The Lowdown on Advertising  

I speak to a lot of small businesses who are in that ‘what now?’ phase. Their business is starting to gain traction; they are selling products, their website is working well and they have loyal followers on social media who are advocates for the product. 

These business owners feel that they have capacity to take the business to another level but don’t know-how. Often, the answer to advertise – but you may have already discovered that deciding whether you should advertise, and then figuring out what elements you need to take into consideration beforehand can be tricky. 

This article is Part 1 of a short series on advertising. Part 1 addresses deciding whether to advertise, finances, outsourcing (or not!) and objective setting. 

Do I actually want to advertise?

Advertising is a tried and tested way to get customers – but only if there is spare cash within the business. I’ll go into finances in a bit but it’s important to note that advertising only works as part of a clear, defined marketing strategy and, although it doesn’t have to be ridiculously expensive, it does cost money and you have to understand how you are going to spend that money and what you will get back. 

You also need to be sure that you have the resources to cope with the extra sales that advertising might generate. If you get 100 extra orders in a week or a month, can you deal with that? Or will your sales create enough revenue to employ an extra pair of hands? 

I will write further articles on the merits of various advertising media so I won’t include them here. However, I will say it’s best not to ‘put all your eggs in one basket'. Educate yourself on the options available and make sure you’re not relying on just one form of advertising, as not every type of advertising works for every type of business. 

Can I afford to advertise and how much should I spend? 

There are a few ways to answer this question and the answer will really depend on what kind of business you have. 

A fairly standard way to address this is to work out your AMC (Allowable Marketing Cost). This is basically what is left of your revenue after you have taken out the cost of producing your products, expenses, overheads and your profit requirement. Hopefully, you have worked out already what profit you are making on your goods after what you spend making and selling your products. If you haven’t made a stab at this yet, you will need to in order to ensure that your business is profitable – and also for the taxman/lady!

Say, for example, your company's sales revenue is £10,000, the cost of producing goods is £5,000, the cost of distribution, etc. is £1,500, and the required profit is £2,000 then the allowable marketing cost would be £1,500.  

You can apply this same formula to your product price or average order value (AOV). 

My AOV is £20 (100%) 

My cost to make/purchase each item is £10 (50%) 

The amount I spend on overheads and expenses is  £3 (15%) 

The profit I need is £4 (20%) 

The amount I have left for marketing is £3 (15%) 

So to get 100 orders, you are looking at a budget of £300. Of course, if you are confident in your business and you can afford to reduce your profit margins at the start (or not make a profit at all!) then you can adjust those figures. But it’s important not to lose sight of what is an acceptable spend once you have paid for everything else. If you have calculated that you can spend £3 per order, then it is wise to drop any advertising that is proving to be more expensive. 

What are your objectives and who are you selling to?

When deciding your sales objectives, it is usually safest to start small and simple. Keeping your AMC (allowable marketing cost in mind), decide how many sales you intend to make. If you don’t decide in advance, it’s hard to ascertain whether your advertising is working 

You may have other goals that aren’t just sales numbers. You may want to increase repeat customers. Or you may want to drive upsells.  

What you want to achieve and who your audience both make a big difference. Both of these factors should determine the type of advertising you choose, how much you spend and how you deem your advertising to be a success. 

It is really important that you understand your audience before you think about advertising. Spending a fortune advertising in a broadsheet newspaper is probably a waste of money if you are targeting teens. Advertising on Tik Tok may not work if the people who buy from you are mostly baby boomers. Get to know the sort of people who are interested in your products. Find out what media they consume, what celebrities they follow, what their interests are, how they view the world and what language they use. Stalk them on social media and read up on trends for people of their age and gender with those interests. 


Who do you get to do your advertising?

If you are considering online advertising, like social media or Google advertising, or maybe PR, then you’ve probably considered whether you are going to run the ads yourself or hire an agency/consultant. 

The most obvious consideration to start off with is whether you afford an agency. Or would the time it would take for you to learn the skills actually cost your business more than hiring someone?  

To get an idea of whether your business can afford to outsource its advertising, start researching and talking to lots of agencies. You may already know that marketing agencies come in all shapes and sizes. Pretty much anyone can get a Facebook advertising account and call themselves an agency. Get some recommendations and start ringing round. Although you will expect to pay a monthly retainer, be wary of any agency or freelancer who wants to tie you into a contract. Undoubtedly, you will get a range of quotes that massively differ. My advice – don’t go for the cheapest. Business 2 Community have a great article on things to consider when choosing a marketing agency. 

Plenty of businesses decide to take on the advertising role themselves. Plenty succeed but also plenty waste money. Again, if you decide to take this route, make sure that your business can afford the hours you will need to spend on it. When you start to educate yourself on advertising techniques, make sure you learn how you are going to measure your success. A good agency will be able to provide you with weekly or monthly reports on sales figures and how much it cost to achieve each sale; you need to be able to do that for yourself to make ensure your marketing efforts are working. 

I find an excellent resource for learning. It sells online courses and I have bought courses for everything from advanced Google Ads to playing the piano. If you dedicate, say, one hour a day to learning one thing then you can get skilled up pretty quickly. One thing with Udemy, though – check the reviews before you buy a course. All courses are not equal! 

Happy to help!

Hopefully, this article has helped with some of the questions you might have had about advertising. The next articles in this series will focus on different advertising channels, especially digital. If you are keen to know about one particular area of advertising, join our Tiny Box Clinic exclusive Facebook group and let us what you’re interested in.

Wanting more after this blog? Why not sign up for one of our FREE 1-1 business or marketing consultations with Tiny Box Clinic?

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