Leaders of accounting firms must answer two questions each year - “How much should we spend on marketing?” and “What should we spend our marketing budget on?” Fortunately there is data on how the fastest growing accounting firms answer these questions.
A recent study conducted by The Association for Accounting Marketing (AAM) and the Hinge Research Institute analyzed data from 100 accounting firms across the U.S. with a total annual revenue exceeding $3 billion.
The Marketing Budget Benchmark Study compared marketing spending against organic growth. Researchers contrasted the marketing strategies of high-growth firms (i.e., the fastest-growing 20% among the sample) and low-growth firms (i.e., the slowest-growing 20%). What the research revealed was that high-growth accounting firms grew nearly 10x faster than their low-growth counterparts and generated nearly $1 million more revenue per equity partner.
How Much To Spend
There are a number of challenges when it comes to deciding how much to spend on marketing. Industry benchmarks are helpful tools but should be used with caution.
There are four primary points that should be considered when comparing your firm against an industry benchmark:
Industry group - What is your industry? For example, our research suggests that marketers at technology firms are spending almost 2% more on marketing than accounting and financial services firms.
Hybrid firms - Does your firm offer a larger suite of services? If your firm offers a gambit of services beyond standard tax services, then we find that you’re more likely to need to spend more on marketing.
Firm size - What is the size of your firm? It’s true that smaller firms tend to spend more of a percentage of their revenue on marketing than larger firms.
What’s included? - What do you include in your typical marketing budget? For example, many firms include charitable giving as a marketing expense. While that may make sense for them, it may not make sense for your firm.
After factoring in all these considerations, we estimate that the typical marketing spend among accounting firms is 1.5-3.1% of revenue. This percentage does not include staff compensation.
So as you decide how much you will spend on marketing, you’ll need to factor in your industry, service offerings, size, and what’s included in your marketing budget.
What To Spend It On
Once you decide how much you will spend on marketing it’s time to figure out what marketing expenses and strategies you will actually employ. Let’s look at what the research tells us about the differences in high-growth and low-growth spending habits.
The first primary takeaway is that high-growth firms spent nearly 42% more of their marketing budget on digital marketing techniques than low-growth firms.
While more traditional marketing investments such as sponsorships, membership dues, and networking events remain top expenses at most firms, the fastest growing firms are thinking digital. And it’s not a surprise why!
In another study conducted by the Hinge Research Institute on buyers of professional services, research found that nearly 68.5% of buyers reported that they prefer to use digital channels to research a business challenge over traditional channels. But it doesn’t stop there. When the time comes to evaluate service providers, 72% of buyers said they also preferred digital channels. It’s clear that the high-growth firms are attempting to meet their buyers online.
The trend towards digital continues as the study revealed that more than 60% of accounting marketers would recommend increasing spend on video, internal education and training, and search engine optimization. When asked which expenses they would reduce, they responded with print advertising, sponsorships, outsourced telemarketing, partner discretionary budgets, and TV/radio advertising.
Another key takeaway from the research is that high-growth firms allocated an astounding 6x more of their marketing budget to education events, which include both in-person training and webinars. As the marketplace continues to shift, marketing teams need to adapt and learn new skills. The high-growth firms are not only investing more in digital channels but they are training their staff to do it themselves.
Building the right marketing budget is a labor of science and art. Each business needs to craft their budget to fit the profile of their needs and meet their buyers where they are. With that in mind, here are a few points to walk away with:
Trim non-productive expenses
Consider investing more in digital channels
Train your team
Track implementation and review budget each quarter
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