Recently Ben met with a potential client. Not that newsworthy I know but nor is this client particularly special, their objection rather mundane but very critical to successfully implementing a newsletter.
This client had good client flow. They are running about 66% capacity. So they could grow another 50% with their given infrastructure – all additional profits effectively and the only additional cost would be marketing to get those clients.
When Ben spoke to the client they had no spare cashflow to invest in growing the business! All the money made was coming out.
So while it made every sense in the world for this client to do a newsletter however they had a real problem creating the upfront cash in order to succeed with a newsletter. You know, they couldn’t really invest ‘anything more.’
It got me thinking after we had a chat. I realised that this is:
The Death Knell For Every Business!
It made me realise just how dangerous steady state is in a business. As soon as you get stuck like this, in the big picture you are sunk.
Especially when you aren’t really a marketing person. I know Ben and I can do an awful lot with very little – with just $4,000 cash a tiny client list and another $3,000 in trade credits we built this business. Ben’s potential client’s business is a professional practice. He’s not really a marketer in the sense that you or I are.
It’s frightening to think that this business is balanced on the knife-edge. What happens if there is a dip in client flow? What do they cut then? What about if the business loses a source of new clients?
What about if the business is reduced to operating at about 50% capacity? The costs stay but the business is now in a solid state of losing money…
What costs do they trim away then?
I think this so clearly explains the small business paradox – why so many are started and so few survive. There isn’t the commitment to marketing, many business owners rob Peter to pay Paul. Take money that they have no right to be taking – money that should be going into marketing is instead being taken as income.
When growing a business the first steps are:
- 1. Set aside money for marketing. THEN
- Cover all essential operation costs (don’t go splurging on expensive office space and furniture…). THEN
- Pay yourself. THEN at all times you have to
- Always leave a profit (not necessarily in the accounting sense) or otherwise have money you can redirect back into marketing to further grow the business.
“The man who stops advertising to save money is like the man who stops the clock to save time.”
-Thomas Jefferson (This quote may be falsely attributed to Jefferson, it could have been Henry Ford, but it is better to acknowledge someone than to claim it as original thought)