ASA Central Network

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  • 1.  Marketing Budget

    Posted 04-07-2021 16:17
    As with many others, we are reviewing our Marketing Budget for 2021 and realize that there is a need to increase spend. What we have budgeted for years past is just not cutting it with all the recent challenges in staffing. So I was hoping to get some insight as to what other companies are using for their budgeting matrix? I know that the SIA in 2020 was showing .25% to .4% of sales and others where looking at .2% to .4% of revenue. We just want to review all of our options before setting out budget. I appreciate any insight that can be provided.

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    Nyoka Adkins CSP
    Director of Operations
    Custom Staffing Inc.
    Lima OH
    (419) 221-3097
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  • 2.  RE: Marketing Budget

    Posted 04-08-2021 08:02
    Good morning Nyoka,

    The numbers you shared are dead on for industry averages. That spend includes marketing and job advertising expenses, but (for some reasons that I do not get) tends to not include salaries of people working in marketing functions in staffing companies.

    When setting your marketing budget, I encourage people to think about the investment in different ways:

    • First is the traditional way, budgeting based on a percentage of sales. This can provide a rough estimate for the total marketing spend, but it really doesn't factor in your growth plans. For example, let's say you want to invest 0.25% of sales in marketing and you had $1M in sales last year. Would you budget $2,500 for marketing? Probably not because that would not be sufficient to drive growth.

    • Second is based on your overall business model. This is similar to the first method but forward-looking. With this method you look at your desired breakdown of a dollar of sales revenue. How does that dollar get divided? ASA did a great infographic showing a typical breakdown of the bill rate, and in that graphic, it shows the percent of revenue that goes to temporary staffing wages, taxes and benefits, and G&A expenses. For your business, how should the G&A be divided? What percent goes to sales, recruiting, overhead, and of course, marketing? This may be the same percentage as the first bullet or your model may have a higher or lower percentage of revenue that you want to allocate to marketing.

      Once you know your model, you can then determine a marketing budget by looking at your desired growth and multiplying by your marketing allocation percentage. Again, let's say you are $1M company, and you want to grow to $2M this year. If your allocation to marketing is 5% of your G&A expenses, and you're like the ASA illustration and your G&A is 21.3% of sales, your marketing budget would be 1.07% of sales x $2M = $21,312. That's better, but it still might not be sufficient to achieve 100% growth.

      And that's a sub-lesson about marketing budgets. For growth companies, they have to invest a larger percentage of sales than an established company does. Need proof? Look at most VC-funded tech companies. They will run negative cash flows (sometimes for years) in order to achieve growth goals. While I would not advocate that model for most staffing companies, it makes you think about balancing your desire for growth with your risk tolerance for investing to achieve that growth.
    • The last model for marketing is actually the one I like best. It can be used for your overall marketing budget or to do a back-of-the-envelope test to evaluate any marketing investment. With this model, you look at the marketing (and recruitment marketing) activities you most need to support your sales team and recruiters. Then, you determine the strategies and tactics you need to implement, and you cost out what it takes to effectively implement those tactics. Once you have that number, determine a target return on marketing investment that you would require. And finally, compare the sales required to produce your target return to the investment. Does it seem feasible? If so, make the investment.

      In practical terms, our company does this when we think about going to a trade conference like Staffing World. We look at the total cost of the event (booth space, shipping, preshow marketing, travel, etc.), and we have a target multiple that will justify the expense. If we think we can achieve that target in new sales, then it makes sense to be an exhibitor at Staffing World. If not, we stay home (don't worry ASA, we are headed to Denver this year!).

      For Custom Staffing, you might look at individual activities or since you asked about budgeting as a whole, you might outline all your desired marketing strategies and tactics, add up the total cost of implementation, then determine your own target ROI. If it seems realistic to achieve that ROI, you have your budget. And you can compare this number against either of the first two bullets as a sanity test.

      One last thing I like to do when trying to determine if the target ROI is feasible is to translate the target sales number into something easier to measure - number of new clients and/or number of new job orders. While no two clients or job orders are alike, you can look at your average client size and/or average job order sale amount to help estimate if your target sales number is feasible. For example, if you want to get $1M in new revenue, and your average client generates $50K in sales, then you need 20 clients. If your marketing investment is sufficient to target 200 prospects, then you need to convert 10% (which might not be realistic). But if your investment allows you to target 2,000 prospects, and you need a 1% conversion rate, that's probably very achievable.

