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Mike Lieberman, CEO and Chief Revenue ScientistMon, Nov 9, 2015 8 min read

How Much Should We Be Investing In Inbound Marketing?

Inbound Marketing Investments And Results Are Directly Related To One Another

What Does Inbound Marketing Cost?This is one of the most important questions you need to ask as you’re evaluating options for your inbound marketing program investment. The easiest way to answer it is by determining how aggressive your revenue goals are. The more aggressive they are, the higher your investment in an inbound marketing program should be.

Let me be even more specific. There is a lot of work that goes into planning, building and growing your inbound marketing effort. This is a long-term focus (12 to 24 months or longer). Once you start down the path of inbound, you need to stay the course.

Inbound is a marathon, not a sprint, and the companies that see the best results are those that make the move to work on their program month in and month out.

So, back to the level of investment required to drive results. As I stated, inbound is a labor-intensive effort. You must be constantly creating content, optimizing landing pages, evaluating analytics, nurturing leads, adding to your website and enhancing the prospect’s experience throughout the buyer journey. The more you do, the better your results will be.

Get Out Your Calculators

Deciding an investment level is a simple math exercise. Start with your revenue goals. Lets say you’re a $10 million/year company and you want to add an additional $2 million in incremental revenue in 2016. If your average revenue per new client is $10,000 per year, you’re going to need 200 new clients over the course of 12 months. Assuming you close 50% of your sales-qualified leads (SQLs), you’ll need 400 of them.

Typically, SQLs represent about 10% of total leads, so in this scenario, you’ll need 4,000 leads over the course of 2016, or about 333 per month. Again, well use some general numbers: To generate 333 leads a month, you’ll need about 33,000 monthly visitors to your website.

This is a reality check. Take a look at your current traffic. If you have 1,000 visitors a month now, it’s probably going to take you four to five years to get up to 33,000 a month. Or, you can accelerate that timing by increasing your investment. For instance, it might take us 24 months to drive your site from 1,000 to 30,000 visitors at an investment level of $10,000 a month, but we might be able to get there in 12 months if you invest $20,000 a month.

Greater Investment Means Faster Results

There is a direct relationship between the timing, the actual results expected and the investment level. Need to lower your investment? No problem. Make sure you also lower your expectations around the results and the time it’s going to take to achieve them.

Now that you understand the key mathematical relationships between investment and results, let’s look at this question from a different lens ...

The Inbound Marketing Magnifying Effect

The longer you do inbound, the easier it gets (and the less youre required to invest) to drive the same level of results. Why would that happen? First, you’ve earned the attention of many more people over time. Your email list, which started at 2,000 names, is now at 10,000 names. Your social media audience, which started at 200 followers, is now at 2,000 followers. Your number of blog subscribers, which started at zero, is now at 2,600 daily. So, the effort and investment to produce a single blog article will generate exponentially better results the longer you’ve worked on your inbound program.

We call that the Magnifying Effect: the same amount of investment for exponentially better results. The challenge is that you need to hit a critical mass or tipping point in your program to realize this momentum. Every client has a different tipping point, so predicting exactly when the Magnifying Effect will kick in is difficult.

There is one other concept that you need to be aware of, and that’s the relationship between revenue and investment. In the case above, you’re looking for $2 million dollars in revenue. Would you be willing to pay $100,000 to get $2 million? What about $200,000 to get $2 million?

What would it be worth to know exactly how many leads you’re going to get tomorrow? Next week? Next month? Next year? As I mentioned above, the Marketing Machine that follows as a result of inbound marketing is going to be a company asset for years to come. So, what would you pay for an asset like that?

The Experts Say

Here’s more food for thought: The U.S. Small Business Administration recommends spending 7-8% of your gross revenue on marketing if you’re doing less than $5 million a year in sales and your net profit margin – after all expenses is in the 10-12% range. suggests that companies doing less than $250 million spend around 6.4% of revenue on marketing, with some of the more aggressive firms hitting as high as 9%. So, our $10 million company above should be spending between $600,000 and $800,000 on marketing.

With this type of investment, you would have a great opportunity to hit the numbers we outlined above. You can create enough content to drive up website traffic dramatically, to nurture leads aggressively and to develop a web experience that easily connects with prospects and turns visitors into leads. This level of investment also shortens the time frame, so what might take 24 months at $20,000 a month may only take 12 months at $40,000 a month.

The most important takeaway from this article is the long-term thinking. Go all in on inbound and invest enough to move the needle, and quickly. The result will be a much stronger and earlier flow of leads taking a slow, up-and-to-the-right performance model into a more exciting hockey-stick performance model.

Start Today Tip – Almost every single prospect or client is significantly underinvesting in their marketing efforts, and the result is a lot of modest results. Clients who invest more aggressively always see more dramatic results. Your tip is to create an accurate marketing budget for 2016  one that is perfectly aligned with the actual numbers you need that investment to deliver, perfectly aligned with the timing of those numbers and appropriate for your size, profit level and risk tolerance.   

Quantify Your Inbound Marketing Program With The Inbound Lead Calculator If you need help coming up with that potential budget number, start by figuring out how many leads you need in order to hit your revenue goals. Use our Inbound Lead Calculator by clicking on the button.

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Mike Lieberman, CEO and Chief Revenue Scientist

Mike is the CEO and Chief Revenue Scientist at Square 2. He is passionate about helping people turn their ordinary businesses into businesses people talk about. For more than 25 years, Mike has been working hand-in-hand with CEOs and marketing and sales executives to help them create strategic revenue growth plans, compelling marketing strategies and remarkable sales processes that shorten the sales cycle and increase close rates.