The Biggest Mistakes We See with Reg CF Marketing Budgets or Reg A Marketing Budgets…
When we meet with new prospects that are either currently in their capital raise or just trying to prepare their Reg CF marketing budget or Reg A marketing budget for their capital raise we seem to find the same question popping up over and over again…
“How much should I spend on marketing?”
This is the golden question isn’t it?
Typically what the real question is behind the first question is, “how little can I spend to raise the most amount of money possible for my fund?” – there is nothing wrong with this question.
The problem comes with the answer.
There is no absolute when it comes to finding an answer for how much you will need to spend on marketing to raise 100% of your fund minimum raise.
There are a lot of factors that come in to play that are variables for each and every potential sponsor/firm.
Do you already have a list of interested investors?
Do you have a large “friends and family” list you are going to market into?
Do you have investors from previous deals you have successfully completed and provided a good return for?
What type of offering is it? Is General solicitation allowed?
What is the current state of the market and available deal flow?
Are you going to hire an external marketing agency or do it all yourself?
These are all questions you will need to look at as you begin to map out how much you should set aside for marketing… Typically you are allowed to actually put a percentage of the raise back into marketing so be sure to look at this when you are structuring your offering documents.
We always tell clients you should at least budget 5-10% for marketing.
So a real world example would be a Reg CF that is looking to raise $1,070,000 – the marketing budget we would suggest for this fund (depending on some of the answers to the questions above) would be anywhere from $53,500 $107,000.
The next big question is usually how fast will we be able to raise the funds?
That depends if you want to put $107,000 into a 60 day marketing campaign or if you want to spread that out over 6 months…
Our normal suggestion is to spread that marketing budget over the next 6 months so you can scale up as needed but also test the waters enough to make changes to ads, creative, and marketing campaign strategies.
For lack of a better analogy, if you want to put $100 into a penny slot machine, you are more likely to hit a jackpot vs. just putting $1.00 in a penny slot and then moving over to the next machine…
If you have questions about how to setup your Reg CF marketing budget or Reg A marketing budget shoot us an email and we can send you a free template…
We would love to schedule a time to talk with you about your Reg CF or Reg A marketing budget if you have any questions.