For the purposes of this post when I refer to a ‘small business’ I am referring to a company with ten to fifty employees that primarily sells to other businesses (B2B). If you have a consumer product or service the model is very different and out of my specialization.
I have worked in multiple situations where I was essentially providing a virtual marketing department, often to businesses that did not have a formalized marketing function in-house. This was often (if successful!) a transitional process where I would work with management to define marketing plans and get the basic process and components in place and working well. Since the goal is to generate high quality leads for Sales and as a result increase business, there would be two outcomes: I’d either be offered a job as Director of Marketing or I would help the client hire one. To reach this point marketing had to be successful enough to require a full time, typically onsite manager. In some cases, staying with an outsourced model was still cost effective in comparison to a hire. So experience has taught me that either model can be an indicator of success, depending on the growth rate of the business.
Lets look at the underlying costs. These are general numbers, not actual numbers which vary depending on your products, service, markets served, average sale size, life of customer, etc. On the outsourcing you side you might contract with a consultant like myself to serve as a de facto Marketing Director. You’d likely pay a monthly retainer in exchange for having a certain amount of that person’s time dedicated to working with you. This is the model I prefer as it allows me to create an integrated model that is not based on quoting a bunch of disparate projects. Let’s say you pay $2800/month for eight days of time or an annualized rate of $33,600. On top of this you are quoted and invoiced by any outside vendors like art directors or photographers on a project by project basis. These vendor arrangements are managed by the consultant with your approval required before committing to a quote and terms.
It’s important to understand that these vendor costs are likely to also exist when you have an in-house marketing manager unless you are ready to direct hire talent, which is not only costly but often difficult to find.
Now lets look at a direct hire. An experienced Marketing Director or Manager in a small company in an area like Rochester is going to draw a salary of $50-85k plus benefits. You’ll also incur costs for office space, equipment and HR costs, likely raising that annual cost to $70-100k. Yes, you’ll have a full time resource and if you require that, then this is probably the route to take. The question is, do you really require a full time employee and are they actually paying for themselves? In many cases you don’t need this level. The goal is to get there, but it is unlikely that the need is there from the beginning.
Then there is the question of efficiency. Very often, the right hired gun gets things done faster and at a higher quality level than a less experienced employee. We specialize in getting up to speed quickly and we bring an outside perspective that is being refreshed as we are exposed to new challenges with a variety of clients. In my case I have worked with complex medical technology (iCardiac), commercial food service enterprise software (CaterTrax), social media and reputation monitoring and management software (Techrigy) and even not for profits (Innovocracy, PCHO). There were challenges with every one that were applicable to the others.
If you’re interested in exploring this model, the best way to start is with an independent marketing assessment that not only determines which route is best for your company, but also sets key performance indicators (KPIs) which is business-speak for ‘specific goals’.
What About Agencies?
Good question. I’ve worked for two marketing agencies and a traditional ad agency and the answer is that they can’t afford to work with small businesses that are B-B sellers. And if they take you on, you are unlikely to be working with their A team. Why? Everybody is responsible for being billable. So, imagine you have a kick-off meeting with your agency. A principal is there ($250/hour), an account exec ($125/hour), creative team (two at $125/hour) and an admin ($75/hour). You chat for 90 minutes and you get an invoice for $1050. And every time you pick up the phone to ask a question, you pay. I’m not making this up. It works for large companies with significant budgets so that’s where the agencies focus. And, BTW, a lot of the smaller ones are folding because their bread and butter schticks, branding and advertising, are less and less relevant.
Rant over. But think about it.