Setting a Marketing Budget for a Landscape Company

The primary goal of marketing is to generate and nurture high-quality leads. You want to attract the right potential customers to your business and to set expectations in their minds about the experience they will have with your company. It is the role of sales to convert these leads into customers.

For almost all businesses, the right marketing strategy enables the company to grow faster and provide customers with a more satisfying experience.

It may seem as though your business is getting along just fine without investing in marketing, but you will likely reach a tipping point where it starts to make sense to invest in marketing, including  a marketing consultant. I go into more detail here on when creating a budget is worth your time, so if you are unsure if your business is at the right stage for this, start with that post and circle back. (After all, if you are not yet ready for a budget, you are likely not ready for a marketing budget either.)

However, for those who know the time is right, read on.

A strategic investment in marketing has the power to:

• Grow revenue over the long term
  
  
• Improve retention rates for current customers, by keeping your brand top-of-mind
  
  
• Build and refine your brand, making the sales process more efficient

How do I determine the right marketing budget?

Think time and money.

For most businesses, I think in terms of a percentage of the owner’s and other employees’ time as well as a percentage of revenue. These percentages may change every few years as you measure the results.

For the landscape industry, I think in terms of 3%-6% of revenue for marketing and sales, not including the value of the owner’s time. Companies with residential maintenance customers may have a higher percentage, but they need great measurements and pricing that enables them to pay for more marketing.

You need to start thinking about a marketing plan when your revenue hits $1 million.

You might spend more than 3-6% that first year as you develop the plan and conduct experimental campaigns to drive leads. Be sure to account for this as you begin your marketing efforts.

In the landscape industry, once your revenue exceeds $15 million, you may want to hire a marketing expert full time to create and execute a plan.

Companies with revenue between $1 million and $15 million will want to hire a marketing consultant. When you hire a consultant, be sure to hire someone who will create AND execute the plan. The marketing consultant needs to be accountable for the results and your time is too valuable to execute marketing campaigns.

If you are selling recurring services and you are effective in retaining customers (e.g., landscape maintenance customers), then you can spend more money on marketing than if you are selling one-time services (e.g., residential design / build).

Once you have determined the rough monetary target for marketing, you will need to fit it into your overall annual budget. If you haven’t yet read my blog post on an easy process for preparing your budget, you may want to check it out here.

Diagnosing and Optimizing Marketing

Periodically, you should review the results and costs of the plan to ensure you are realizing your goals. Your business may need more or different marketing if:

• You are not getting enough leads for your salespeople to close.
• You are getting leads, but not enough of the leads are qualified.
• Your brand is not known and building a brand is vital in your market.

A Word of Warning

I have met many marketers that want to “start at the beginning.”

These marketers want to get started with the business name, logo, and website. (In the old days, they would sell you a brochure instead of a website.) However, if you have been in business for a few years, are profitable and have a reasonable degree of customer satisfaction, then run from any marketer who wants to start there.

Here’s why: Many marketing consultants start with these items because changing them is entirely within their control and the metrics for success are fuzzy. They do not need anyone to respond other than you to achieve marketing success. Frankly, it’s easier to get you to respond than it is to get your potential customers to respond.

If you have the most awesome name, logo, and website, what good will it do if no one sees it? You need people to see them and respond – to identify themselves as potential customers.

The real value of marketing lies in connecting with the right potential customers at the right time. Achieving that result is much more difficult than designing a new logo or developing a new website.

Frankly, I like for marketing people to demonstrate an ability to generate leads prior to re-designing a logo or website. With the revenue coming from those new leads, you can fund the new logo or website. Doing the new logo and website first is most likely a ticket to more spending without more revenue – completely backward.

How can you measure effectiveness?

Another word of warning: if a marketer never mentions revenue as the goal, run.

Revenue is the ultimate goal of marketing. Unfortunately, I have encountered many marketers who do not understand that reality.

With all that said, it can take a long time for marketing spend to generate leads that become revenue. Generally, marketing is a long-term investment, and the results increase as campaign duration increases. Revenue is the lagging indicator of an effective marketing campaign, often apparent long after the campaign’s launch. Therefore, we want to identify some leading indicators of increased revenue.

Think about the customer journey – all touchpoints – and what interactions can be measured along the way. These might include the following:

• Phone calls
• Email inquiries
• Proposals
• Lead quality: whether leads fit your ideal customer profile (correct location, revenue size, type of services needed, etc.)

Monitor these leading indicators on a regular basis to get a general sense of marketing effectiveness. Of course, as these leading indicators convert to revenue in the sales process, you will also be able to measure revenue.

Common Objections to Investment in Marketing

“I haven’t done paid marketing and don’t seem to need it.”

When you first start out, often you do not need a marketing budget. Friends and family will help you get started, and early adopters are motivated to help. However, that situation usually becomes less favorable over time as the “newness” of your business fades.

You may be growing revenue based on your personal contact list. When that list runs out, you will need marketing efforts to continue growing.

Although referrals are an excellent source of new leads, you should measure the number and quality of these referrals so that you will be ready to expand your marketing if necessary.

One final note:  To grow, your contact list and referrals must produce revenue greater than the revenue lost from customer attrition.

“My margins will not support it.”

When I hear this statement, it is an immediate alarm bell, signaling an urgent need to raise prices, increase efficiency, change the business model, or some combination of all three.

Most companies underprice because they do not know all of the costs required to grow and sustain a business – marketing costs included. For most companies out of the startup phase, I encourage owners to fund marketing out of profits. If you have been in business at least a few years and you do not have profits, you probably have other problems with your business model that are not likely to resolve with marketing.

“I don’t think I am ready.”

You may be right. You may not be ready.

Here’s what you need to be ready:

• Confidence in your ability to execute for your customer.

Perfection is not required, but predictability is essential.

Let’s put this in school terms. A consistent passing grade is more important than a mixture of As, Bs, Cs, Ds, and Fs. You need consistency so that marketing can begin setting expectations in the minds of your potential customers.

• The ability to grow and service more customers.

It does no one any good to attract more customers only to disappoint them. Ensure that your business can handle an increased volume of work and that you will not be overwhelmed by the results of your marketing campaign.

• A focused definition of your target customer.

If the sole requirement for being your customer is that a person is willing to pay you, then you need to create a narrower target customer profile. Here’s a good expression to remember:  “If you are talking to everybody, you are talking to nobody.”

Moving Forward With Confidence

If you are ready to expand your marketing efforts, keep the following simple statements in mind:

• The goal of marketing is to generate well-qualified leads.
• The goal of sales is to convert leads to revenue.
• Measure as many steps in the process from lead to revenue as possible.
• If you are not generating leads, stop spending money.
• If you are not closing those leads, stop spending money.

Finally, measure the cost of any marketing campaign against the results – primarily revenue.

With the right marketing, your company will grow, and you will be able to bring even more value to your customers and your community – the ultimate goal of a thriving business.

Special thanks to the guest blogger for this post, Greg Herring!  Check out his upcoming webinar series on Making 12% Profit on August 15th and August 29th. 

Greg Herring has served as a CFO of both public and private companies. Herring is the CEO of The Herring Group, an operational and strategic finance consultancy. He has significant experience in the landscape industry, where he serves business owners challenged by growth by installing financial dashboards and systems that provide more margin for their businesses and their lives.

Reach him at [email protected].