Here’s the bottom line: The Painting Industry is more competitive now than it’s been over the last 5+ years.
If you started your Painting Business during or after COVID, you have only known the “good times.”
The “COVID Rush” is over, and like everything else in this economy, the cost to acquire new business has gone UP.
This means you will have to spend more to keep business consistent.
But what if you want to scale? How do you increase sales when buyer intent (demand) is low and competition (supply) is high?
Answer: Invest in marketing.
In this article we’re going to review how much you SHOULD spend on marketing, and how to measure the numbers to ensure your marketing is PROFITABLE!
Let’s start with a simple question…
What is the difference between ROI and COM?
You are likely familiar with the term Return on Investment, or ROI. Cost of Marketing, or COM, is the same metric, just measured in a different way.
Calculating ROI
Revenue Generated / Marketing Investment = ROIx
For example, if you invested $5,000 into marketing to generate $100,000 you would have a 20x ROI.
Calculating COM
Marketing Investment / Revenue Generated = COM%
Using the same example of a $5,000 marketing investment with a $100,000 return, you would have a 5% COM.
Why use COM instead of ROI?
When measuring numbers, it’s important to have a target with boundaries. For instance, there is no boundary to how much ROI you can generate.
You could have an 85x ROI or a 3549% increase in ROI, but those numbers don’t give you much context or information to compare.
On the other hand, COM has a target range. While the SBA states that B2C Service Businesses spend on average 11.8% of their revenue on marketing, they also provide realistic targets to aim for, which leads to the next question…
As a Painting Business, how much should I spend on marketing?
The standard answer to “How much should I spend on marketing?” is 5-10% of your TARGET annual revenue, but marketing is more than just lead generation.
Several variables can dramatically impact the answer to the simple question.
This is why comparing numbers to another business owner can be dangerous. You might be comparing apples and potatoes.
Some of the variables include:
Let’s dive in…
Business Goals
If the standard COM range for a Painting Business is 5-10% of your TARGET annual revenue, you must budget for when you want to be, not where you’re currently at today.
For instance, if you’re currently generating $500k in annual revenue, but your target for next year is $1M, you must budget $8333/mo (10% of $1M) to realistically hit that goal.
You must invest in your FUTURE company, not your current!
Age of Business
Established Painting Businesses
It’s not uncommon for companies with 3-5 years of online reviews to keep their annual average COM (cost of marketing) under 5%. Companies like this typically require less funding since their reputation and brand recognition alone can fuel a marketing campaign.
Startups
As a Startup, you will generally require more upfront capital to win over a new market. COM for businesses under a year old can range as high as 20-30% for the first 12-24 months.
Age of Marketing
Marketing takes TIME. It’s no different than investing in the stock market or a retirement account. If you plan on “testing the waters” you must budget for no less than 6 months, especially in a seasonal painting industry.
Quarterly trends should indicate the success or failure of a marketing campaign.
Level of Competition
This is a basic concept, but it’s often overlooked. Your reputation, brand awareness, and sales processes are all relative to your local market.
A Painting Business in another market can make selling sound easy, but that doesn’t mean they have good a sales process, it could just indicate a lower level of competition.
Cost of Marketing: The Real-World Answer
The real-world answer to the question “How much should I spend on marketing?” is simply: Whatever is profitable OR helps you reach your business goals.
If your strategy is not profitable, it should be an exception to a rule and a temporary investment to become profitable and hit your targets!
Calculating your TRUE Cost of Marketing
As a Business Owner, you MUST know your numbers, but before we get into the weeds, it’s important to understand why we can’t simply divide two numbers to understand our COM.
Marketing doesn’t solve sales problems. Marketing magnifies sales problems.
This is an important distinction because if your COM isn’t profitable, you might be trying to solve the wrong problem, which can end up costing you MONEY!
To calculate your TRUE cost of marketing there are a few “non-negotiable” metrics you must know in your business — In other words, you cannot scale your Painting Business without these numbers.
We recommend recording these monthly, but take a quarterly or annual average for the most accurate representation of marketing in a seasonal painting industry:
Each of these numbers tell a story.
For instance, if your Set Rate is below 70% (industry average) your lead quality could be at fault, OR your follow-up process may need some work.
Close Rate is 100% dependent on your sales process. If this number is below 35% (industry average) your sales processes are negatively impacting your marketing investments.
To make this as simple as possible, we created a simple COM Calculator, exclusive to Painting Businesses that will help you understand these numbers to take action in your business TODAY 👇
How can I improve my COM?
There are countless levers and buttons to push and pull, but which ones will have the most impact on COM?
Let’s review:
