By definition, hypergrowth companies are outliers. Hypergrowth is defined by a compound annual growth rate (CAGR) of 40%. Companies grow that fast by pouring on the gas and reinvesting every dollar back into the company – usually, in the earliest stages, the reinvestment is heavily based on product and talent. Slack is a great example of this; it had a $1.1 billion valuation before ever hiring a CMO. When marketing and PR become a priority, and that’s when the question of how much hypergrowth companies should spend on PR starts to circle, and it’s difficult because hypergrowth companies can’t use baselines of slow-moving Fortune 500 companies or even those in the pre-IPO stage.
PR and Marketing Spends: Rules of Thumb
You know that adage, “Dress like the job you want?” Hypergrowth companies need to spend on the valuation they want. In 2023, because many companies invested heavily (marketing budgets went up 13% on average) in branding and marketing during the pandemic, VC-backed business valuations rose considerably in the wake of the pandemic, 68.5% in some verticals. Marketing and PR investments are just that: investments. Wouldn’t you spend $5 million to make a billion?
We are thoroughly out of the pandemic and are now managing uncertainty. But for ambitious companies, this presents a true opportunity. Especially if you’re looking to creep into market share, according to Christine Moorman, at Duke University’s Fuqua School of Business:
“Companies tend to cut back on marketing in periods of economic uncertainty,” said Christine Moorman, the T. Austin Finch, Sr. Professor of Business Administration at Duke University’s Fuqua School of Business. “This general tendency should be tempered with an understanding of the cost of reaching consumers and what competitors are doing. Inflation may be a chance to leap ahead if others pull back.”
Average Companies Have Average Spends
The 2023 CMO Report reflects this changed environment:
-The average marketing budget was 10.6% of the overall budget and 9.2% of revenues.
-For companies with $10-$15 million in revenue, the average spend was 15.5% of revenues.
-For companies under $10 million in revenue, the average spend was 19% of revenues.
-For startups, the average marketing spend was 11% of revenue.
So the question is – are you average? If you’re in hypergrowth, you are decidedly NOT average. Hypergrowth companies aren’t average and are often in dogfights for additional funding or customer acquisition against better-funded competitors. So, there’s no question that hypergrowth companies need a hypergrowth PR budget that reflects their ambitions. It’s unreasonable to think you can stagnate your budget but grow revenues aggressively.
Hypergrowth: What’s PR Worth To YOU?
Unlike other initiatives, it has cross-functional importance. This is important because, in a moment, we’ll discuss how hypergrowth companies can make their marketing and PR budgets go further.
Before we do, a note about marketing spend distribution: most companies lump PR into their marketing budgets, and all companies face the dilemma of marketing budget balance. Again, this takes some introspection into your goals, audience, and competition. But one thing about PR is that it has a very long shelf life. Whether you do a publicity stunt, a Super Bowl ad, or a social media post, the impression is seconds long, and then it’s gone. But PR tends to have a very long shelf life. We’ve seen clients continue to get traffic to their sites for years after posting a piece of content. In addition, it’s still the most trusted form of marketing. According to the Edelman Trust Barometer, 65% of consumers trust earned media more than any other form of marketing. PR is an investment like buying a house, whereas marketing is like renting.
Ask yourself, “How will we use and activate PR?”
Will PR help you secure top talent?
Will PR help you secure capital?
Will PR give potential customers confidence in the company?
Will PR support low customer acquisition (CAC) and high word of mouth?
Will PR increase loyalty and reduce churn?
Will PR support culture and purpose?
PR is cross-functional, so it stands to reason that PR’s budget should be cross-functional as well. If you’re using PR as a recruitment tool, then-candidate marketing or internal comms could help increase the budget. Product development and PR can collaborate on low CAC, so there’s an opportunity to mix those budgets as well.
Be sure that your overall marketing budget matches your ambitions. If you’re growing at 40% CAGR, your budget should match, and remember that today’s marketing and PR investments are tomorrow’s returns. You may need to increase your marketing and PR budget by more than 40% to achieve 40% CAGR; once you’re on that track, perhaps you pull it back to match your growth, and once you’re publicly traded, your budgets may more closely match the average CMO projection.
What Should the Hypergrowth PR Budget Include?
Your hypergrowth PR budget scope should reflect your priorities for your business and how you will use and activate PR. Typically, when I speak to hypergrowth companies, I immediately assess whether the following PR tactics will work for them:
Plus, any company investing in its reputation should do crisis PR planning.
That’s not to say these are the only PR tactics that will work for a hypergrowth company, but these are the immediate things that come to mind. Different hypergrowth strategies will dictate how each of these will be executed.
If you’d like some specific examples of budgets across a variety of ranges that worked for hypergrowth companies we’ve worked for, we can share what we’ve seen work throughout our executive-level experiences, contact us, we’d be happy to talk about effective strategies based on your goal.