What does successful marketing look like? How do you know when you’ve done a good job at marketing your web presence and business? The answer is very simple. If your marketing is successful, your revenues should be growing steadily.
Notice that I used the word revenues instead of profits. There is a big difference between revenues and profits. Having more customers, more repeat sales, and having customers spend more money each time they come are activities that increase your revenues. Basically, you bring more money in the door. If you manage this money well, you will take more money home. If you don’t manage this money well, you might have brought in a lot more customers, but still take home the same amount of money as before.
Marketing is the activity of bringing more money in the door. Finance is the activity of managing that money so you will take home more money. If you did a great job at marketing, your revenues will increase. If you did a great job at finance, your profits will increase. In other words, successful marketing does not necessarily lead to your taking home more money. In order for you to take home more money, you must combine good marketing with good finance.
Another thing to point out is that if your marketing is successful, your revenues should be growing steadily. Notice I didn’t saythe faster your business grows, the better. This is a very important point to make. A lot of entrepreneurs went out of business because their companies grew too fast.
At first, this might seem like a contradiction. How can someone go out of business by bringing in too much money in the door? The answer to this contradiction is not so obvious at the beginning. But once I point it out to you, you’ll begin to understand why steady growth is better than growing too fast. When your company grows too fast, you bring in a lot more money in the door. You have a ton of customers, and you have to service every one of them. First of all, you’ll be busier than ever. In the past, you are able to take the time to really make sure you do a good job for each customer. Now, you are rushing everybody just to get all the jobs done.
Your customers’ satisfaction level might go down. They might have to wait a lot longer to get serviced because there are 5 other customers ahead of them. So the first problem with growing too fast is that you can’t service each customer as well as you can before. The second problem with growing too fast is that you might have to develop and new web modules, hire new web designers, programmers and customer support staff just to service this surge of customers. All these additions are expensive!
Let me ask you this. If you’ve owned your business for a while, isn’t it true that business comes in cycles? Isn’t it true that there are certain times of the year when you are really busy, and certain times of the year when you’re not? What happens if there is a business downturn? What happens when the surge of customers is over, and you find yourself not having enough work to do?
You’ve just spent a lot of money hiring new designers, programmers, SEO consultants and more. Now, you have to pay all these employees that don’t have enough work to do. It’s a business downturn, so you don’t bring in the door a lot of cash either. You have all these employees that are bored, and you have to pay them all. If you start firing employees, it might lower everyone’s morale. When your business is low on cash, things can get really ugly. Many companies grow too fast, run out of cash, and go out of business.
Finally, the third reason people go out of business by growing too fast is that they don’t know how to manage the surge in revenues. If you suddenly get a lot more customers, you suddenly bring in a lot more money in the door.
What do you do with all that money? Most people don’t know what to do. They’ve never brought in so much money before, so they misspend the money. It’s a little like suddenly winning a lottery of 40 million dollars.
What do you do with all that money? Most people start wasting money and spending like crazy, because they think they’ll never run out. Well, believe it or not, a business downturn comes, and they not only are short on cash, but they’ve also acquired the bad habit of spending money like crazy.
More people go out of business by growing too fast than not growing fast enough. That’s why we say that the sign of a good marketing program is to see your business grow steadily, not explosively. This brings up the question: what is good, steady growth? What is a healthy growth rate? A healthy growth rate is to grow your revenues by 10-20% per year. Growing by 20% a year is almost pushing it, so we would say 15% a year is probably a very good growth rate. If your revenues grow by 10-20% per year, you would have done an excellent job on marketing.
[Via Visual Scope]