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Marketing strategies, just like any other business asset, are best when diversified. The problem is, the more comprehensive your marketing playbook, the more difficult it can be to gauge how much you\u2019re spending vs. how much you\u2019re making. That means you need to optimize your marketing budget if you want to make your business as profitable as possible.<\/p>\n
A well-planned budget ensures your resources are allocated effectively, helps improve ROI, keeps you on track to reach your business goals, and can help you see what\u2019s working and what\u2019s not. In this blog, I\u2019ll show you how to optimize a marketing budget for small businesses, calculate ROAS, avoid the sunk cost fallacy, and more.<\/p>\n
At its essence, a smart marketing budget is about investing money to hit your goals. Naturally, this doesn\u2019t work if you don\u2019t know what your goals are. Start here\u2026<\/p>\n
You want to have SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals. Clear objectives help you determine how much to invest in each marketing channel and guide your decision-making process.<\/p>\n
Your marketing budget should align with your broader business growth objectives. If expanding market share or entering a new geographical area is your focus, allocate resources accordingly.<\/p>\n
Knowing your audience is key to making the most of your marketing dollars.<\/p>\n
Your research should include:<\/p>\n
Where are your buyers and sellers spending their time? What social media platforms do they use? How much do they make and what are their biggest problems?<\/p>\n
Increasing your understanding will help you choose the right channels and create a focused real estate marketing plan<\/a> that resonates with your target clients.<\/p>\n Reviewing previous ad spend and campaign performance is critical for creating an effective budget if you\u2019re running ads. Identify what worked well, calculate ROAS (more on this below), and determine areas where improvements can be made. Avoid falling into the sunk cost fallacy\u2014don\u2019t keep investing in strategies that aren\u2019t delivering results just because you\u2019ve already spent money on them.<\/p>\n Expenses vary based on your overall marketing strategy<\/a>, but most agents will end up spending on certain things such as a CRM, specific AI tools, open house essentials, an email marketing distributor, and SEO tools.<\/p>\n Here are some of the most common:<\/p>\n Take a good look at your content marketing calendar<\/a> and see what tools and expenses are involved in each.<\/p>\n Many agents would say to allocate 5\u201310% of your gross commission income to marketing but in a market like this, 10-15% might give you a greater ROI.\u00a0<\/span><\/p>\n Remember, those who go hard on marketing in down markets are the ones who thrive when things speed back up. And they\u2019re starting to speed up now, which means you need to be even faster.<\/p>\n If you earned $100,000 in GCI, consider how much $15,000 spent on strategic marketing could earn you.<\/p>\n Never go over what you can realistically afford.<\/span> Your marketing budget is just one factor of your life that you need to budget for. Taking out of your savings is not a sustainable strategy.<\/p>\n Use the Tom Ferry Business Plan Template<\/a> to create a budget for your entire business and track your spending.<\/p>\n ROAS stands for Return On Ad Spend, and it\u2019s a key metric for helping you determine the effectiveness of the digital ads you\u2019re running.<\/p>\n The ROAS formula is Revenue from Ads \u00f7 Ad Spend = ROAS<\/span><\/strong>.<\/p>\n ROAS Example:<\/strong> If you spent $1,000 on ads and generated $5,000 in revenue, your ROAS would be 5. This means you earned $5 for every $1 spent on advertising.<\/p>\n No matter what kind of marketing you\u2019re running, you MUST be tracking the ROI, but it\u2019s especially true for digital small business advertising.<\/p>\n Tracking the ROAS of your real estate social media marketing<\/a> will help you reallocate your budget for better results.<\/p>\n Essentially, the sunk cost fallacy is the idea that businesses (and people) will continue investing in things simply because of the money and effort they\u2019ve already spent. \u201cWell, it\u2019s too late to turn back now, heeuhh!\u201d\u00a0<\/em><\/p>\n If you\u2019ve poured money into an ad campaign that isn\u2019t generating leads, it may be tempting to put more money into it instead of redirecting your budget to something else. Don\u2019t do that.<\/p>\n It\u2019s similar to the IKEA Effect, which states that you\u2019re more likely to keep a dresser or a bookshelf because you\u2019ve put in the effort to assemble it.<\/p>\n I don\u2019t want to say too much here because this topic deserves its own blog, but I will say that this is a major killer of not only real estate lead generation<\/a> but also management and leadership.<\/p>\n You must know when to hold \u2019em and when to fold \u2019em.<\/p>\n Your marketing budget needs to be in line with your overall marketing strategy<\/a>\u00a0and work to improve it instead of constraining it or scattering focus.<\/p>\n The best way to do this is with our Marketing Budget Template<\/a> inside the Tom Ferry Business Plan. This will help you break down exactly what marketing channels you\u2019re using and what you\u2019re gaining from each, and help you to separate your fixed and variable costs.<\/p>\n Please keep in mind that this is just an example, and I\u2019m not saying that this breakdown is right for you!<\/p>\n In this marketing budget example, our agent has allocated $15,000 to a fully-rounded year-long marketing strategy.<\/p>\n Creating a marketing budget isn\u2019t just about crunching numbers\u2014it\u2019s about strategically aligning your resources with your business goals to achieve sustainable success.<\/p>\n Marketing is an investment. You spend money in order to make more back in return.<\/p>\n Tens of thousands of agents will tell you that coaching is the highest ROI investment <\/strong>you can make in your business. Having a professional coach help you craft a winning marketing strategy and budget and implement them is absolutely invaluable.<\/p>\n Make this the year you take your finances to the next level. Schedule a business growth<\/a> evaluation to learn more!<\/p>\n<\/p><\/div>\nAnalyze Past Marketing Performance<\/h3>\n
What Are Normal Marketing Expenses for Small Businesses?<\/h2>\n
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What Percentage of Revenue Should Be Spent on Marketing?<\/h2>\n
What Is ROAS?<\/h2>\n
How Do You Calculate ROAS?<\/h2>\n
What is Sunk Cost Fallacy?<\/h2>\n
The Best Way to Create Your Marketing Budget<\/h2>\n
A Marketing Budget Example<\/h2>\n
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Monthly Expenses Breakdown:<\/h4>\n
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Build a Marketing Budget That Fuels Your Growth<\/h2>\n