We do reviews of businesses for sale all the time, and one of the most common things we see outside of ecommerce businesses is very low spending on advertising. I’m talking about numbers of 1-2% or less of revenue. Why is that?
When I look into it further, there are some common thread explanations:
- Advertising doesn’t work for us
- We get enough from word of mouth
- I don’t have time for more customers
- We do advertise, but then we get busy, and we have to stop, but then when jobs finish, it gets slow again, and we restart
These explanations may be true as far as they go, but each of them really hints at a bigger underlying problem that, in my view, is worth solving.
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The ideal state for any business to achieve is one where the owner is not needed for any day-to-day operations. This does several key things:
- Prevents burnout (how do you get burned out if you can take time off whenever you want?)
- Maximizes value whenever you decide to exit (absentee-run businesses always sell for significantly more than owner-run businesses, some of which don’t ever sell at all)
- Allows for growth and improvement because the owner isn’t just buried in managing the day-to-day fires that every business creates constantly, so the owner can work on the business
In order to get to this ideal state, the business has to grow enough to be able to support a manager or, really, a management team, who can be trained, retained, and incentivized to treat the business like they were the owners and do a great job whether the owner is around or not.
To get there, you need to be able to reliably attract new customers and operate at a profit margin that will allow you to invest in growth, hiring a management team, and still having enough left over to make it a good living for the owner.
So now we’re back to the original issue- to get customers, more than you may by word of mouth, you need to be able to advertise in a profitable way that builds the business. If, instead of doing this, you are not because of one or more of the reasons listed above, then it’s time to revisit those and figure out how to overcome them.
If you think advertising doesn’t work for you, that usually just means you haven’t tried the right thing or didn’t do it right, not that it can’t or never will work. There are a million different ways to do it, and some will work for any business.
The key usually starts with being really clear on who your customer is- ads going to people who aren’t going to be a customer will, of course, not work. From there, the offer has to be compelling enough to get them to give you a chance.
If you think you get enough as it is, or that you don’t have time for more customers, then it usually means the business itself is the issue- the owner hasn’t set up processes or systems or delegated enough or standardized enough to be able to do more.
So, it’s not that you get enough customers, it’s just that you haven’t prioritized how to handle the ones you have, so you can handle them more efficiently. This really has nothing to do with advertising.
If you have a feast or famine type of business, then again, this just means you need to right size your pipeline so instead of getting full and then running out of work on and off, you need a steady stream of interest so you can slowly add to the team without overcommitting on payroll or having to turn away work. You can also adjust work volume by adjusting pricing and offers.
The bottom line is to grow your business to your ideal state, you need to have a reliable and adjustable way to bring in new customers consistently, and that requires having an advertising and marketing plan. But in order for that to work and you to invest the time to find one that works for you, there is often a more fundamental operating issue in the business you have to address first.
So, ask yourself what’s holding you back from working to drive more customers to your business? Whatever it is, work on that first, and then push forward with growth. The reward for the effort is that ideal business state that is what we all hope our business can one day be, but few achieve.
Not because it’s impossible or even that hard, but simply because they don’t make the time or realize the issue that’s holding them back. You can do it much faster than you probably think, but you have to work on the real problem to get there!