How Much Should Your Landscaping Company Spend on Marketing?
BY IRA THOMSON – SEPTEMBER 20, 2022
Key Takeaways:
- The “Old % of Revenue Standard” is a poor way of determining your landscaping companies marketing budget.
- You should move away from a static marketing budget model to a dynamic growth focused marketing spend.
- Know your cost-per-lead & cost-per-sale. If you don’t have a solid handle on these metrics, make your best educated guess and start measuring them ASAP.
- Revenue-per-sale & revenue-per-lead vary greatly depending on service and are essential inputs to the marketing spend equation.
- This article provides a simplified example of how to think about marketing spend, but doesn’t cover variables such as seasonality, multiple services, market factors, cost of service fulfillment BUT if you are interested in learning about how we help landscaping businesses determine their marketing budgets based on all these inputs, reach out today for a no strings attached consultation.
How Much Should I Spend On Marketing?
This is an important question we hear all the time from prospective landscaping clients. The short answer though is always the same though; Tell us more about your business!
This answer might disappoint some landscaping business owners reading this article and hoping for a quick answer, but trust me – you want to be measured and thoughtful with how you budget for marketing and wary of anyone who gives you too quick of a canned response.
Calculating your marketing budget and determining how much you should spend on marketing for your landscaping company at the start of the fiscal year (or maybe for the first time!) requires several essential inputs in order to set yourself up for the best possible chance of success and properly align your marketing budget with your business growth goals. This is why we ask a lot of business oriented questions when we meet prospective clients and throughout our onboarding process. In order to properly deploy marketing strategy, we need to understand your business!
Additionally, your marketing budget shouldn’t be set in stone and there is no problem (in fact, it’s important) with reviewing and adjusting your budget and spend regularly.
In this blog article we’ll outline a stronger growth focused method along with a few metrics that you can use to help determine how much your landscaping business should be spending on marketing.
The Old Standard
You’ve very likely heard the “rule of thumb” for determining marketing budget. This is commonly called the “percentage of revenue” calculation. The idea here is very simple. Allot a specific percentage of your current revenue for marketing spend.
The upside to this method is it’s extremely simple and easy to implement and, since it ties to your overall revenue, it adjusts depending on whatever current revenue you’re generating (which we will see later on is also a downfall).
The downsides to the old percentage of revenue method are many! For instance, it doesn’t factor:
- Your historical marketing performance
- The nature or pricing of your services
- Recurring services vs. 1-off projects
- Your current rate of growth
- Your actual growth goals
- Almost every other factor except your current static revenue!
As you can see the “popular standard” is pretty dang flawed. But there is another, better method. Read on!
Marketing For Growth
The whole point of marketing is to grow your landscaping business!
So it doesn’t make sense to base your marketing budget solely on your current business and revenue, it has to include your future growth goals.
In fact, when implemented effectively, marketing can be an inexpensive and efficient way to acquire new customers and build your client base and business (as opposed to acquiring another business, paying for external leads etc.)
Below is a simplified version of how you should calculate marketing budget for your landscaping company based on growth.
Know Your Cost-Per-Lead (CPL) & Cost-Per-Sale (CPS)
For the sake of this example, we’ll assume you only have 1 service. In reality you’re likely to sell several different services and each of these services has their own unique CPL, CPS and sets of attributes (exp. target audience, commercial or residential, seasonal selling and service windows, sales cycle length etc.).
You also may have a very precise idea of your CPL & CPS, but chances are you’ll have to make an estimate here and dial this in more accurately as you obtain more data and improve (as a landscaping marketing company, we know landscaping companies inside and out so can typically accelerate this process with a very accurate prediction of future CPL based on other companies and services we’ve worked with over the years).
CPL is essentially a measure of how efficient your marketing machine is (for instance, we’ve made our landscaping marketing machine very efficient at driving low CPL for landscaping companies). On the other hand, CPS tends to be more a measure of how efficient your sales processes are (follow-up processes, prospective client discovery call, proposal submission). By the way, our Landscaping Marketing Program helps you improve this aspect of your business as well!
CPS is simply CPL*CR (conversion rate). In other words, the % chance you will convert a lead to a paying client. This depends both on the quality of the lead as well as the efficiency of your sales processes.
A quick way to calculate these numbers is to reverse engineer them from your current marketing investment (if you have one!). For the sake of this example, If you currently invest 150k/year in marketing and this produced 2000 leads with 1250 closed sales, then you can calculate the following:
- CR (conversion rate) = 1250 sales / 2000 leads = 62.5%
- CPL = 150k / 2000 leads = $75 / lead
- CPS = $75 / 62.5% = $120 / sale
This is a simplified version for the sake of this article. In reality, it’s never this cut and dried and there may be several different calculations required for different services. This is also highly dependant on what you call a lead (a lot of landscaping business owners and even marketing agencies get this incorrect). A lead should be an opportunity to sell your service. For example, If you receive a phone call for a lawn fertilizer product that you don’t sell – that shouldn’t be counted as a lead. Our goal at Landscaper Marketing is to drive qualified leads. That is, qualified buyers in your target audience and service area seeking to buy your service.
