in your industry can help to shorten and flatten this learning curve and save you significantly in the long run.)

As your campaigns begin and your agency collects performance data, they’re able to help you identify opportunities within your plan and optimize spend accordingly. This could mean adjusting messaging, removing certain platforms, investing more in a specific avenue of communication or even adjusting your goals and budget.

If you’re looking to increase your impact and revenue, aligning with a marketing agency could be the way to go. Learn more about our agency’s approach or schedule a Discovery Call with us to get started!