In case you missed my previous posts in this series, we've been talking about making your Digital Marketing Department or Agency profitable by treating it like a business. First, we talked about the goals and metrics, then moved into revenues. You can think of this as a pro forma balance sheet, complete with Assets, Liabilities and Equity. In today's post we'll take a look at the Liabilities, the cost side of the ledger.
We have looked at several possible scenarios for growth in primary KPIs. Here's a summary for Year 1:
| Scenario | Traffic | Visit/Lead | Lead/Cust. | Churn | Revenue | Growth |
| Base Case | 10000/mo | 1% | 1% | 20% | $181,188 | 0% |
| Case 2 | +25% | 1% | 1% | 20% | $181,188 | 0% |
| Case 3 | +25% | 2% | 1% | 20% | $209,274 | 16% |
| Case 4 | +50% | 3% | 3% | 10% | $396,991 | 219% |
Hourly rate - $100/hour: an average that includes benefits and overhead (office, electric, other services) for each participant in executing the project. NOTE: This estimate does not include profits—just the costs for an average employee involved in sales and marketing. Your rate will vary depending on salaries, overhead, turnover, etc.
In this scenario, we need to maintain basic website metrics, 10,000 unique visits per month and a 1 percent visit-to-lead conversion rate. Depending on your industry and current online visibility, this scenario calls for a relatively light effort to maintain that profile. For example:
To get that done, we need the following team, time commitments and technology:
Total: 60 hours per month @ $100/hour + $1600 = $7,600 per month
In this scenario, we need to grow website traffic 25 percent per year while keeping conversion rates constant (or growing slightly). To accomplish this, we focus on brand awareness and thought leadership via content marketing, social media marketing and possibly PPC and/or email marketing.
To get that done, we need the following team, time commitments and technology:
Total: 80 hours per month @ $100/hour + $3300 = $11,300 per month
In this scenario, we need to increase visit-lead conversion rates by developing and promoting top-funnel content (inbound marketing). Depending on your industry and current online visibility, this scenario calls for an increase in content marketing, demand generation, landing page and CTA optimization and marketing automation capabilities. For example:
To get that done, we need the following team, time commitments and technology:
Total: 120 hours per month @ $100/hour + $4300 = $16,300 per month
In this scenario, we are seeking to grow all primary KPIs in order to drive significant new revenues. We need to optimize the entire sales funnel by increasing our efforts in content marketing, social media marketing, conversion rate optimization, lead nurturing, lead scoring and marketing automation. Our sales team becomes more involved due to higher conversion rates, lead intelligence and CRM integration. For example:
To get that done, we need the following team, time commitments and technology:
Total: 200 hours per month @ $100/hour + $5800 = $25,800 per month
| Scenario | Revenue | Cost | Net Revenue |
| Base Case - No Growth | $181,188 | $91,200 | $89,988 |
| Case 2 - Grow Traffic | $181,188 | $135,600 | $45,588 |
| Case 3 - Increase Visit/Lead | $209,274 | $195,600 | $13,674 |
| Case 4 - Aggressive Growth | $396,991 | $309,600 | $87,391 |
Estimated levels of activities, time commitments and costs are all based on our experience as a digital marketing agency, with an eye on our clients' marketing budgets, as well. You will need to calibrate these levels and costs based on your industry, competition and internal practices, but they should serve as guidelines for planning and setting expectations for success. I realize that these scenarios will not be relevant to a small business with a limited marketing budget, and that good marketers can (and often do) fulfill several of these roles. But I think the manpower efforts still apply if you want to achieve these targets.
It's also tempting to jump to the conclusion that less ambitious goals and budgets are likely to be more profitable than more aggressive scenarios, but remember that this is just Year 1. In my next post we'll run these scenarios out over the next 5 years to look at profitability and the equity side of the balance sheet.
Many companies will look at these liabilities and decide that the necessary investments in manpower, technology and third-party fees aren't worth the short-term losses, especially at the beginning of the revenue cycle. As we will see, it's a mistake to be short-sighted about digital marketing. The long-term benefits will greatly outweigh short-term losses.
In my final post in this Series, we'll look at Planning for Profit via Digital Marketing.
Photo Credit: Philippe Put
With over 30 years of business and marketing experience, John loves to blog about ideas and trends that challenge inbound marketers and sales and marketing executives. John has a unique way of blending truth with sarcasm and passion with wit. Connect with John via Twitter, LinkedIn or Google Plus.
