Small businesses often operate near their breakeven and therefore to become profitable they must either lower their breakeven or increase their sales. The fact is, lowering your breakeven is neither simple nor even advisable. If you are fat anyone can provide a simple answer to your weight problem—don’t eat. I can guarantee you that if you don’t eat you will lose weight. I can also guarantee that if you don’t eat long enough you will die. The real answer to weight problems is the purchase and use of running shoes. Exercise more and your body becomes more efficient—you can eat more and still lose weight. The same goes for your business—most businesses are starving themselves to death. It isn’t less overhead that you need—you probably need more! But obviously you can’t just eat more—you also have to run!
Small business owners are generally very good at sales. The owner understood his product and represented it well. They convert sales quite effectively in large part because the owner is personally involved in the sales process. Sales revenue produced from sales are the result of an easy equation—number of opportunities times the close rate. Since they are good at sales their close rate is high but since they fret over every dollar they rarely invest effectively in the generation of opportunities.
Sales is the conversion of leads into dollars; marketing is the generation of those leads. The unfortunate truth is that businesses with limited funds are reluctant to invest in marketing. Since they rarely have a controlled budget they don’t know what they can afford for marketing. Marketing is not unlike any other expense—it has to fit into your budget, however consider what the effect would be upon your business if you had twice the number of sales opportunities per month! There is nothing that you could do that would have more impact upon your business so long as: (1) your close rate is not reduced; and (2) the cost per lead is monitored and controlled.
At your management retreat ask your sales team to identify your current marketing effort. Identify you current “cost per lead.” This is the real marketing cost to your business. Then challenge them—how can we double the number of leads while maintaining the same close rate? Obviously there would be an increased cost to this effort and there is only 100% of your revenue that you can spend. The next step is to go to finance—how can we re-allocate our budget so that we can accommodate this effort? When it is determined how you are going to afford it you then must go back to sales and establish controls to maintain the close rate and cost per lead.
If you want to really change this year, change your marketing.