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How Much Should Startups Spend on Marketing?

dollar sign(Note: New blog posts about startup marketing can be found on my ME Consulting Website.)

How much should startups spend on marketing?

It’s a difficult to answer question to answer because many startups think that anything spent on marketing is a challenge to justify, whether it’s $100/month for a digital tool or $25,000 for an extensive media and blogger outreach program.

The reality is most startups see marketing as a luxury or something that solves a point of pain, rather than a need-to-have or an exercise that has solid ROI. As a result, establishing a marketing budget can be a daunting exercise.

The easy answer is how much to spending on marketing is do more than nothing. Every part of a startup requires an investment in time, money and/or people, so spending on marketing is a no-brainer.

So how much makes sense?

This depends on a number of variables based on your budgets, objectives, target audiences and where your startups sits within the growth cycle.

For early-stage startups with limited resources, a reasonable budget could be $250 to $1,000/month. This would involve using a handful of free tools such as Tweetdeck and Hootsuite for social media monitoring and publishing, social media services (Facebook, Twitter, etc.) and Website optimization tools such as Kissmetrics, MixPanel or SEOMoz.

A budget of this size doesn’t involve having a part-time or full-time marketing person but it  provides ground cover and establishes a solid marketing foundation that can be built upon as growth accelerates and a marketing plans expand.

Over time, the marketing budget can expand to $1,000 to $10,000/month by adding  a part-time or full-time marketing person to handle social media and create content for blogs, case studies, white papers, press releases and marketing and sales collateral. This kind of budget lets a startup use premium services such as Hubspot or InfusionSoft. And it may accommodate having a PR agency on a project basis or on a small retainer, although I’m not a fan of early-stage startups having monthly retainers for PR.

As a startup accelerates it growth and begins to drive brand and product awareness, it is not unreasonable to be spending $10,000 to $25,000/month on marketing. At this stage, a startup has expanded its marketing team to two or three people, it is aggressively leveraging social media and content marketing, it’s sending people to conferences and perhaps sponsoring key events, and it has a solid media and blogger outreach program.

As much as spending money on marketing can be difficult for a startup to grasp and make happen, marketing is a key and necessary part of running a business. If customers don’t know you exist or understand what you do, it goes a long way to undermine the growth and success of your business.

For startups looking to jump-start their marketing, I provide strategic and tactical services – core messaging, brand positioning, marketing strategies and content creation. 

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How to be David When There’s a Goliath

For most startups, being to market first with a new idea or service is a rarity and luxury. For everyone else, the market is usually dominated by one or two players, even if the market is still in the early stages.

It can be intimidating to have another startup with a strong foothold, not only with customers but in terms of awareness and media/blog coverage. It can look like an uphill battle in which a fledgling startup is scrambling to gain traction and credibility.

So, what does it take for a startup (aka David) to battle a Goliath, even if the Goliath is another startup?

At a high level, it means taking a different approach that can separate a new startup from the pack in some way. It could be better design, UI, UX, customer service, marketing or pricing (although pricing is a short-cut). It could be a matter of being more creative, flexible, agile or opportunistic.

One of the realities for many market leaders is the danger of complacency. With large market share and a strong brand presence, it can be easy to lose your competitive edge. This can open a window of opportunity for new player to move quickly to move the ball forward. The wins may be small but as long as they keep coming, they add up over time.

The most important thing for “David” startups is recognizing that having a good product at the right price isn’t nearly good enough. It gets you in the game but it’s table stakes. To battle Goliath, you need to be better, faster, more user-friendly and flexible.

At the end of the day, it could see David become a strong player but still be a David.  This isn’t a bad thing because it means you have a viable business that always has the potential to close the gap if Goliath stumbles, loses its competitive focus or stops improving and evolving its products.

The bottom line is not to be daunted or afraid of Goliath. Instead, focus on what you do best and then make it a mandate to do even better.

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mesh: Canada’s Digital Conference

mesh startupsSeven years ago, I got together with some friends on a cold February night to talk about how the Web was starting to change how we lived, worked and played. In a fit of madness, we decided to organize mesh, which has become Canada’s leading digital conference.

The latest chapter of mesh happens on May 15 & 16 at the Allstream Centre in Toronto. In many respects, this year’s speakers and topic ranks among the best we’ve had. The biggest reason is there’s a great mix of speakers who will discuss how the Web continues to be a disruptive and innovative force, and panels and workshops designed to educate and upgrade your skills so you can work better or differently.

Whether you want to be inspired or informed, mesh delivers.

We kick things off with keynotes by Treehouse’s Ryan Carson, who will talk about education is being delivered and consumed, and the Nieman Journalism Labs’ Josh Benton on how evolution of media. Then, we’ll get into sessions on the Web’s impact on books,  brain fitness, design, politics and television.

On day two, JP Rangaswami (Salesforce.com’s chief scientist) will discuss how the Web is changing how we work, and Kyle Munsun will talk about the rise of brand journalism. After that, we’ll have panels looking at the future of money, travel and HR, as well  as workshops on content marketing, social media optimization and digital advertising.

On day two, we also have a mini-startup stream featuring a panel of entrepreneurs talking about the YCominbator program, and a panel of VCs looking at the financing landscape.

While I’m biased, mesh is a great opportunity to expand your horizon and get insight about the specific things that impact your personal and professional lives. In some respects, mesh is like going to a buffet as opposed to having a big helping of one dish.

This combination makes mesh different from most other digital conferences. At the same, time, it is also mesh’s strengths. Another thing that makes mesh so good is the networking opportunities. Unlike other conferences, mesh attracts people from a variety of sectors, which provides the opportunities for different and new perspectives.

