According to the Small Business Administration 2021 Small Business Profile Report, there are around 31.7 million small businesses in the US. Of these, over 80% don’t have employees and struggle to make a mere $44,000 a year in gross revenue. Naturally, at that level, it’s tough to spend even $10 on advertising.

You can certainly grow relying solely on organic traffic generating methods. In fact, there are many successful companies that grew without relying on paid ads. However, building organic growth takes time and other types of resources. You need to have the proper positioning, perfect products, and incredibly loyal customers who will help you spread your message. If you have all that, you won’t have to spend any money on advertising.

However, if you find that the organic strategies do not give you the results you’re looking for, you want an immediate jump in growth, or you want to grow consistently, paid advertising on social media or search engines will be that much-needed fuel.

Think of paid online advertising as a faucet. You can turn it on or up when you want more water, you can turn it off or down when you want less water.

I personally recommend marketing managers and business owners use a mix of both paid ads and organic growth strategies. With the right combination, your revenue can skyrocket, and you’ll get be able to scale faster. Achieving your growth goals is simply a matter of dialing things in and turning them up.

So, When Should You Start Advertising Your Business?

1. Make Money First 

When a new business comes to our agency and says they need help with marketing, but their revenue falls below $100,000, we usually advise them on organic growth strategies. Chances are they’re still trying to figure out their customers are and getting their operations in order. If you’re under $100,000 in annual revenue and this is your first business, go knock on doors, cold call, network, and attend events to meet potential clients or promotional partners. You can go online and use Vistaprint to get brochures, postcards, and business cards. Go on Squarespace and get a website for a few dollars. Just start and focus on growing your revenue.

In my book, the Client Acquisition Blueprint, I explain a 10-step process for starting your marketing process. Step #10 is paid advertising. Implement the first nine chapters of the Client Acquisition Blueprint to get to around $100,000 in sales before investing in advertising.

2. Put Your Business Systems In Place 

You have to really dial in your business before implementing paid advertising. You need to have a product or service people want, have an easy way for people to give you money, and have your systems for delivery working. How are you answering your phone or emails when someone submits an inquiry? Are your conversations smooth, or are you winging it every time because ‘it’s all in your head’? Write it down, put it on a checklist, and make it easy for someone else to follow the same process. Make sure you have some basic automation and tracking in place to handle the new influx of business. Otherwise, you’ll get the calls, inquiries, and opportunities, but they’ll fall off your desk without you even realizing it.

Even when business owners think they have it all together, I’ve seen them shut off their successful ad campaigns because they’re ‘too busy’ and couldn’t handle the work. It’s a good problem to have, but it’s almost as bad as the feast and famine, cashflow rollercoaster most businesses find themselves in. I’ve seen business owners not put the proper tracking in place or write contact information on sticky notes, then toss them out with their lunch leftovers.

3. It Takes Courage 

Have you ever heard the expression, “It takes money to make money”? I disagree with that statement 90% of the time because you can find ways to make money without having to spend money. However,  in advertising it’s definitely true. More importantly, making money takes courage. The courage to go out there, learn a new skill, learn how things work, and then just take an informed leap of faith.

You never really know if a campaign will work, but you can’t get gun shy and start prematurely tweaking campaigns before they get a chance to produce enough data. If all this sounds too scary, and it most likely does – nobody wants to spend money without any guarantees or assurances – don’t worry. Below, we’ll go through the basic metrics to track on your paid advertising campaigns, so you know what to focus on. In the Client Acquisition Blueprint, we cover how to maximize your advertising efforts and create winning paid ads campaigns.

 

The Profit Path for Paid Ads

The Profit Path is simply a series of key metrics to track when running any marketing campaign. Here’s how to structure your own Profit Path, so you can build profitable advertising campaigns:

1. Determine Your Average Client Value

Look at your last 12 months of transactions and determine what your average client is worth to you. This will help you determine the maximum you’re willing to spend to acquire a new client. Measure both single transaction value and Customer Lifetime Value (CLV).

• On a single transaction: How much does a customer spend on average in their first purchase? Caution: this is where most business owners stop and they leave money on the table for their competitors to snatch up. Only looking at what you make on the first transaction is a huge mistake that prevents you from going all in on your marketing.
• Client Lifetime Value: How long does each client stay with you and continue to buy your products or services? I usually start by simply figuring out my clients’ 12 month value. How much do they spend with us during the first 12 months?

2. Set your Advertising Budget

In the Client Acquisition Blueprint, I talk about how to set your overall marketing budget. A good place to start would be to budget between 10% and 20% of your top line revenue for marketing. This number can adjust as you grow. Also, the more creative you are and the more organic marketing methods you deploy, the less you’ll have to budget out of pocket for marketing.

If you’re a $500,000 business (or want to have a $500,000 business) then you’re looking at spending between $50,000 and $100,000 in marketing yearly.

A simple way to divide your budget in this scenario is:

• 50% to pay for your team and assets. This can be either an internal marketing team or an agency partner. $50,000 per year might get you an entry level or mid level marketer depending on your market and location. Meanwhile, a great agency that specializes in digital marketing will charge between $2,000 and even over $10,000 per month depending on the services you need.
• The remaining 50% can be allocated to pay directly for advertising, in other words, this should be your ad spend budget.

3. Key Website Metrics

• Traffic: How many daily visits is your website getting? How many visits are your landing pages getting?
• Lead Conversion Rate: What percentage of your visitors take action and become a lead?

4. Key Sales Metrics

• Sales Conversion Rate: How many people do you need to talk to in order to get a sale?

5. Costs and Returns (Figuring out if your paid ads are profitable)

• Cost Per Lead (CPL): How much did it cost you to acquire a lead? Divide the ad spend by the number of leads generated from your campaign to find your CPL.
• Cost Per Acquisition (CPA): How much did it cost you to acquire a client? Divide the ad spend by the number of clients you got from your campaign to find your CPA.
• Return on Investment: Revenue earned divided by ad spend.

It’s important to monitor these numbers during the life of your advertising campaign, but you should structure your Profit Path from the beginning, so you’re clear on what to track. Set baseline targets, even if at the beginning you’re just taking educated guesses. After a couple of months, you will be able to make changes and optimizations to reach new targets based on your findings.

Advertising can be pretty simple. It’s a pay-to-play game that with some planning and strategic actions can have a very strong and positive impact on your growth.

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👉Order a copy of my book “The Client Acquisition Blueprint”.

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• The 10 keys to an EPIC online presence
• The secret to generating all the leads you could ever want—including the Not-So-Obvious questions you need to answer to attract highly qualified, easy-to-work with potential clients.
• Paid and Organic Traffic Mastery: The Fail-Proof Facebook Ads, Google Ads, and Organic Authority campaigns that nobody is talking about yet.

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