“How much is this going to cost?” …The number 1 question that comes from business owners when we discuss a new website or digital strategy.
The smart ones, wait until they can weigh up the value (Or ROI) from our proposal before asking this question. The not so smart ones ask that question right out of the gates. “How much is this going to cost?” ..Before we’ve even deciphered what “this” is.
So, you’re considering investing in a new website. Or perhaps a social media strategy or SEO or an email marketing strategy. Or all of the above (which would constitute an overall digital strategy.)
Let’s pretend you’re going for a digital strategy. You’ve made the decision to start improving and enhancing your on line presence. To start increasing visitors to your website, increasing your social media following and improving conversions from both. To begin with…
You’re asking the wrong question.
The question business owners should ask is not “how much does this cost” but “how much can this make”. An investment in a good digital strategy should improve sales and reduce costs. With an overall improvement in revenue and profits.
An increase in revenue
Our studies of 48 companies (and further online research) suggest that an investment in a digital strategy can lead to an increase of 8 – 10% in revenue. It’s up to the business of course to decide what that means. i.e. A company with £1m turnover can expect to increase revenue by around £90,000 within 12 months.
An increase in profit
A good digital strategy will ultimate reduce costs for a company over the finiancial year. Cost cutting exercise might include – improved billing processes, faster payments, e-commerce, automated messaging and alerts, reporting for forecasts and more.
Often companies are still spending on “old media” like radio, TV, magazines, newspapers, billboards and more. An effective digital strategy often allows companies to cut back on old media spending with no loss of advertising coverage or brand awareness.
In all, (from our own experience and on line research) we can deem that companies can can improve profits by 1% to 3% in 12 months. Taking a £1m turnover company, with a pre-digital net profit of £100,000. We can assume an increase in profit of £20,000. If we consider increased revenue also. This can be around £32,000.
So how much should I spend on a digital strategy
Doing the maths, a good metric for determining spend a new digital strategy would be 1% of turnover. A £1m turnover business could invest £10,000 in a new digital strategy and expect a really good return on their investment.
For micro businesses of £250,000 or less turnover, we’d suggest investing 2% of turnover in digital. Simply because there’s a threshold in the amount required to create a quality digital solution.
Cut to the chase – where’s my £100k??
Well, if you’ve got a business with £1m+ turnover and you’re not “all in” on digital… Get at it!! Your £100,000 is there for the taking. If you’ve got a micro business, start spending 2% of turnover with a good digital partner (or partners) until you get to there.
It’s not just a case of just “throwing money at it”
The assumptions above are founded in the fact that you’ve found a creditable digital agency to create and implement your digital strategy. Beacon13 has been creating, managing and supporting successful digital strategies for companies in NI in 5 years. We’d be happy to help with yours. (subject to a few checks. )