Marketing ROI can be extremely complex or extremely simple, but for now, we’re going to focus on the part that is simple.
To quickly calculate your ROI, without looking anything up, write down the total revenue for your firm for last year, the total of all advertising expenses for your firm from last year, and the total referral fees that your firm paid last year.
Now, total the total referral fees and total advertising fees together. Divide that total into your total revenue. The resulting number is your marketing ROI.
Marketing ROI Example:
For example, if your total advertising expense is $1 million plus $2 million in paid referral fees divided into total revenue of $10 million, your ROI is $3.33.
This means that you are generating $3.33 for every $1 you spend on marketing.
Why is a Referral Fee a Marketing Expense?
We know that you don’t actually use referral fees for marketing or advertising, but they are part of running a law firm. However, if you remove this fee from the equation, it will change your ROI ratio drastically.
Referral fees are not a fixed expense like rent, and they are what you pay to acquire a new client, which actually does make them a marketing expense. If you don’t include these fees in your ROI calculations, you will have a final number that is very flawed.
Inefficiency of Referral Fees
By adding referral fees into the equation, you will discover that these fees are a costly and poor use of your marketing budget.
Still, many firms dish out up to 45% of their revenue in referral fees. You could pay out much less in revenue for advertising, but most firms don’t include fees in their equations so they don’t know how their marketing dollars are actually working for them.
Improving Your ROI
Unfortunately, improving your marketing ROI takes more than just calculating it correctly. One of the best ways to do this is putting your focus on what you do best – being an attorney and letting a professional manage your marketing.
These experts know how to manage your marketing dollars so you get the most bang for your buck and your business will no longer be advertised by your gut and instead will be controlled by numbers like it should have been from the start.
There are better uses for your marketing budget. We cover some of the biggest marketing tactics you can use in this guide.
At Bambiz, we work with elder law and estate planning firms and have extensive experience in developing social media marketing strategies unique to your firm, location, and potential client base.
To learn more about how we can help grow your business using online marketing, schedule a free 15-minute call with us.