For a service based sales professional, it’s oftentimes easy to overlook the necessity of a marketing budget. However, creating and sticking to a marketing budget is advantageous for any small business.
In this episode of Stay Paid, Josh and Luke open up about the challenging topic of a marketing budget, and provide tips and tricks to help you develop a budget that works best for your business.
- A marketing budget helps you track and refine your progress.
- Your marketing budget cannot happen until you set a revenue goal.
- Download our free marketing revenue calculator.
The fear of developing a marketing budget.
Let’s face it: people are weary of creating a marketing budget. Between the multiple moving parts and the magnitude of the investment, developing a marketing budget can fall to the wayside. But in reality, a marketing budget is the ultimate metric. It helps you to not only track your progress and refine your tactics, but it also holds you accountable.
How much should you budget?
For starters, the average marketing budget for a service based sales professional is about 10 percent of your commission income.
However, another option is to lead with revenue. This means that you should look at what’s working, and keep doing more of that. It’s a foundation for you to re-examine your sales from the previous year. Bank on putting 10 percent of your gross income back into your marketing for the following year. This allows you to anticipate what you’ll be spending each year.
While ten percent is a great benchmark, it’s important to consider what type of business you’re in. If you’re just coming into the market, you’re going to have to spend a bit more. You have to capture market share, and marketing helps capture attention to turn people into clients. You have to spend more money to get your name out there.
The MREA Economic Model
Gary Keller, CEO of Keller Williams, recommends that real estate businesses follow the MREA Economic Model. It’s based on three concepts: what goes in, what goes out, and what’s left over. Those concepts are called income, expense, and profit.
What Goes In (Income): Gross commission income (GCI) is 100 percent of the revenue your business takes in.
What Goes Out (Expenses): Expenses have two categories:
- Cost of sales (COS) are the costs of making a sale, including marketing. This should be limited to 30 percent of GCI.
- Operating expenses include your real estate business’ overhead, including your office and your staff. That should also be limited to 30 percent.
What’s Left Over (Profit): When you keep your expenses to those levels, you’re left with profit.
How our marketing revenue calculator can help
Your marketing budget cannot happen until you set revenue goals for your business. Once you’ve established goals, you can then start to calculate a budget.
The number one thing is to start by reverse engineering, and determine where your deals are going to come from. With our marketing revenue calculator, you’re able to plug in your information and develop the revenue needed to reach your goals. From there, you’re able to determine how many transactions are needed, select the appropriate channels, and develop a winning marketing budget.
Bonus download: open house kit
Following this podcast, our goal is to provide you with as many actionable tips as possible. This episode includes…
- Download our marketing revenue calculator, and plug in your numbers.
As always, take action on these tips!