Know Your Revenue-Per-Lead & Revenue-Per-Sale
Once you’ve calculated (or have a good estimate and are in the process of setting up systems to track) your Cost-Per-Lead & Cost-Per-Sale, it’s time to figure out how these leads perform to generate revenue.
To do this we calculate RPL & RPS. This is important as it’s the key to reverse engineering from your growth goal to determine how much money you need to budget for marketing to attain that goal.
Figuring out Revenue-Per-Sale is a fairly simple calculation because these are the numbers that (hopefully) you will have dialed in as a business owner. For this example, let’s say you sell a recurring lawn maintenance program that costs $250 per service and recurs 4x a year. Your yearly RPS = $1000.
Since you already know that you have a 62.5% conversion rate from lead to sale you can simply multiply this by .625 and determine that your RPL is ~ $625. That is, each lead (that you pay $75 for) is worth $625 in yearly revenue.
Align Your Growth Goal With Your Marketing Budget
The final step! All you have to do now is connect the dots to align your Growth Goal with your marketing budget. Let’s say you are a 2M a year landscaping company looking to grow to 2.5M over the next year. Your growth goal is 500k.
But wait! You’ll also have to account for cancelled business (churn) and non-recurring business. Let’s say this is another 500k (that is to say, 75% of your business is recurring. For example, maintenance contracts). This means that your marketing efforts should be aimed at generating 1M in new business (500k growth + 500k replacement).
Now simply reverse engineer:
Target Revenue / Revenue-Per-Sale = the # of new sales you’ll need. 1M/1000 = 1000 sales needed.
Sales needed * Cost-Per-Sale = Marketing Spend Required. 1000 * 120 = $120k
So there you have it. We can now see that in order to achieve your landscaping companies growth goal of growing from 2 Million to 2.5 Million you will need to spend $120k on marketing. If you want to look at this as a % of revenue it is 120k/2M = 6% or 120k/2.5M = 4.8% of goal revenue.
A Final Note
We made a lot of assumptions in this article. The intent is to give you a superior method and general understanding of how to calculate marketing budget (based on inputs like growth, rather than simply % of revenue). A couple simplifications we made that are rarely true in “real life”:
- When setting your yearly marketing budget (and maybe even your first budget ever) it’s unlikely you’ll have perfect CPL & CPS #’s. In this case, it’s important to make an educated guess, based both on historical performance and predicted performance and then iterate and improve as you acquire more data. At Landscaper Marketing this is our specialty; helping you formulate a best estimate and then continually iterating and improving based on all the data we analyze.
- You won’t have only 1 service with the same CPL, sales value, LTV (life time value) and recurring value/ cancellation rates. Your marketing budget should encompass all your services, growth goals for different services as well as labour and equipment variable costs of services (below).
- Your CPL & CPS isn’t linear. Depending on your current size, competition and target market your Cost-Per-Lead isn’t going to be a flat curve. It might rise as you sell to lower hanging fruit and have to spend more on tougher sales. It might be higher in a more saturated market or lower if one of your competitors goes out of business. The important thing here is to determine what cost-per-lead and cost-per-sale is profitable for your business.
- Cost of Services for landscaping companies for labour and equipment (variable & fixed costs) is vastly different. You might see the same ROI or % of revenue required for 2 different services, however one of them may have a much lower margin/higher cost of fulfillment.
- We didn’t touch on seasonality. And of course your marketing spend should fluctuate within the year, depending on seasonality of your services (exp. are you spending in the late summer to win de-icing and snow removal contracts and retainers for the winter?)
Our Landscaper Marketing Team
We pride ourselves on providing our clients with a comprehensive suite of services that can help them achieve their goals. Whether you’re looking for someone to help you produce high-quality video and image content, rank you higher in search engines, curate a social media marketing strategy, or need assistance with paid search advertising, we have the experts who can help. Our team of landscaping content marketing experts can create digital marketing assets that will make you shine online. And, our backend advertising wizards know how to leverage these assets in the most efficient way possible. So, if you’re looking for a complete solution to help you achieve your objectives, look no further than Landscaper Marketing.
Start Growing Your Landscaping Company Now!
Reach out today for a no strings attached consultation with Chris, our very tall and friendly Director of Client Relationships, and learn how we help landscaping companies grow.
Learn how we helped a landscaping company grow to 1 million in revenue per month from online sources alone.
See how we helped a permeable hardscapes company become an online juggernaut.
Or check out how we helped a landscape company reach the coveted 10M a year mark.
We help grow Canadian landscaping companies that currently make 2M+ per year in revenues. Need some more proof?
Check out our Landscaper Marketing Machine, Blogs, or reach out today for a free, no strings attached consultation to see if you qualify for our Canadian Landscaper Program.
Whatever you do, don’t forget to leverage the power of Google My Business when developing your landscaping company’s online presence. With it, you can boost organic visibility and local search rankings with relative ease. So make sure to include this powerful tool in your overall digital marketing strategy. Good luck!
