How Much Should I Be Spending On Marketing?

If you want more clients at your law firm, you’re going to need to spend some money on marketing. The question that we’re often asked is “how much should I spend?” and our answer is usually some variation of this:

  • How big of a company do you want?

  • How quickly do you want that company?

  • How much does it cost you to get a new customer?

  • How many new customers do you need to hit that revenue level?

  • How much are you currently spending and how successful has it been?

Typically, the question isn’t just “how much should you spend” but rather “what is the best way to achieve your goals and what does the data say is the best marketing investment to do that?”

Now, that said, there are some useful guidelines that you can use to determine your ideal marketing spend.

We have this client that was investing tens of thousands of dollars a month on Pay Per Click (PPC). He was spending a small fortune. But it seemed to be working for him, as he was getting a lot of new clients. One day we were doing a statement analysis together and his PPC budget was $0. We asked him if maybe he just forgot to pay a bill. He answered:

“No, I actually had this gut feeling that the PPC wasn’t working, and so I shut it off. Turns out that it didn’t affect my business, as I was obtaining the same amount and possibly more clients through other means. I was just doing it because everyone else was doing it.”

On the one hand, from a strict financial perspective, this was great. He was saving thousands of dollars a month and he wasn’t losing any business. He was suddenly profiting a lot more with minimal effort. But it also created more questions than it answered:

  • Why didn’t you know that PPC wasn’t paying off before? Why not shut it off sooner?

  • Okay, PPC isn’t working, but are there other investments that you can make with that same budget that may be more effective?

  • Are you meeting your objectives and should your objectives change?

So what we like to do is we like to start with a baseline amount of spend based on the size of your business.

In the beginning, available cash is typically pretty small, and so most of your new sales are going to come from your own personal hard work – your personal connections, your network, and your blood, sweat, and tears. At this stage, we typically say you should be investing about 5% of your revenue into marketing.

Between 250k to 750k, that number should increase to 7%. You’ll need a bit more of an investment to stay at this revenue range and save some of your own time.

At almost exactly 1mm in total revenue, you should be spending 10% of your total sales on marketing.

That may sound like a lot, but this 250k to 1m stage is often the hardest to pass. The increase in marketing spend will help you get there.

Then, as you start to reach 5 million and 10 million, you should be at about 5% to 9% depending on your success and growth rate, and after 10 million, you should be settled at about 7%. Though this may sound like a decrease from the 10% you were investing at the 1mm range, the total investment is still quite a bit more because you’re taking that percentage from a larger pool of total sales.

Now, will that be enough to help you meet your business goals?

We have no idea. That’s going to depend on what those goals are, what the return is, and more.

If you’d like to get a bit more information about how to analyze and optimize your marketing spend, we have some free resources you can use that will help guide you towards making better investment decisions at your law firm.

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