    Nyoka, I hope this is helpful. There are definitely some complexities in budgeting that I did not cover here and not all marketing investments are equal, but hopefully, these models will help you find the right methodology for budgeting for your company. Please feel free to reach out directly if you have questions.

    David





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    David Searns
    CEO
    Haley Marketing | 888.696.2900
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  • 3.  RE: Marketing Budget

    Posted 04-08-2021 09:36
    Edited by Jay Mattern 04-08-2021 09:36
    Nyoka:

    I also agree with your numbers for what is traditionally being budgeted for marketing efforts in the industry. I offer a slightly different path for you to consider as a response to your post. 

    • Strategy before execution. You mention that there is a "need to increase spend" for your marketing budget. Is that really the case? Will simply spending more money lead to more or better results? I don't think you can answer that question without stepping back and taking a hard look at your current marketing strategy. If your current marketing efforts are not producing the desired results (more on this in the next bullet point), and if they are not properly aligned directionally with how your organization is positioned and the market(s) served, doubling or tripling your spend will only serve to impair your ROI.
    • Clear and realistic expectations. Is your concern about the marketing budget possibly being influenced by unrealistic or unclear expectations? Through no fault of you or your team, it is very easy (and quite common in staffing) to move quickly through setting objectives and expected outcomes and head right towards the actual results being produced. I often work with clients who, once they define their expectations with regard to the marketing program, can more accurately assess how the program is working and are able to make more and better "on-the-fly" adjustments.
    • Messaging and communication. Who is your "audience" for both prospective clients and candidates? Has a deep dive taken place on the personas/profiles of each and is all of your messaging (email, social media, print, website, direct mail, etc.) consistent and delivering relevant content that resonates with them? Does your corporate brand connect your messaging in a way that communicates the unique value Custom Staffing brings to the marketplace? It is often the case that by tightening up the messaging and brand presentation, an immediate improvement in marketing outcomes can be seen.
    • Employment brand. I'm guessing that, like everyone else in the staffing industry, the real challenge right now for you is not with generating new clients, but rather finding talent to fill the onslaught of job orders you now have. Staffing firms are first and foremost selling organizations. That has always been the case, but we're beginning to see the scale tip from client acquisition to candidate acquisition. Aside from economic recessions, the market tends to always have more opportunity than there is talent to satisfy it. in growth cycles, job openings tend to be leading indicators and available talent a lagging indicator. The messaging discussed in my previous point that is directed towards the client will not get the attention of job seekers. They have their own unique wants and needs and it is imperative to make sure you develop and sustain an "employment brand" that directs its efforts towards communicating effectively with candidates - and as we all know, it's not just the money! Competitive pay rates are great, but there are many other considerations that these seekers are looking for. 
    • Organizational structure and accountability. I'm not sure who drives your marketing program and who is ultimately accountable for the results produced. It sounds like the overall responsibility lies with you. As Director of Ops, you have a very important role and one that covers a lot of ground. Prior to my current role with TerraFirma Marketing, I co-founded a staffing company and held many different roles, including one like yours. I understand the demands of that role. One of the things I did early on was to add an administrative marketing function. Not someone with years of marketing experience that would cost a fortune, but someone with a degree in marketing with some work experience. This allowed me to develop the internal marketing function as the company grew and have someone accountable for day-to-day execution. You may already have that function, but if not, it's worth considering. As an alternative, of course, you can always outsource your marketing to a professional firm like mine or David's!

    I hope these ideas help you as you assess whether to increase your marketing spend or make adjustments to your current program. And, of course, I'm always happy to talk staffing!

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    Jay Mattern
    CEO
    TerraFirma Marketing
    South Bend IN
    (574) 213-3855
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  • 4.  RE: Marketing Budget

    Posted 04-08-2021 10:39
    Hi Nyoka,

    Ty may wish to chat with Haley Marketing about this issue. Besides having many clients that they can probably give you some aggregate spend data, they also have wonderful marketing ideas to consider.  Also Terra Marketing is another good staffing marketing co that may also have data sets to help in your decision making.

    While we are  a work comp staffing solutions vendor for the last 15 years, and use social media almost exclusively because of the data capture and analysis that we feel makes our marketing very efficient, when I owned a 60 office staffing co for 16 years prior, capturing and analyzing sales people lead data was a monthly activity for us.

    Take care

    David


     
      
    David Schek
    President
    Staffing Comp Solutions
    American Staffing Association Member
    ASA  Central 2019/2020 Most Valuable Contributor
    ASA PAC Contributor

    America's Leading Staffing Workers  Compensation Broker With 50 Years Experience. 
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