Budgets & Spending: Gather Data Quickly so You Can Get to Efficiency Faster. Here’s How

I have a quick question I wanted to go over with you that we get a lot from our clients. I’m actually in the middle of building a proposal right now and it made me think about it. One of the biggest things we get from clients is push back or an understanding of the budget. People often use this term  — you’ve probably heard this yourself or you maybe have even said it yourself — and it’s this idea that, “Well, once this starts to work, we’ll spend more. We have a really flexible budget, but we want to start small. Once we get some traction, we’re totally open to spending more.”

Now, my honest feedback is that in the history of the five years that we’ve done this, we’ve had no more than three clients ever actually expand their budget when it’s doing well. So it got me to think:

• Why are budgets such a stagnant experience?
• Why is it such a bottleneck to growth?
• Why do we get stuck on our budgets?

The fact that budgets don’t grow is a huge issue but I think we can systematically change the way we approach budgets and spending. What we actually did for ourselves and saw great success with, is when you have all of your campaigns set up, they’ve been running, and let’s say you do need to start small because you don’t have enough corporate buy-in, maybe you don’t have enough self-confidence around it, maybe you don’t have enough data of proof — it’s okay to start small.

[ctt template=”5″ link=”diSZ5″ via=”yes” ]If you can just drastically expand your spend, you can drastically decrease the time it takes you to find the right budget or to figure out the quality of the channel.[/ctt]

Once you feel somewhat decent, I would encourage you to completely change your spend and try to go as big as possible, as quick as possible. Now, I’m not saying this because we make more — Directive does not charge a percentage of spend so it has nothing to do with that. If you can just drastically expand your spend, you can drastically decrease the time it takes you to find the right budget or to figure out the quality of the channel.

Here’s What We Did

We spent about $5,000 a month for two months, gathered some good data and closed some great deals. I then thought, “Wow, what a viable channel. I wonder how big of a growth lever this could be if we pulled it?” From there is we spent $30,000 the following month. With that, we were able to get all the data, we knew which markets were best for us, we knew which keywords worked, which ones didn’t. We were able to drastically lower our spend back to less than $10,000 a month but still more than the five, at an efficient level where it’s now generating more opportunities for us and it’s doing so efficiently.

I would encourage you to take a month after you’ve gone for a little bit and say:

• What would happen if we really poured money into this channel?
• We’ve got a couple of opportunities, we closed the deal from this, what would happen if we spent $50,000? $100,000?
• How big could we make our business from this channel, learn from that month?”

Then hone down and get efficient from that.

[ctt template=”5″ link=”4rkpy” via=”yes” ]If you’re not spending enough to gather that data quickly, you’re simply delaying the time to efficiency. [/ctt]

Closing Thoughts

The reality is if you keep spending the same amount every month and it’s a low amount, you are drastically increasing your time to learning how effective the channel can be and you’re constantly operating inefficiently.  The person managing your account, really can’t turn off keywords, terms, bid adjustments, concepts and things they’re testing until they have statistically significant data. If you’re not spending enough to gather that data quickly, you’re simply delaying the time to efficiency. The best thing you can do is spend enough to get enough data as quick as possible to then get your account efficient.

In closing, I’d love for you to consider variable budgeting and rethink the static — frankly — outdated approach to budgeting and allow yourself to gather data quickly so you can get to efficiency faster. Feel free to leave a comment and thanks for watching!