Planning the budget for the year? If you plan to launch a new paid channel this year, learn why we feel that $5,000 is the minimum you should invest in a new channel – all things being equal.
We often get asked by clients and potential leads how much they should put aside to test a new channel. This could be launching on Google for the first time or maybe they have maxed out Google and want to test out Bing Ads or Facebook next.
We always tell clients that the minimum we would test with is $5,000. At times, this can send a shiver up the spine of the person receiving this news. There are 4 very important reasons why we landed on $5,000 after being in this industry for over a decade:
- Room To Fail And Keep Going
- Capital To Invest More
- Return On Your Investment
- Proven Business Model
Let me share with you what experience has taught me to hold true. By the end of this article you’ll learn why our media spend minimum is $5,000/ month.
Room To Fail And Keep Going
I don’t like to fail. Clients don’t like to fail. Hell, I hate to lose in general! The one thing that I can never say nor ever guarantee a client, are results.
There is too much out of our control in regards to their website and the experience someone has after clicking on an ad. Sure, we build custom landing pages for our SaaS and technology clients, but even then we still don’t control the main marketing site or the funnel after that landing page.
Having a test budget of $5,000 to spend on a new platform means that if our first idea is wrong, we have the room and opportunity to test out a second idea (or sometimes a third idea). We could have the right keywords and the wrong landing page. Only having $2,000 or $750 to spend, doesn’t necessarily offer the insight required to find success.
Recently, we had an auto client where we bid on the wrong keywords in the first round. We luckily had room in the budget to test out our second batch, and that did the trick. We saw the conversions flow into the client’s somewhat unremarkable site. Testing and learning is something we do with every client and each test is a learning opportunity for everyone.
Capital To Invest More
Tell me if you heard this one from a potential lead:
“If it’s profitable, we will give you more money.”
I always hear this line when someone thinks they only need to spend $1,000 on Facebook or Google Ads to make it “work”. This often comes from someone who does not always understand digital marketing. Maybe someone told them that is all they need to spend. Perhaps they didn’t do the research necessary to realize that many businesses spend in the hundreds and millions of dollars a month online. Either way, I’ve found over the years that the VC backed startups we talk to are sometimes the most uninformed.
I know a lot of agencies and freelancers will take on a client where the spend is that low. We are not interested in that business. It’s rare that clients actually honour a verbal contract to invest more money down the line. I find if anything, they want you to keep getting that CPA lower, even if the quality of customers suffers. Sometimes this means not helping them build a profitable business with long term potential.
Investing in digital marketing is like building your dream home. If you don’t invest the right amount of money, you won’t be happy with the end results.
Return On Your Investment
If you started to invest money and build your dream home, you’re going to want to see a return on your investment. You want to see the value of your property go up or maybe you rent it out long-term. If you went the cheap route, however, and didn’t put enough money into your home to build it, you are not going to be as happy as you could be. The value of your investment goes down.
The same thing happens with your paid advertising. If you only spend that $750 or $2,000, it is possible that the budget will dry up without receiving the results that were expected or hoped. It is also possible that you or your boss will point to your efforts or advertisings efficacy as a whole for said poor performance. I have seen this play out and it’s always an awkward situation for everyone involved.
The situation not working out wasn’t because advertising doesn’t work. It does, even when we think we are not susceptible to it. The reason it didn’t work was because you didn’t put the upfront investment in it to see your money back. This also applies to your creative assets and the time you put into those. Making the right meaningful investment is key to seeing success in each part of your business.
Proven Business Model
The clients who can afford to test out a new paid channel for $5,000/month generally have a business that is working and growing. The business has some consistent revenue and they feel it’s the right time to expand. They truly see the $5,000/month as an investment and not a cost to their business over the long-term. Clients in this area of growth are making 6 figures a year and need help scaling and or launching on new paid channels.
Any clients we work with below the 6 figures a year is usually taking money out of a VC investment round. That’s not always the case but it has been for a number of clients. A few of our New York clients fall into this area.
Everything above is based on a client marketing across a country and having a large enough market size to warrant $5,000/month in media spend. We don’t do any local based marketing or have a client who only targets one province or state.
In that situation, your budget would be different. If you want to make paid advertising work for your brand then you need to make that investment from day one!