You aren’t prepared to run the bases. You might be so focused on rounding the base paths that you completely forget to step on third base. The same is true on big campaigns – you may miss that one crucial detail that sinks your efforts.
Overnight success is elusive. Get rich quick schemes and losing weight overnight rarely work. Here’s what the Bible has to say in Proverbs 13:11, Wealth gained hastily will dwindle, but whoever gathers little by little will increase it.
Mistake #23
Not Investing In Marketing
Believe it or not, there are many small businesses out there getting by with little or no marketing. Nineteen percent of you don’t do any marketing according to the State of Small Business Report by Wasp Technologies. In my experience, even those businesses which don’t do any marketing do marketing. It’s just not recognized as such.
You do need to invest. Your business will never grow unless you invest a reasonable amount of money to acquire a new customer. Here’s an example, a business owner wants 50 new customers per month, which should require a marketing budget of around $12,500, but they’re only budgeting $3000 per month. Guess what? They’re never going to hit their target. Budgets and goals need to be in sync.
Why CEO’s Are Unwilling to Invest
Some entrepreneurs think that by scrimping on marketing, they’ll be able to put that money back into the business. However, your business is like a car, and marketing is gas. It stops going when you run out.
Here are the top five excuses I’ve encountered:
You confuse marketing with other things. Those who have this misconception think marketing is about advertising campaigns, websites, email marketing, social media, etc. Marketing is a lot more (hopefully, you’ve seen some of that already in this book).
You don’t have enough money. As long as you’re producing something of value, you have to do marketing to grow your company, because it’s the only way to attract more business. If your marketing is producing positive ROI, why would you ever stop doing it? Remember, marketing is an investment, not a cost.
It costs too much. You have the money but don’t want to spend it on marketing because you think it’s too expensive. There are many low-cost and no-cost options out there if things are tight. Also, good marketing campaigns can be self-funding.
You were burned in the past. If you hired an agency or marketing consultant and had a bad experience, you may be reluctant to spend money. However, you have to get back in the saddle and try again. Just do it differently this time, and test your way to success (see mistake #52).
Your think your assistant can do it. Sometimes business owners want to save some money and think their administrative assistant can do the marketing. Guess what? He or she probably has less time and aptitude for marketing than you do.
Mistake #24
You Spend Too Much On Marketing
Spending too much on marketing can be as bad, or worse, than not spending enough. Overspending on marketing tactics that don’t produce is a waste of money, just like underspending leads to lackluster results. How do you know when your spending is just right?
The Three Bears Formula:
To get your marketing just right (not too high and not too low), you need to know how much it costs to acquire a customer (CAC). An excellent CAC depends on your industry and business model. The basic rule-of-thumb is that the payback on CAC should be under 12 months.
How Do You Know If You’re Overspending?
I mentioned in mistake #2, No Marketing Budget, that a good rule of thumb for small businesses is to spend about 7-8 percent of revenues on marketing. It’s called the A/S Ratio, advertising to sales ratio, and it is a valuable metric for planning and budgeting. In very general terms, any expenditure over 10 percent of revenues may be overspending. I used the word “may” because your strategy could call for spending a higher amount for a specific reason (e.g., a new product launch or to counter a competitive threat).
Some of the signs of overspending are the following:
A large audience
Too few targeted messages within a campaign
Numerous subscriptions to social and web analytics platforms
Low engagement rates on your digital advertising and social media posts.
Strategies for Reducing Spending
There are two keys to spending just the right amount of money: 1) know your customer acquisition cost and 2) conduct small, iterative marketing campaigns (see mistake #52 for more on testing). Then, it’s merely a matter a trashing the ones that don’t have the required CAC and repeating the ones that do.
Another strategy is to focus your marketing on tactics that are free or that don’t cost much money. These could be things like email marketing, content marketing, PR, free videos, etc. One of the fundamental principles of Lean Marketing is to own your traffic. Lean Marketing occurs when you have the name and contact information for your customers and prospects. You then control the marketing (as opposed to Google or Facebook). It also lets you communicate with your prospects in a highly affordable manner.
Mistake #25
Underestimating Marketing Costs And Overestimating Results
Many small business owners make the mistake of being unrealistic about marketing costs and overestimating results. I plead guilty to this one. You can’t predict with 100 percent accuracy, but you can improve the quality of your predictions.
Many entrepreneurs, who by nature have relentless enthusiasm, wrongly assume that customers will beat a path to their door. It usually doesn’t happen. The inability to adapt to these unpredictable swings in revenue stalls many businesses. When you don’t know how much revenue is coming in, it’s tough to balance expenses. And, you won’t survive long if you can’t manage your company’s cash flow.
Costs You’re Likely to Underestimate
What’s the best may way to avoid these budgeting problems? Knowing where you might make mistakes. Here are some costs you’re likely to underestimate:
The cost to acquire customers. I mentioned the importance of CAC (customer acquisition cost) in mistake #10, No Metrics. It varies from industry to industry, but the cost to acquire a customer is usually three times more expensive than you think it’s going to be.
The cost to retain customers. Customer retention is just as tricky for small business owners. Customer retention can be a big problem and often costs far more than anticipated.
Opportunity costs. Opportunity costs are the costs of not doing something. If you make that spur of the moment purchase on Facebook advertising, what’s that causing you to forgo?
Impulse purchases. We’ve all heard the old axiom, “It takes money to make money,” but this old saying often leads young entrepreneurs to gross overspending. When you make impulse purchases, go back and recalculate your budget to see the impact.
Indirect costs. Indirect costs are those times when you say, “Yep, I should’ve thought about that.” They are less noticeable and seem to come out of nowhere. Think through every step of a campaign and try to predict as many costs as possible.
The time. “Time is money.” Most business owners don’t know how much time marketing takes. It could be as much as 50 percent of your time in the early stages of a company. There is a time cost to any initiative, including those things like blogs, social media, and publicity. Make sure your time is well-spent.
How to Be More Accurate
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