How to Set a Property Management Marketing Budget According to Greg Crabtree, CPA

Greg Crabtree, CPA is back on The Property Management Show to talk about marketing spends and the return on investment (ROI) that property management companies should expect to see on marketing budgets.

If you’re not already familiar with Greg, he’s an accomplished entrepreneur, financial expert, and the author of Simple Numbers, a book that every business owner should have read by now.

When we first had Greg on The Property Management Show, it was at the beginning of the COVID-19 pandemic, and we were talking about managing cash flow for small businesses. He said that although company owners pick marketing as the first thing to cut back on, he didn’t necessarily agree. You can watch/read our previous interview: Managing Hits to Your Property Management Cashflow.

We asked him back on the podcast to talk about why that behavior exists in business, and why he thinks it’s a big costly mistake.

First, let’s talk about the effect of economic trends on marketing spend.

Marketing Spend and Economic Trends

Marketing spending is traditionally seen as a canary in the coal mine for economic slowdowns. The spend may not be cut to zero, but companies don’t want to spend extra money on marketing when they feel like there’s not a customer willing to respond to those marketing efforts. When marketing budgets are cut, it’s an indicator that the economy is softening.

While researching for his next book, Simple Numbers 2.0, Greg created a model that aggregated clients’ data as if it was one big conglomerate. This was across a blend of industries and across geographies. This model focused just on U.S. economic statistics and captured data from 100 companies.  

The marketing spend of that model dropped about 60 percent right at the beginning of COVID. 

Remember that a lot of businesses closed during the early days of the pandemic. You’re not going to market a business that no longer exists. 

On the other side of that trend, some companies saw a huge influx of business because they served the needs of customers during an unprecedented pandemic. Business was coming in faster and faster. 

They didn’t need to invest in marketing, either; they had more business than they could respond to.

It took over 12 months for the rate of marketing spending to get back to the pre-COVID level. 

Fast forward to today. There have been a lot of wild shifts. Companies have done a lot of different things, but even many of those that suffered are now getting back to the feeling that things are working. The biggest issue for those companies, right now, is labor. 

Labor Supply’s Effect on Small Business’ Bottom Line

The biggest issue businesses are facing is the labor issue – they are finding it difficult to find people to do the job at the same price.

It’s not a question about generating new sales. It’s a question of not having the people they need to deliver on the product or service they’re selling. This is a population problem.

This is a problem that had already been set in motion years before now; COVID did not cause it. 

In the U.S., we don’t have enough people to do the labor. In 2001, we were at about a 2.4% replacement birth rate. Today, the U.S. is at about a 1.6%. A stable society is a 2.1%. And, we are not willing to fill that birth gap with immigrants at the moment.  This is a serious problem globally, and quite a few countries are in what we call an inverted pyramid when it comes to population.

We don’t have enough people.

Marketing Spend is Going Up Despite the Economy Tanking

The economy is slowing,