How to Hire a Marketing Agency, Part 1: Know Your Four Numbers

Why start with numbers

Most marketing relationships go wrong before anything is signed, because the owner walks into the first call without the numbers that would let anyone judge the work later. A salesperson who senses that gap will happily supply a scorecard of their own. It will measure the things they are good at. Four numbers close the gap, and three of them come out of QuickBooks in an evening.

The four numbers

The first is sales for the last twelve months, the plain top line. The second is everything spent on marketing in that same year. That means every vendor, every listing service, the website bill, the truck wrap, the person who posts to Facebook, plus the software nobody has opened since March. The total is easy to miss. The spend sits in several line items that each look reasonable on their own, which is exactly how it climbs without anybody being wrong about anything.

The third number is the second divided by the first. This guide calls it cost of marketing: out of every dollar of sales, how many cents went toward making the phone ring. A service business that is holding steady typically lands between 5 and 10 cents. That range is an operating standard from the author’s years running marketing for a Northwest Ohio home services company, not a published survey, so treat it as a working range. The number itself matters less than deciding it in advance, because a percentage chosen in January is a budget and a percentage discovered at tax time is a surprise.

The fourth number is where the last twenty jobs came from, by name. If the office cannot say which of those twenty called because of a Google search, a neighbor, a truck they saw on Airport Highway, or a postcard, then no vendor can be judged fairly later. The first thing to fix is the tracking rather than the marketing.

What other companies spend

For a sense of scale, the chart below shows what marketing executives at US companies report spending, by company size. Smaller companies report a larger share of sales going to marketing. Those respondents are marketing executives whose figure includes their own salaries, so the number is a reference point rather than a target for a plumbing company. Every one of them could state their number, though, which is the point.

The tracking that produces the fourth number

No vendor can be held to a number the business cannot measure, so the tracking comes before the hiring. The pieces are small. A separate phone number for each place the business advertises, all forwarded to the office line. The website, the Google listing, the truck, and the mailer then each show up with their own caller ID. A “how did you hear about us” question that the person answering the phone actually asks, with a short fixed list of answers rather than a blank box. A “source” field on every job in the scheduling or invoicing software, so sales can be added up by source at month end and divided by what that source cost. That last division is cost of marketing by channel (each place the phone can ring from), and it is the single number that ends most arguments about whether a vendor is working.

This advice is wrong for a shop small enough that the owner personally answers every call and remembers every customer. A notebook does the same job there, until roughly the point a second truck goes on the road, and the owner is usually the last to notice.

Build the tracking before the agency arrives, because the agency will offer to build it. A vendor that measures its own work has a conflict it did not ask for and cannot easily escape. One Northwest Ohio home services company killed a $20,000-a-month television test at month six, in a year the market did $2 million, only because every call had been tagged by source from the first week and the television’s real share could be read against its cost.