Today’s topic is about tipping the needle, tipping the hand in your favor.
I’m about a week away from finishing up my master’s thesis. As I’ve mentioned once or twice in the past, I decided at least last year to try and cross off more of my bucket list items. I’ve really been doing a lot of reflection and just realizing as cliché as that sounds, our time is limited here. So when I looked last year, I wanted to look at what is something that’s been on the list for quite some time that I’ve made zero progress on and really haven’t even thought about it. It’s just been on the list for the sake of being there.
Some of the things I crossed off and some of the things I kind of circled and then I added a few things. One of the things that have been on the list for several years was to get my master’s and it’s been a great experience, so far. I’ve learned a lot and met a lot of great people. It’s been a really good experience.
For my master’s thesis, I have been studying entrepreneurial failure. I’ve been studying and looking at what are the causes or reasons why people have to shut down and go out of business. And this has been a really, really interesting study. What I did was looked at, I guess two different avenues of collecting data and information. The first one is I’m looking at everything that’s available online — in books in journal articles like the Harvard Business Journal or the library at the university that I attend. These are the kinds of resources that have already been out there. Based on my research, I found a lot of similarities in why people close shop.
The number one issue, which I would assume comes at no surprise is cash flow. Businesses run out of cash. And then there were a lot of other challenges and issues, such as team issues, competition, not having a robust plan. However, the one that continued to come up in writing was the whole marketing aspect.
What I decided to do as a second form of research was to conduct over 100 interviews. I ended up meeting with 119 entrepreneurs to be exact, which had closed down for whatever reason. They had to have a couple of commonalities in order to fit the study.
- • Able to reach $100,000 in sales
- • No ton of redundancy
I wasn’t overly interested in interviewing entrepreneurs or borderline entrepreneurs that started something and only did $1,000 in sales, to be honest. Next, I also had to look at the industries that they were in to just to make sure that there wasn’t a ton of redundancy because there are certain industries that sadly have a really dismal failure rate.
Like it’s tough when you look at some of these, the construction industry and restaurants being a few of them. More than 50% of restaurants go out of business in the first year alone.
You might be thinking to yourself, “Well, I probably shouldn’t be opening up a restaurant.” Well, yes and no. As long as you’re aware of the reasons that these businesses are closing, then you can start to mitigate it. That was what I wanted to give you the context. The thought process of this particular episode then was, well, what can you do differently? What should you do differently?
What I started to find with these interviews is that there are a lot of things that really were not talked about in the journals and articles.
The first one was life and the unexpected things like bankruptcy, divorce, or losing a family member that then caused kind of this downward spiral. But as I continued to peel back the layers of the onion, there were several other things that kind of came up.
One was a support network, where most of these entrepreneurs felt like they didn’t have anyone they could turn to. They didn’t know, kind of what to do next. They didn’t know once things started to get bad or start to go on that downward spiral, what do they actually do? I do believe that if these entrepreneurs had more of a support network and some people that they could have turned to, that would have helped mitigate a lot of these challenges.
But I will tell you that the thing that I was most surprised by was marketing and I wasn’t pleasantly surprised.
What I learned was that most of these entrepreneurs, and when I’m saying most, I mean 91% said that they do not feel they did enough marketing to grow their business. Less than 10% of them had a written marketing plan — less than 10%.
Now, let me ask you this, if you were opening up a business from scratch or if you were looking at taking your business from where you are today to where you want to be — getting through that gap — do you think that having some kind of plan and then being able to backward plan it would be helpful? Basically, that’s the first recommendation that I’m making in this paper — having a written plan and then backing into that plan. I think I’ve done at least one, possibly two episodes on kind of planning and backward planning — hugely important concepts.
So if you’re doing $100,000 a year in sales and you want to get to $200,000, what do you have to do differently? What has to change? And then you can break that down to each month, each week, or each day. Then put things in place so that you’re able to gauge the metrics, kind of your marketing gauges to see where things stand — you want to make sure of that. And that is step one, wherever you are today.
Step two is that you need to start to adopt and adapt to a “marketing first mentality”. Marketing above all has been the topic that I’ve been preaching from the stage for the last 200-plus episodes. If I’m telling you that 91% of these businesses said they didn’t do enough marketing, then the second question that I asked was, “would more customers coming into your business has potentially or kept you in business, yes or no?” Over 85% of those people said yes. Are you starting to gather the trends here?
The businesses that are going under don’t have a plan. They are not backward planning anything — they’re doing very little marketing. They don’t know about buying and acquiring customers and they’re not having enough customers. That’s ultimately the symptom that is putting them out of business. They run out of cash, but they run out of cash because they don’t have enough customers. They don’t have enough customers because they’re not doing enough marketing. This is the single most important thing in your business — the single most important thing in your business. If you still don’t understand that marketing is an investment and not an expense, you’ve got to start to make those mindset pivots very, very quickly. If you don’t understand the key metrics of your cost per lead, cost per sale, or lifetime value of a customer and if you don’t have those metrics and you’re not able to very quickly gauge them for the day, week, or the month, you’re not going to be able to succeed. And if you are, it’s going to be more by luck than anything else.
So, if you want to tip the needle in your favor and if you want to not wind up on the wrong end of the coin, you have got to get your act together from a marketing and a marketing planning standpoint.
How difficult would it be for you to sit down for a couple of hours and just look at where you are today, where you want to go, and then literally just start to map it out. Even if you just do it for a month. If you said I did $10,000 in sales this month, I want to find a way to get to 15,000 or 12,000. Well, what has to change?
Unless there’s seasonality in your business and you don’t do anything differently, you’re not going to be able to directly impact that progress. If you know that what you didn’t do or this particular tactic worked well, why can’t you start to ratchet those things up so that you’re never having to worry? You’re never having to lose sleep at night, literally sitting there staring at the ceiling figuring out how you’re going to pay payroll because you don’t have enough cash to support the business. You don’t have enough cash to pay your team. You’re not taking a salary. You haven’t grown a profit. I do not want that for you and that’s the whole reason that I continue to do this day after day after day — I don’t want you to be on the wrong side of those statistics because what it does is it creates this negative ripple effect. And that is the piece that I’ve found most devastating in my thesis — this ripple effect that I’m calling it, that when you have to close down your doors, your life gets affected. Not just personally, but emotionally. A lot of these entrepreneurs fall into deep states of depression and question their self-worth. Their relationships with their kids or their significant other suffers. If they had family members as investors, these relationships suffer, too. I had conversations about people not being able to go to Thanksgiving anymore because of what the fallout did. It has a ripple effect on the community and your customers. Think about all your employees and then their families — I need you to bring your A-game.
I have learned after studying this and executing this for 15 plus years, that the way that you grow a business is by improving your marketing — plain and simple.
I hope you enjoyed today’s episode, I actually felt that this was one of my favorite, if not my favorite episodes that I’ve ever done so far. Look forward to your feedback. Have a wonderful rest of your day.