budget msp marketing

How Much Should You Spend on MSP Marketing?

Being in the IT business, you’ve realized by now that it’s difficult for consumers to place a price on something that they don’t fully understand.

That’s really one of the major woes of your industry.

Most of your consumers don’t know much about IT. They don’t want to know about IT (which is why they call you).

Everything is in perfect alignment — until the very lack of knowledge that drives people to your services also creates price-perception hurdles in the sales process.

A lot of things seem easy (and therefore, cheap) when they’re not fully understood.

If it looks easy to do, it looks cheap to hire out.

In pricing strategy, that’s a very simple maxim of perceived value (and perceived quality).

This is something that we face all the time in marketing, as well. Many people think that what we do is simple. Truth be told, most people don’t really understand what we do, just like with IT professionals.

And just like you, we’re on a constant crusade to demonstrate our value. This is critical for my personal survival in this industry, for our company, and for our clients…

…but in this post, I want to leave the personal part out of it.

The Real Value of Marketing Your MSP

This isn’t about hiring any particular person or company. What I want to talk about is the very foundation of your marketing efforts: your commitment to it as a business owner.

I’ve been working with Axcient’s Tom Watson on a few upcoming webinars for their MSP Ignition! series. The topic is MSP marketing (natch) and the first thing I typed out while we were brainstorming was:

Do successful MSPs have outstanding marketing because they’ve grown enough to afford it… or did they become successful because they recognized the value of marketing, invested early, and made it part of their overall growth model from the very beginning?

What do you think the answer is?

Marketing got them there, of course. In many cases, it may not have been their promotion (advertising) that shot them to the top, but promotion is only one piece of the giant marketing puzzle.

Overall, the way they brought their offering to market determined their success. This is true of every business. Even someone with a brilliant idea that people should be clamoring for can screw up their chance for success by bringing it to market ineffectively.

Just look at  the consumer electronics industry over the last 20 years and you’ll see plenty of examples.

Like it or not, marketing makes or breaks businesses on a daily basis. So the real value of marketing your MSP is that your company can’t exist without it.

Market or die. That’s the simple part.

Now the sliding scale comes in. How much marketing should be done? Where? How much money should you spend on it?

Setting an MSP Marketing Budget

Firstly, make sure you’re actually budgeting for marketing. If your plan is to use whatever is left over from the rest of your operational budget on advertising, you’re doing it wrong.

When determining how much of your budget to allocate to marketing, there are a lot of factors to consider. Your revenue, of course, as well as the size of your company and the competitiveness of your market.

Assuming that your MSP qualifies as a small- to medium-sized business, your marketing budget should be somewhere in the area of 8% of your gross revenue. That’s based on typical Small Business Association recommendations, however many experts raise that number substantially if you’re in a competitive industry.

Unless you’ve managed to score a regional monopoly, you’re most likely dealing with a lot of competition. This means your MSP marketing budget recommendations can go as high as 20% of gross revenue.

If we look at the real-world numbers — not recommendations, but what small businesses are actually spending on average — you’re going to see a number closer to 12% of gross revenue.1

What this means to MSP owners is that if you’re not allocating 12% of your revenue to marketing, you may find yourself struggling to grow — or even stay afloat.

It’s Not the Size of the Marketing Budget; It’s How You Use It

You can certainly “pay-to-win” in the business world, but the vast majority of owners don’t have bottomless pockets.

Putting those dollars to good use is paramount to success.

As Tom, Jamie, and I continue to work on the marketing series for MSP Ignition!, I’ll be going into more detail on spending wisely on our blog. Be sure to check back for the latest!

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