Given how many business are operating lean and mean, going to mesh can seem like a bit of a luxury but it’s an investment with a terrific ROI.

A pre-registration ticket for mesh is $579. If you can only escape the office for one day, we have single-day tickets for $399. To learn more about the speakers and topics, here’s the schedule.

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This Week in Canadian Startups (April 28, 2013)

This WeekIn the newest edition of “This Week in Canadian Startups”, we kick things off with Kik raising $19.5-million to drive the growth of its mobile messaging business.

The newsletter also includes blog posts and articles on when to sell your business, why a product launch isn’t necessary a good thing, how Toronto is emerging as one of the leading places to create a B2B startup, and the eight angel investors you should avoid.

Here’s where you can subscribe to the newsletter, which comes out every Saturday morning.

 

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Why Toronto is the Best City for B2B Startups

startupsWithout patting ourselves on the back too much, Toronto is starting to emerge as one of the world’s leading and most vibrant startup communities.

In particular, Toronto has become one of the best places to launch a B2B startup.  If I could be so bold, Toronto may be the best place to launch a B2B startup.

Here’s why:

1. A great pool of talent, particularly developers whose skills and experience are as good as anywhere and, as important, reasonably priced compared with places such as Silicon Valley. We’re also seeing a growing number of repeat entrepreneurs and more executives with solid marketing and sales experience. In other words, there’s plenty of startup bench strength in Toronto.

2. There are many large enterprise companies who can become customers of early-stage B2B startups. This includes Canadian companies, as well as foreign companies with Canadian operations. A Canadian startup, for example, could sell its product to a U.S. company based in Toronto, which would give it a great foothold to sell into the U.S. parent. An entrepreneur recently told me that Toronto is a great place to start a B2B business because the first five customers can be easily attracted to provide product market validation.

3. A strong and tight community of investors, entrepreneurs, service providers, incubators, accelerators and schools that make it easy to make connections and get the support needed to establish and grow a B2B startup. This is probably one of the biggest assets of Toronto’s startup community, although we may not completely appreciate it. You only have to look at the number of startup events to realize the vibrancy and activity of the startup landscape. I would argue the community has been nurtured over the past five years, and it is now starting to bear fruit.

4. There is growing access to capital, although there is room for improvement. Over the past few years, more capital has become available to B2B startups to make it easier for startups to get going. One of the reasons why B2B startups are attractive to investors is they can go after specific markets, driving development, marketing and sales efficiency. That said, there is still more series A money needed to accelerate growth once a B2B startup gains solid traction. The big thing that has to happen is the return of institutional investors, who have been on the sidelines for far too long. In the meantime, Toronto is a short flight from New York and Boston, making it easy for U.S. investors to invest in Canadian startups.

5. The rise of incubators and accelerators such as Jolt, InCubes, Extreme Startups, Ryerson DMZ, Drive and Hyperdrive that are developing, nurturing and developers entrepreneurs, while turning their ideas and projects into viable businesses. Many of the startups involved in these programs will fail but the experience gained by entrepreneurs along the way will be invaluable.

What do you think? Is Toronto a B2B startup haven?

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Startup CEO = PR Pro

At a recent event, I was talking with a startup CEO about the success of some mobile apps he had developed.

“So, what’s the secret?,” I asked.

“Great coverage from blogs and the media,” he said.

“How do get them to write about you?,”, I asked.

“I email them. I’ve never used a PR agency,” he said.

Imagine that, an entrepreneur getting coverage by sending an email to a reporter or blogger. Who knew it could be that easy!

First, a few caveats. This particular entrepreneur has been around for a few years with a variety of startups, so the success of his approach is a result of a lot of legwork and relationship building. He’s also developed some interesting/news worthy applications.

That said, his ability to attract media and blog coverage should be inspiring and eye-opening to any entrepreneur, particularly those involved in an early-stage startup.

Truth be told, it’s difficult for early-stage startups to get media and blog coverage. There are so many other startups looking for attention that it’s hard to stand out, let alone convince a reporter or blogger to write about you. Second, you need to be a good storyteller, which is not part of many entrepreneurs’ skill set.

Yet, I believe a startup entrepreneur is the best person to get media and blog coverage – much better than PR agency/boutique.

Why? When an entrepreneur pitches a story, it comes across as more real and authentic. It’s a person  building a business, not a hired PR gun. It’s an opportunity for an entrepreneur to establish a personal connection.

It is important for startup entrepreneurs to remember building relationships with reporters and bloggers can take time to develop. It’s like you can hit a home run out of the gate. As well, the initial goal may not be getting coverage. It can start with an invitation for coffee or offering some insight or information.

Another important consideration is making it personal. An entrepreneur needs to do their homework when approaching a reporter or blogger. They need to understand what someone writes about, their interests and how they want to be contacted. It also helps to have read someone’s articles or blogs to gain more knowledge and insight.

At the end of the day, getting coverage from reporters and bloggers can be the dividend from making a concerted, long-term investment. Having a good idea of who you want to target and how to connect with them sets the stage for an entrepreneur to establish a foothold, which could lead to coverage at some point.

One last note: While startups entrepreneurs can be effective PR conduits, there are definitely roles to be played by PR agencies, boutiques or individuals. At the right time, PR practitioners can play a key role in helping startups reach the right people to deliver relevant and interesting pitches.

When it comes down to it, the biggest value delivered by PR practitioners is their networks and connections. They can get a reporter or blogger to take a look at a pitch that otherwise would be quickly deleted or ignored.

Links:

- How to make startup PR work

- When should startups pull the trigger on PR?

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