I coach a lot of business owners, almost without fail that business owner is "trying to save money" by finding cheap marketing. He'll tell me he's looking for the most economic marketing, however, he's probably found the most expensive way to market. For the more successful businesses they are carefully choosing where they spend their money, but in a different way.

When Does Cutting Out a Dollar of Expense Actually Cost you $10?

The focus of most "struggling businesses" is how to keep expenses down by cutting expenses, but successful businesses look for the Return on Investment and then spend where it generates the most. They are looking for where to spend that makes the most in return.

Cutting frequently saves a buck, but finding the ROI frequently generates 10 times that buck, or 100 times. And even more frequently when a business owner cuts a buck it's a buck that would have generated the 10 times, so it wasn't $1 they cut, but $10.

A struggling business frequently doesn't have a clue which marketing is working nor how well, so when things get tough they just cut, and it's very likely a dollar that was generating several times more. In this case cut a dollar, lose $10 for every dollar cut.

Frequently looking for "cheap marketing" by what does the marketing materials cost doesn't result in truly "cheap marketing", it becomes expensieve marketing.

A successful business owner is asking himself "how many new clients do I want to buy today." And then doing it.

I can hear the comments in the low roar that generated.

Yes, I know that some small struggling businesses believe they just "don't have the money" so they have to watch their pennies. And I know you aren't a McDonald's that spends $4B a year placing a "Golden Arch" on every billboard around the country. In fact, you MUST SPEND your money more carefully, but you must spend where you get the greatest return for your investment. The words you MUST SPEND for the Greatest Return are critical.

Another phrase that I said a paragraph or two ago that's also critical is, a successful business owner asks himself "how many new clients will I buy today." He isn't asking "how much can I avoid spending on marketing today." However, that is what most small business owners are doing when they say they've got to cut some expenses and marketing gets cut.

At the worst time of their business, and of the recession, when they need more clients to pay the bills, they are cutting marketing expenses instead of "buying more clients." Of course, it's also important to know how to make thta dollar spent give you the biggest return. Spending a dollar that generates less than a $1 isn't the right thing to do either. But that's a simple fix. Improve the marketing message that that marketing multiplier will go way up.

The True Cost of Marketing Is "The Cost to Acquire a Lead, or to Acquire a Client."

Get this critical statement, "It isn't what marketing costs you to buy the marketing material, or to pay someone to do your marketing that counts.. It's how much does it cost to acquire a new client that matters." It's also how many dollars are generated in sales for every dollar spent in marketing that matters.

If every dollar spent in marketing generated $10, or maybe even $100, would you gripe about the cost of marketing? Well, then stop griping and start finding that multiplier.

If you knew that every client you acquire cost you $100 for a client worth over $10,000 would you gripe? Or would you go out and start buying clients at $100 each?

When marketing is commonly thought of as "an expense" most people are "trying to cut costs" and marketing is almost always one of the things that get cut.

Biggest Mistakes Almost All Small Businesses Make

Or, when a business is starting out, a common thought is "I can't spend on that, so let's find the cheapest form of marketing we can." The problem is that the cheapest form of marketing is likely to be the most expensive to your business.

Let's take a look. The marketing formula states that, to get a certain number of new clients or new prospects the formula works out to be, number of people we get our marketing in front of times the conversion rate of that marketing results in the number of leads, calls, or whatever it is we want from our marketing.

people seeing our marketing X conversion rate of marketing = # new leads

Let's say that we spend $1 for letters we send out to our target market, and send 1,000 letters. Let's also say, for right now that you only get 0.1 response rate. In this case, at 10 return on investment? I realize we aren't included the cost of his time with them to make the sale, but this isn't a bad return... but he was trying to cut back on spending that wasn't he?

Why was he cutting back? Because his perception was that an $8 lead was too high and it was an "expense that he could cut." The result was that he was holding back, not spending on those leads, and he had bought only a few batches of leads. Of course when he bought them in those small batches, he'd only make a sale every week or so and that wasn't paying his rent. So, he started cutting back further, thinking he'd have more left over to pay the rent. Wrong direction!

So, when he realized that a customer cost him $160 to acquire, which would generate an immediate $600, I asked him "How many of those do you want to buy?" This was the first time he really "got it." All he had to do is buy 20 $8 leads and he'd have $600. Then he could take that $600 and invest in the next 60 leads which would generate about 6 sales or $3,600.

The next question might be, "How many of these do we have to buy to become a millionaire?"

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