Are you spending money advertising your funeral home but are unsure if you’re spending too much or too little? Watch this video to learn how much you should spend, what to include in the budget, and when it is okay to spend more.
The transcript and ChatGPT summary are below the video.
Transcript – How much to spend on Funeral Home Advertising
Hi, this is John Callaghan. This week we are talking about advertising. Specifically, how much should you spend on advertising your funeral home?
It’s a question I get all the time from people. How much should you be spending? Here’s what we’re going to talk about, the percentage of revenue, what to include in that, and when to spend more.
Now, the gold standard that people always refer to is three percent.
Three percent of revenue is what you should be spending on your advertising. To me, broad generalizations like that don’t necessarily work for everybody. There’s a lot of special situations. We’ll go into those in a minute.
Three percent, if you’re doing a million dollars a year, that’s $30,000 a year in advertising, roughly 2,500 a month. Yes, that’s probably a reasonable number to be spending on your advertising. But again, there are people out there that I’ve met that spend zero on advertising and other people that spend 20% of their revenue on advertising.
It’s really about what does it take to grow your business?
There are some special situations. Do you have an awareness problem? Are you the best kept secret in town to people not know about your funeral home? You need to spend some more money on advertising.
Have you changed the name of your funeral home? Good reason to spend some more on advertising and make sure that everybody knows that you’re still in business, you’re just using a different name.
Do you have something new to offer them a new service offering? Maybe a new package that you’re rolling out, a new celebrant service, for example. In that case, spend some more on advertising.
So there are some special situations. three percent is a good starting point, but I have seen people spend zero, and I’ve seen people spend 20%.
Two, five is pretty common, but don’t be afraid of spending more and don’t be afraid of spending less.
What do you include in that 3% or whatever the percentage number is? You’re going to work with only your direct cost of advertising.
When all of the MBA studies were done and they came up with that three percent rule in the first place, the only thing included in that is the direct cost of your advertising. Whatever you paid the media company. Whether it be Google, Facebook, your cable, TV provider, newspaper, whoever you’re writing the check or sending the credit card to, that’s the direct cost and only include the direct cost of your advertising.
What do you not include? Everything else.
Let’s say for example, you do a project with me and we come up with a whole strategic growth plan for your funeral home, and as part of that, we come up with an advertising campaign that is not included in the 3%.
If we bring in a designer to design some new Facebook ads for you or new billboards or new TV commercials, that’s not part of the three percent.
Let’s say you’re running an entire social media campaign and you’re spending $2,000 a month with a social media company to run all of your Facebook and other accounts. That’s not a direct cost of that advertising, so you don’t include that. Only include the direct costs.
When do you spend more? When it’s an investment and generates a return.
When it stops being an expense and is an investment that generates a return on that investment, a positive return, that’s when you spend more.
For example, let’s say you invest a thousand dollars in Facebook ads and you generate 10 pre-need leads. You close three of those on an average of $4,000. Let’s say there’s a direct cremation, a middle size service, and a two day regular service in there, average of $4,000, you’ve generated $12,000 in revenue.
Now granted, that’s not all profit, but you invested a thousand, you got $12,000 in revenue, something less than that in profit.
Is the investment less than the profit? If it is, keep going. There’s no reason to stop spending money if you’re generating a positive return on investment.
The percentage of revenues start at 3%, but don’t be afraid of spending more what to include only the direct costs and when to spend more when it’s an investment that generates a positive return on that investment.
This is the start of a whole series on funeral home advertising. If you take a look at my mind map, it’s they’re all over the place.
Advertising is an important part of growing your funeral home business. Next week we’re going to talk about the advertising mix.
Then we’re going to talk about the two different types of advertising and how they’re so dramatically different. Then we get into specific forms of advertising in today’s market, Google, Facebook, tv, radio, billboards, mailers.
If there’s any specific type of advertising that you’d like my comments on, send me an email and I’ll be glad to include that in the mix.
This is John Callaghan. I’ll be back next week with more information about how to grow your funeral home with effective advertising.
Bye for now.
ChatGPT Summary – How much to spend on Funeral Home Advertising
John Callaghan advises funeral home owners on advertising budgets. He challenges the standard recommendation of spending 3% of revenue on advertising, suggesting that individual business needs can vary greatly. Callaghan emphasizes that advertising should be seen as an investment rather than a cost, and the budget should be adjusted based on whether the advertising generates a positive return. Direct advertising costs, such as payments to media companies, should be the only expenses included in this budget. He concludes by inviting funeral home owners to contact him for specific advice on various advertising methods and promises to cover more on this topic in his series on funeral home advertising.
