Understand Your Marketing ROI


When I tell other business owners that half of our business comes from online leads, they’re visibly shocked. And then I always have to follow up that statement with, “Well, I’ve been marketing online for 5 years now.” And they breathe a sigh of relief.

This conversation takes place once a week. And that sigh of relief always confuses me. Is it because you’re thinking, “Oh, that’s why I don’t have online leads – it’s not that I’m doing it wrong.” Or is it because I’ve given you an excuse for all the things that might be bad about your online presence – “It’s not my website that’s hurting me.”

Either way, no matter how many times we talk to clients about how long it takes to build a good reputation online, they demand instant results. Every small business is a unicorn that people are dying to find, they just need a little boost, right? Start posting to social media and BAM! – windfall.

If it was that simple, and it happened that quickly, then everyone and their dog would be a business owner rolling in dough. It obviously isn’t. And yes, it’s harder than it looks and yes, it takes longer than you think it’ll take. But trust us, the returns on investment in online marketing are worth it.

Let’s do some math.

Our typical online marketing program is about $1,000-$1,500 a month. This is the same plan my company is on. It includes blogging, newsletter, social media and social media ads, online review solicitation, and the occasional PPC campaign. All highly targeted, usually running for impressions only. Everything designed to position us as leaders in our local industry and to help us build our brand.

Ok, so let’s say you’re going to pay $1,500/month for a similar online marketing services plan at a local-reach level to help your small business.

Let’s also say your company makes $400,000 every year just based on referral business and networking, and you want to grow by 25% each year until we hit the million dollar mark:

Year 1: $400,000

Year 2: $500,000

Year 3: $625,000

Year 4: $780,000

Year 5: $975,000

Year 6: $1.2 Million < GOAL SURPASSED

We’ll have to assume in this scenario that some of your new customers will refer (if you do a good job). Each year, your referral base grows as well as your online leads. Your happy customers also become more likely to refer because they see you online, on social media, your Google reviews, etc.

As your customer base grows, so do the new pool of potential referral sources. It’s a virtuous marketing cycle fueled by your consistent presence online. If you’re like us, and the split between referral and online leads ends up being around 50/50, that math might look something like this (roughly):

Year 1: Start Online Marketing

Business stays stable, starts forming a community online. Online reputation starts to catch up with real-life reputation.
Online Marketing Budget: $18,000
Total: Still $400,000 in referral/return business (does that mean it’s not working?)

Year 2: Online Leads Begin to Come In, Referral Base Begins to Grow

That boost of $100,000 is $50,000 online leads, $50,000 referrals.
Online Marketing Budget: $18,000
Total: $50,000 online leads | $450,000 in referrals/return business

Year 3: Consistency is Key, Now You’re Cashing In.

You’re now getting $62,500 in online leads and $62,500 additional in referrals. Not too shabby.
Online Marketing Budget: $20,000 (small increase in advertising perhaps)
Total: $112,500 in online leads | $512,500 in referrals/return business

Year 4: Increase Your Advertising Budget to Keep Up the Momentum.

Let’s say you add a new website and more pay-per-click to keep up your momentum. Your next growth of $155,000 a year – $77,500 in online leads and $77,500 in referrals. Worth it!
Online Marketing Budget: $32,000
Total: $190,000 in online leads | $590,000 in referrals/return business

Year 5: Capitalize on Your Strong Brand

Now, your referrals have grown by nearly an additional $100,000 and online leads total nearly $100,000.
Online Marketing Budget: $40,000
Total: $287,500 in online leads | $687,500 in referrals/return business

Year 6: Goal Year – Start Investing in Maintaining Your High-Quality Presence.

Your final growth year before you hit your goal is $112,500 in online leads and growth of $112,500 in referrals.
Online Marketing Budget: $50,000
Total: $391,000 in online leads | $800,000 in referrals/return business

My math is probably terrible, but what I’m trying to illustrate is that over time, online leads can become a significant chunk of your new business. Not only does this free you up to run the business instead of worrying about in-person sales, but it’ll allow you to hire salespeople, scale your services – just grow like you want to grow.

In six years, you will have spent around $178,000 or maybe a little more in online marketing and your return on that investment is just over $1 million in additional sales over 6 years just in online leads. This doesn’t count the increased referrals and return business that comes from an active presence online.

Was it worth it?
Umm, hell yes! I would pay $200K for $1 million any day.

Did your first year feel like you sank money into nothing?


95% of your competitors will give up after the first year. If you understand the value, you will dominate in 5-6 years. Small businesses absolutely suck at investing in the long-game.

PS: Online Marketing is just a slice of your marketing pie. Spend at least the same amount on customer service training, building a community of happy customers, rewarding them for referring you, activating that base of past customers and branding.