Let’s start with the RIGHT question
Before we get into this, let me ask you a question
What one thing would do the most for your business?
Is it,
Getting more clients with your marketing Getting clients with cheaper marketing Getting more clients that cost you the least to acquire
Inexpensive Marketing, Low Cost to Buy, or Low Cost to Acquire a Client
I was asked by a local business management group to speak on “Inexpensive marketing.” So before we started I felt I had to clarify what they meant by “inexpensive marketing.”
First, let’s explore our concepts. When the stock market was doing well, 15% a year was considered a good return. Would you invest a dollar in the market to get an ongoing return of $0.15? Or would you invest a dollar into your business that would generate 200%? Or would you rather hold back on the dollar, but invest some of your personal time instead of money. Most people believe that TIME is FREE. I don’t believe it is.
Time Isn’t Free
Let’s say that you make $200 an hour when you are working at “what you do” in your business, or Time billable time. So, if you go out networking (most consider it relatively free) and you might get one client a month. However, you spend 4-5 hours a week, or 20 hours a month to get that client. Although, in your own head you spent nothing up front, it actually cost you 20 hours x $200/hour = $400 to acquire that client. After all, if you could do something else that took that time load off of you, then you’d put the whole 40 hour week into generating $200/hour, or $8,000 a week. There is no free marketing. We just want to find the most effective way to get the most people at the lowest cost “to acquire a client.”
Cost to Acquire a Client . . . The Most Important Focus
The cost to acquire a client is different from what we spend up front on our marketing.
The national statistics for marketing costs range from a start up (that becomes successful, that’s an important differentiator), typically spends 50% of his first year’s profits to acquire clients. So, if he makes a $100K profit, he probably spent around $50K to get it. Some small businesses literally turn white when I say that to them, but let’s look at it a different way. Back to that stock market scenario. That’s a 200% return on investment. In the stock market would you invest $50K to make $100K? In fact, you’d get excited with that kind of return.
Then why do business owners panic when they hear that they may have to spend $50K in marketing to make $100K return? It’s their conditioning. They are so used to managing their check book by “cutting costs” that they aren’t looking for the ROI, the Return On Investment.
After the first year of business, the national average for small business marketing to profits heads down to around 25%. It takes more the first year during the startup, but then it can drop, sometimes even more than that.
That means that we have two choices, either spend $25K next year to get $100K, a 400% return on investment, OR, we, again, put our $50K in next year, and generate $200K.
And frankly, I’ve seen some of my coaching clients hit 10 to 100 times ROI. It’s there, we just have to work to find it and make it happen.
Now that I’ve set some groundwork for this, let’s look further. It’s all about
What it costs to ACQUIRE the client Not what our marketing costs up front.
As a business coach, my job is to help clients find those great ROIs and then multiply their results by actually investing in the right place.
There are a couple of business management mindsets that impact most small businesses
Some operate by “cutting expenses”. Some by ROI
A Focus on Cutting Costs — Wrong Direction
The ones operating with “cutting expenses” frequently are looking for things to cut, and without regard for the ROI, or what it would generate. And there are others looking for what makes them the most and where to spend what they have.
It goes this way, find where you could invest a $1 that would generate $10, then keep looking, find a place that generates $100, and one that generates $1,000. Now we have an easy decision $1 in generates $1,000 out, so let’s go invest, and see how much we can invest as a first pass, and then how much of that $1,000 can go back in for the next round. Within weeks we are off scale.
But, as I talk to the other mindset, and share with them the EXACT same scenario and same opportunities, their response will always be: “No, can’t spend it,” “No, don’t have it.” It’s a killer mindset. It will kill those businesses, I guarantee it.
One of my clients who said “I don’t have it” said he had too many bills to pay to be able to invest like that. He had about $20,000 in bills, and had never generated enough money to even break even. In other words, his monthly income was way less than $20,000, so he was always dipping into his pocket to pay the $20K, he was typically bringing in only $15K, and, in his opinion, he just didn’t have any money left over to invest in another path. After all, he was always having to come up with another $5K every month out of his pocket.
I showed him that even if he got only a 2:1 return, that if he invested a small amount into marketing that works, that for every $1 spent, he’d have $2 left. In fact, he’d have $20K to pay the bills and another $20K to put into his pocket, a big change from where he’d been. He’d held off spending money he didn’t think he had in an effort to save money. In reality that thought was locking him into a loss situation. That tends to be waht I see rampant around small businesses.
From $5K a Month Loss, to $35K a Month Profit . . . in a Week! It’s all in the Mind.
We took roughly $4K a week from his income, and generated 2:1 or $8K a week income PLUS the income he already had, which was about $3.5K a week. His income ramped up from $3.5K to $11.5K a week, a 3.3 times increase IN A WEEK. And people tell me all the time, “It’s impossible to double my business in a few weeks.” In fact, there are so many ways to do it, that this is just one of the many.
It all goes back to the mindset that is keeping our business back. If we believe that “we’ve got to find the cheapest marketing” frequently we try all of the free ways that aren’t working and it’s actually costing us BIG BUCKS not only in spending of our time, but in lost revenue.
It may appear that I took you a different direction than was implied by the title, but I didn’t. It’s all in how we look at costs, and most small businesses are missing the point.
It isn’t what it costs up front, it’s what it costs to acquire the client. So, don’t look at “low cost” or even “free” as being the ultimate cost. it isn’t. Look at the bottom line, what does it cost to acquire a client?
A good example was two different clients I had, both small businesses and both had started off our conversation about “free marketing.” They both hadn’t been very successful.
Mary Kay Rep Goes from 1-2 clients a Year to 71 in Two Weeks . . . It’s all in the mindset.
One was a Mary Kay rep who told me she hadn’t gotten more than 1-2 clients in a year. Another was another MLM company but certainly doing a lot more business.We built a plan for the Mary Kay rep that showed we probably would be spending about 80c for every lead, and, based on what her sales conversion was it could run between $8 and $80 to land that client, but that she shouldn’t look at the upfront cost, but the overall value of that client. When she said the average client would be spending several hundred dollars a year, even the $80 (which was an outside number. It’s probably going to be MUCH better) would be workable.
Within 2 weeks she had 71 people. In two weeks she had 71 times what she had the whole last year, and now she had a plan that would continue delivering at that rate for the whole next year. By the way, she won an award for outselling all other Mary Kay reps in the area. Her year is going to be phenomonal.
Now, on to the next MLM, not an Mary Kay rep. I showed her that her costs probably would be closer to $0.05 each and that there were actually 1,300 people already looking for what she did. She ran the figures in her head, and said, she couldn’t afford it, even knowing that her Mary Kay rep friend had just acquired 71 new clients in two weeks.
I showed her that with her present approach, she was paying $2,400 a month for a building and generating only 1 new sale a day, so it was costing her $2,400 to get 20 new clients,or $120 each, and that we could add another 50 to 100 a month at only $0.05 for the lead and probably less than $1 to acquire the client. She just couldn’t bring herself to spend money on marketing. In her head she had to spend her money on the $2,400 for the building rental.
Shows to go you how people think.
How do you look at your marketing? As an expense or as an investment?
And are you looking for ways to increase that ROI? I’ll tell you that by changing your message, by changing who you give that message, how many you get in front of, that you’ll see that go up by 10′s of times.
And then we need ot make sure that you are spending in the right place with that now highest return on investment to get results such as these.
Ipad Now US
