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Talking about money always sucks. No one likes it and assigning budgets to specific initiatives is always tedious. There’s also a specific area that most small and midsize managed service providers (MSPs) omit, especially when it comes to cost: marketing. Why? Because talking about money sucks!

Everyone wants more leads, but no one wants to pay for them. However, I believe the biggest part of the MSP marketing budget struggle is lack of knowledge or understanding of the big picture. So let’s clarify the process a bit, and shed some light on marketing budget allocation.

Let’s run a hypothetical scenario

Say you have an agreement with an agency, and for $2000 a month, they run your social media, write you a couple of articles and manage some ads. Or, if you execute internally, you put that $2000 toward online campaigns. Now $2000 can seem like a lot of money, but let’s put it in perspective: the sole purpose of marketing is to bring you actionable leads. You either nurture potential prospects into warmer leads if they’re top-of-the-funnel leads, close them into clients, or discard them and optimize your campaigns for better results. Yes, there are multiple type of campaigns and initiatives, but the bottom line is always growth.

If your marketing generates 10 good leads per month using average industry numbers, turns six of them into assessments or opportunities, then closes one of those, your monthly numbers will look like this:
  • Budget: $2000
  • Leads: 10
  • Cost per lead: $200
  • Conversion to sales lead: 60%
  • Cost per opportunity: $333
  • Conversion to client: 30%
  • Cost per ONE client: $2000
Money out, money in! Now, to calculate your return on investment, you’ll need to take a step back:
  • How much does your average managed service package go for?
  • How long do your clients stay at your business?

To get your answer, multiply those two together! Voila, your profit and return on investment.

Karl Palachuk gives this example regarding monthly clients:

“A $1,000/month contract becomes $12,000/year and $36,000 over three years. Plus, that client totally relies on you for other purchases as well.

Get fifteen of those and you’ve got $180,000 a year!

Add twenty contracts at $3,500 per month and you’ve got a million dollars.

The most beautiful thing about managed services (and cloud services) is recurring revenue. It’s built into the system. It IS the business model.”

I totally read that in his voice. Did you? Let’s continue.

You paid $2000 to get one client that, using the example above, will bring you $12k per year. The math is simple: you will get that money back. It’s just a question of mindset.

HubSpot has developed a pretty handy advertising ROI calculator, if you’d like to give it a go, too.

What should go in your MSP marketing budget

For a full view of what your marketing is going to cost you, you need to clarify a few things first. Ask yourself the following questions:

  • What is the current state of your website?
  • What have you done in the past—is your marketing library completely empty, or do you already have a few assets?
  • Do you have the required software subscriptions to get started?
  • Do you have the time to create certain things, or have an internal resource that can take over? Will you need freelancers?

These are all important. Freelancers, software, new hires, content creation and advertising are all important parts of a marketing budget. If you already have some assets prepared, content creation won’t cost you as much compared to starting from scratch. If your website needs a redo and you need an agency, that’s also important to factor in for the first year. The sweet thing, though, is that MSP marketing budgets aren’t set in stone. You can shift money around based on the success of specific campaigns and your ROI, and some initiatives are a one-off spend.

If you’re planning to do things yourself as a means to save money, you’ll need to consider the price you’re willing to pay for your own time. Time spent doing marketing instead of something else that can yield greater results is important to consider. If you can hire a resource to do the job better, faster and cheaper, it might be better to go that route than trying to do it yourself. SMB owners often forget about the imaginary price tag on their time because they’re not billable. Don’t make this mistake; think of yourself like an employee. Would you pay an executive to write blogs? Probably not. Factor it in!

A rule of thumb that’s floating around the web for SMBs is that 5-8% of your budget should be spent on marketing. When considering what to spend it on, think long term, high impact, and sustainable. Newspaper ads and billboards, for example, are very expensive one-time tactics that you can’t properly measure. Instead, focus your energies on tactics that scale, like digital marketing.

Sherweb can help you with marketing

Sherweb can help partners kickstart their digital marketing strategy with our Marketing Program. In it, you’ll find plays-in-a-box for your marketing and other resources to help you generate new managed services leads.

Until our next convo, stay engaged! Connect with me on LinkedIn, and let me know what you’d like to read about next to further your marketing knowledge.

Sherweb Marketing Program

Written by The Sherweb Team Collaborators @ Sherweb