I am often confused by the decisions normally very smart entrepreneurs make when it comes to marketing, sales, and company growth. It’s as if logic flies out the window and emotions rule the day when we start talking about sales and marketing. Often, this creates cash flow issues and stalled growth.
Of course, I’m not suggesting entrepreneurs need to be perfect and never make a mistake. In fact, I personally made one of these marketing mistakes last year in my business. My issue is with the entrepreneur who doesn’t realize when they are screwing up and who continues to let their mistakes hurt their business over the long term.
I recently read a study that looked at businesses’ cash flow. This study found that only 12% of businesses never have a cash flow issue. That means 12% of businesses can consistently pay their bills, pay salaries, and have profits left over. On the flip side, 47% of businesses say that cash flow is sometimes a problem, and 41% of businesses surveyed said cash flow was a consistent problem.
To be fair, this study didn’t publish any additional info about the business owners. I’d want to ask, for example, did all of these businesses have less than $1 million in annual revenue? If so, I would assume those businesses would have greater cash flow issues than a group of businesses at $1 million+ in revenue. For the sake of this story, let’s assume this is accurate (based on my experience of working with small businesses, it is pretty close). How do you fix a cash flow issue for any business?
In the vast majority of cases, your marketing is linked to cash flow issues. The mistakes many entrepreneurs are making with marketing, sales, and business growth in general are the very same mistakes that are causing the cash flow issue. On a side note, it is also possible that someone just has a crap business model that isn’t scalable, but that’s an article for another day.
Marketing Mistakes That Hurt Cash Flow And Business Growth
I’m going to start with the one marketing mistake that is most near and dear to my heart: customer retention.
You don’t have to use a newsletter to grow and maintain retention (although that is a good idea). Still, you do have to do something, and that something needs its own budget. Retention is not a portion of the marketing budget. Without customers, your business is worth just about zero. The reason so many businesses struggle to grow is they invest nothing in retention. These normally smart entrepreneurs have deluded themselves into thinking that their product and services are so amazing and life-changing that people will continue to buy over and over again without prompting.
So what lie do these entrepreneurs tell themselves when they have 3.5% year-over-year revenue growth, despite having spent thousands — maybe even hundreds of thousands — of dollars on marketing? If you’re a large retail chain, that isn’t bad. But for dentists, lawyers, financial advisors, or anyone in a service-based business, that is far from good. You MUST — starting today — have a customer retention budget. Use the budget to increase retention, and from there, upsell your existing customers.
The longer a customer is with you, the greater the chance for a referral. Their customer lifetime value goes up, too. Done correctly, your retention piece can be used to upsell existing customers and close more prospects. Regardless of how you use it, you must have a retention budget. In this awesome article from Forbes, Jerry Jao makes it crystal clear why, as he puts it, “customer retention is king.”
Getting Bored With Things That Make You Money
As entrepreneurs, we are prone to getting bored. It even happens with our marketing. Regardless of how it is working, we get bored with it and want to try something new. This is such a bad practice on so many levels. I understand wanting to try something new, but you NEVER cancel marketing that is working (even if it isn’t crushing it) to try an unproven new thing. When people do this, they are basically saying “I hate money.” It’s one of the biggest marketing mistakes you can make! How many times have you tried a marketing program, only to have it not work out as promised or as quickly as promised? So stop canceling good marketing to chase unicorns.
Another term for this boredom is “shiny object” syndrome, and this article has great advice on how to cure it. Now, I’m not saying that you shouldn’t try out new ideas. If you want to try something new, create a budget and try it. Don’t kill a pipeline of incoming cash to drill for a hopefully more profitable pipeline. Think about it: If it doesn’t work, you’re screwed. If you can’t afford the new marketing without killing the old marketing that is working, you shouldn’t be starting the new campaign.
Not Investing Enough Money Into Marketing Is A Recipe For Disaster
I was chatting with a dentist from the greater New York area a while ago, and he claimed to be getting patients a from particular type of marketing for about $175 each, which is great for an area with so much competition. However, just because you hit a home run once doesn’t mean you can expect to hit one every time you’re up to bat. In that area, it costs $250–$450 to get a new patient in the door.
You will never grow if you’re not willing to invest a realistic amount in each new customer. I’ve chatted with entrepreneurs who want to get 50 new customers per month, which should require a budget of at least $12,500. But currently, they only have a budget of $3,000 per month. I hate to break it to you, but you’re never going to hit your goal. If anything, the $12,500 per month you have devoted to marketing may not be enough. As you scrape the low hanging fruit, you often find you need to increase the amount you’re willing to pay to get a new customer.
Feast Or Famine Marketing
This is actually the mistake I made last year. We had so much going on in the first half of the year (the feast) that I didn’t plan well enough for July, which is typically a slower month for us (the famine). In July, I need to do more marketing and spend even more money on marketing to make up for all the business I lose when people go on vacation and forget about their campaigns. But I was planning a vacation myself, and in turn, I actually ended up cutting marketing because I didn’t want to do the work that was needed.
Bad planning and a cut in the already planned marketing for July tanked the month. It was our worst month for new sales in nearly two years. You can’t allow a busy period to let you take your eye off the ball. If you have traditionally slow sales months, you MUST do more, spend more, and market more — not do less. Here are some great ways to pump up your marketing during a slow season.
Cash Flow Issues Means More Marketing, Not Less
This is the last of the marketing mistakes for today. When you are having cash flow issues, canceling the pipeline that is bringing in more cash is just dumb. Of course, the argument I always get when I say this to someone is that the marketing wasn’t working anyway. Well, if that was true, why didn’t you cancel it earlier?
Typically, an entrepreneur doesn’t know if their marketing is working or not. All they know is they need money, so they cancel marketing to free up cash. That may help the problem this month, but it creates a new problem next month when no new customers show up. When times are hard, you need to reinvest more in marketing, not less. You must figure out how to close more sales, not get fewer leads.
Real success and business growth doesn’t come from finding the latest marketing gimmick of the month. Rather, it comes from sticking with a bunch of small and rather boring things that work well, over and over again. It comes from creating marketing assets and business systems and processes. I know it’s not as exciting or fun as we all thought it was going to be, but it is what works.
For a few more tips on marketing mistakes you can (and should) avoid — as well as how to get marketing right — request your complimentary copy of our book, The Ultimate Guide to Newsletters.