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Use Profit Margins to Establish A Marketing Budget

Use Profit Margins to Establish A Marketing Budget

This is a pretty simple concept: if you have a product or service you sell, you need to know

how much money you keep on a sale.


The reason this is so critical is not just so you can, you know, live on your income...but also so

you can make educated plans about how you’re going to scale your business and sell more of

your product.


You need to know your numbers in order to know how much you can spend to get a sale and

still be profitable.


For example, if you have a $5,000 product but it costs you $4,000 to fulfill that product,

then you only have a 20% gross margin. That means you’ve only got $1,000 to work with

to spend on marketing to generate more sales. (By the way, that’s a real example from a real

client…)


And if you plan on eating sometime in the next month, then after you pay yourself, there’s

literally nothing left for marketing. Thus, that’s an unsustainable business model.


Many entrepreneurs aren’t realistic about how much of their time is tied up in fulfillment.


Your time is your greatest asset; count it as a real cost every time you interact with a client.


The point here is just to make sure that, before you start spending money on lead

generation, you aren’t pouring money into something that’s actually costing you. In other

words, you want to ensure you don’t scale a loss.


If you know your numbers, now it’s time to build a system for automated lead gen.


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