The following post is the second in our series on “Outsourced Marketing.” In Part 1, The Market we looked at the marketing landscape for businesses that need help with marketing. In Part 2, we provide a framework for selecting the right-fit marketing professional.
Outsourcing: A Buyer’s Guide
Now that you know the options in the market, ask yourself: What is the role of marketing in my organization? In general, we see business owners answer this question in one of two ways:
- “I see marketing as a series of tactical initiatives. The job of marketing is to create materials that support my sales efforts. I tend to prioritize execution: build a website, design a brochure, or revamp our old logo.” We call this, “Tactical Focus.”
- “I see marketing as a strategic business tool. Marketing’s job is to look at the market, assess opportunities, develop a marketing process to capitalize on demand, and measure what works (and what doesn’t). The job of good design is to support the marketing message and strategy.” We refer to this as, “Strategic Focus.”
Each business owner will have a different approach when looking for services – there’s not one wrong or right answer. Take finance, for example. Some owners have simple books and can outsource their bookkeeping to a partner that processes payables and receivables in an afternoon (Tactical need). Others may have more complicated finances requiring a deeper skillset and high-level perspective (Strategic need).
Use Size to Find the Right Fit
An effective way to determine the right outsourcing model is to base your selection on revenue or number of employees. The sections below outline which options make the most sense based on total annual revenue. Note: These figures are for professional services firms. If you’re in manufacturing, you may need to double or triple these numbers – especially if you have high COGS.
Startups and businesses under $500,000 in annual revenue:
The Business Climate: When you’re starting out, most of your needs will be tactical (I need a website NOW) and cash will be tight (unless you’re lucky enough to have funding). As a result, most businesses will need to work with a collection of freelancers to get the job(s) done. As the owner, your challenge will be to maintain a vision for the fast-evolving company.
If you are tactically focused…Concentrate on building a team of freelancers and carefully budget your time to manage them. If time is in short supply, consider spending a little more on a Tactical Agency or a Lone Gunman with a network of freelancers.
If you are strategically focused…Consider hiring a Lone Gunman early on in the process to help formulate a game plan. Look for consultants willing to say, “I’m good at some things, but not at others.” You want a partner who knows their strengths and has the confidence to recommend other experts as needed. A really great Lone Gunman will help set your brand on the right path – something critical to early-stage businesses.
Budget Reality: Unfortunately, start-ups often need to dedicate more money to marketing since they often have to unseat incumbent businesses or create brand awareness. Expect to spend anywhere from 5-20% of your revenues on marketing (often expressed as sweat equity by owners and staff).
Businesses with Revenues
$500k – $1 Million
The Business Climate: At this point in their business’ evolution, owners begin to experience the very real pain of hiring employees to fill “roles” within the company. Successful entrepreneurs begin to transition to managing people rather than delivering services to clients. Marketing becomes an increasingly difficult challenge, and many businesses realize that their initial branding efforts are no longer up to the level of competition. It’s tempting to hire an in-house marketer; don’t do it (see Part 3 of this series for why this is a mistake).
If you are tactically focused… With time in shorter and shorter supply, consider hiring a Lone Gunman with strong vendor networks and project management skills. You may not need the Gunman for her strategic skills, but her ability to wrestle projects to the ground will be priceless. Alternatively, now may be the time to move away from freelancers and towards a Tactical Agency. The efficiencies you realize will offset any added costs.
If you are strategically focused…With revenues approaching $1 million, consider working with a Strategic Agency or hiring a Lone Gunman with quantifiable strategic planning experience. Both solutions will help you wrestle the chaos of your growing business; great partners will have systems and tools that can accelerate the pace of your marketing and help your company grow even faster.
Budget Reality: Your spending on outsourced marketing may increase at this point, as you patch over the “tape and shoestring” solutions created in the business’ early development. Budget lower numbers if you have a market ripe for the picking, small volume, and good margins; budget more if there’s substantial competition or your business model requires educating customers to your value proposition.
Businesses with Revenues
$1 Million – $4 Million
The Business Climate: Reaching the $1 million mark is a major milestone in any business’ evolution. It’s a rare event: statistically, the odds are against clearing this hurdle. Why? For the simple reason that – as a firm grows – the owner must make a significant shift away from being the “go-to” guy (or gal) for everything. Between $1 and $4 million, complexities (like employees) increase in number.
If you are tactically focused…At this point in your business’ evolution a Tactical Agency makes the most sense. Freelancers are still viable, but their cost-savings diminish as your time becomes more scarce.
If you are strategically focused…You’ve probably graduated to a level where a Strategic Agency is the right answer for the added complexity of your organization. If your business is exclusively online, and you have a strong brand, a digital agency is worth consideration. If your company sells a consumer product to a mass market, adding Public Relations may be a key move. In fact, many businesses employ multiple agencies (Boutique and Strategic) to accomplish their marketing goals…often without hiring an in-house marketer.
Budget Reality: By now, you have a sense of annual marketing needs, but may need to spend on outside help to realize new opportunities. Similarly, tracking the return on your marketing efforts will require new processes. Look to dedicate a portion of your budget to more accurately track your sales and marketing efforts (a CRM system or marketing and sales dashboard). Certain industries will require some in-house marketing team members if their business model requires elaborate proposals and presentations (Architecture, for example).
Businesses with Revenues
$4 Million – $10 Million
The Business Climate: Very few businesses actually “sit” very long between $4 and $10 million in annual revenue. One you’ve hit $4 or $5MM, it’s a push to the $10 Million goal line; statistically, most organizations either graduate to double-digits, or they drop down to earlier revenue marks (in other words, there simply aren’t that many businesses that run $7MM in revenues year over year).
If you are tactically focused…With increased business complexity, Tactically-focused and consumer-facing businesses will often hire their first in-house designer or writer. B to B organizations will sometimes bring on a person to help write proposals or coordinate events.
If you are strategically focused…Growth at this scale often means working with an outsourced marketing partner that specializes in your industry or product category. Examples include agencies that work with professional service providers vs. agencies that focus on consumer goods. It’s tempting to hire a “marketing director,” but rarely does this pencil out (more on this later).
Budget Reality: Over time, marketing has become a larger and larger cost center for the business. This is natural, as growth means moving into new markets and bumping up against new competitors. Hopefully, you have systems in place to track marketing ROI.
Should I Hire?
In the final installment of our Outsourced Marketing Series, I’ll take a hard look at when it makes sense for businesses to hire an internal marketing resource or team. Outsourced marketing is a key move for most businesses, but at some point there comes a time to add full-time, dedicated resources. I’ll share key criteria you can use to determine not only WHEN it’s right to hire, but also WHAT TYPE of hire makes the most sense for your business.
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