This question was posed on Quora and I was asked to answer it. “Why are small business owners reluctant to work with marketers?”
I am not sure it’s true that small business owners are reluctant to work with marketers.
In fact, I see many small business owners convinced that marketing is their one true way out of their current struggles, when in fact adding more customers to a broken system is one of the most stressful things they can do, both for their businesses and for themselves.
But I’ll come back to that after the Quora answer…
This is what I answered on Quora:
“Marketers” seldom listen.
And then they often do not want to be held accountable.
They are usually selling something that gets the client on the come back. In other words the small business owner has to keep paying for the result, like a medication, instead of a solution, like that provided by a physical therapist.
I know these are terrible gross generalizations, but past experiences bear out a lot of it, and lead to reluctance to engage with new people who are pitching marketing.
I want my Marketing Activities to appeal to my Target Customer and generate leads that are ready to convert. I know that my sales process works, what my conversion rate is, and thus I know my acceptable customer acquisition cost (CAC).
A “marketer” that does not understand these things and who is not willing to be accountable or share past successes (with numbers) is not someone I want to spend time with.
And finally, most “Marketers” who do understand all of this are better off working with larger clients who can pay them what they are worth at scale. A successful campaign for a large client is worth exponentially more than a successful campaign for a small, local business. So, they can charge more for the same work.
Coming down on marketers pretty hard, huh?
But what if you think marketing is THE solution and you are eager to find the right person or offering? Consider these 2 things first.
Number 1 – How robust are your processes?
Do you have documented processes that make it easy to train and foster consistency in your business? Are you confident that different customers and patients are going to get the same experience regardless of the location or individual they are dealing with in your business?
If not, you may want to start here.
Shoring up the weak links and ensuring that the best ways to address a customer, handle a phone call, or follow up with a patient are documented and shared with everyone in your organization is a great place to start. It gives you all an opportunity to review and talk about the way you will all do a thing in your business. Different people can share what’s worked for them in the past and you can add or alter the process to focus on the best way to do that thing.
Then the focus is on consistency and execution, ensuring that the documented way is the actual way that a thing is performed in your business every, single time.
This will give you insight into whether a process is working or not, as well. If you have 3 people following the same process, you should be able to get a fairly consistent result. Track the outcome can reinforce this. And if you want to make a change to a process, you then have a baseline result you can test against to see if your new addition actually improves your desired result.
Including attention to service and the customers’ experience in formation of these processes can actually turn into internal marketing that nets real results from the people who are already buying from you. If they have a great experience, won’t they tell people about it? And won’t that turn into more new customers?
But in this way your processes will be robust enough to handle the increasing volume and feed on themselves.
Number 2 – What’s your Return On Investment (ROI)?
Remember, there are no expenses in business! There are only investments! Money you spend in your business should return more than what you spend. It’s that simple.
People often try to make this complicated. In fact, the more complicated someone tries to make it, especially someone selling you something, the more likely it is that you won’t get a true read on your ROI. Figuring this out doesn’t have to be complicated. It should be pretty straight forward. But beware the “too simple” explanation as well.
If someone is selling you a solution for $3,000 and your average sale is $1,000, then they will likely tell you that you only need 3 sales to break even! Sounds simple, right?
But there are 2 additional things here.
If I said give me $3,000 and I will gladly give you back $3,000 in a month or two, you would probably say, No. And you probably should. Why would you pay out money to get the same money back later? Why would you seek to break even? Isn’t the point here to get more back?
Now the other thing about this scenario is that the someone selling this solution is basing your return on gross revenue. But you have costs. So your gross revenue calculation only works if you have inventory that will expire and not otherwise be used. It’s covering a loss, versus generating more profit.
So, you have costs. Your costs are usually much easier to figure out than it’s made out to be. To dive into that you will need to know your profit margin.
For this example we will use 15%.
A 15% profit margin on a $1,000 sale yields $150 profit. This means you spent $850 on overhead (fixed expenses like rent, utilities, equipment, ongoing marketing, etc.) and personnel (wages, taxes, benefits, insurance, etc.) to get the $1,000 in gross revenue and the $150 in profit. That’s your 15% return.
If someone is selling you a $3,000 marketing solution that is not already factored into your overhead budget,, then where is this new investment coming from? If it’s on top of your regular budgeted expenses, it will come out of your revenue after your regular expenses, which is also commonly known as your profit.
How many new customers at $150 profit do you need to earn back the $3,000? 3,000 divided by 150 is 20. So in this scenario you will need 20 new customers to get your $3,000 back. If the spend is $3,000 per month, then you will need 20 new customers per month to cover this new expense. But wait. It gets worse.
Didn’t you already have the $3,000? Are you willing to work harder for the same profit? Are you willing to bring on 20 more $1,000 customers for the privilege of paying your new marketing friend $3,000?
To get an additional profit from the profit you spent, you will need more new customers than your break even. How much more do you want to earn for all the new work you are doing?
Most of us are not thinking or looking dispassionately at our new marketing investment and potential return the way we can and do with other investments. Most other investments do not require us to work harder. We can get excited when we are being sold by a good sales person and easily overlook this ROI thing. But I recommend you take a real look at it.
To summarize, people selling you things can be a godsend or a parasite or something in between. It’s up to you to assess which in a way that will protect your business and give you a return on all your business investments.