January 20th, 2011
In the early days of my entrepreneurial career, a very dear friend said to me, “It takes money to make money.” We kind of laughed about it and had fun with it. It was repeated often until it became somewhat of a mantra and he became a mentor to me. The further I got into the startup venture, the more I understood what that meant. Since then, the more I work with clients (yes, the entrepreneurial ones, but even many of the others), the more I find I really have to coach them on this. It boggles my mind how organizations fail to realize this over and over again.
Looking at business management statistics for successful companies, the ratios vary widely. Many will say 50% of a growing organization’s time in the (S)MB space should be spent marketing; and the number increases to 90% and greater, the further you move into that S (small) business space. Whatever the “magic number” is, suffice it to say it’s a lot larger than what most people think, and certainly than what most organizations do…except for the really successful ones anyway.
Yet, how often do we see marketing budgets slashed? Nearly every entrepreneur is so focused on getting “the product” out, they fail to pay attention to the marketing side or think it is something to address later, not realizing how long it takes to make it happen. They feel once the product is available for purchase, their biggest hurdles are over and sales will (obviously) start, and everything will be fine. Then a year later, they find they haven’t sold anything, or very little. They are still struggling with the right message. They perhaps have even put more money into further product development when the first round or two is still sitting on the shelf. This is a major balance to be sure. You can’t market (past a certain degree) with no product, but you truly can’t sell without marketing.
It is also interesting to see this phenomenon at work with hiring/budgeting trends. Where do organizations tend to hire first, sales or marketing? When sales are declining or times are getting tough (like recessions), do organizations tend to hire more sales people or more marketing people (or external marketing resources if this is their model); the real question being does investment go into sales or marketing? Almost inevitably, investment goes into sales.
This is quite interesting indeed given I have never seen a good salesperson not eager to jump on a solid lead. However, I have seen many salespeople frustrated, to the point of burning out and moving on, by not having enough leads. Further, as I work with clients and they explain to me they are struggling with sales, and leads, and building their pipeline, I find many people get really confused. When I’m trying to decipher the information and really nail down the issues, I ask some seemingly straightforward questions about whether the problem is lead generation or people to follow up on the leads, and similar type questions. I get a lot of confusion, stammering, and blank stares…or cover up calling it all semantics. It is jarring to me how many executives cannot differentiate these issues…and they are very different issues, requiring very different resources and talents to resolve the situation.
If you step back and think about the problem without truly being “in” it (so this is not your company, just look objectively at the problem at hand…pretend it’s MBA school case study time), far more people would be in agreement of a strategy that built leads to the point of having very busy salespeople, comp’ing salespeople for extra workload and having execs (or some marketing resources, or inside sales, that could be effective for a larger part of the sales cycle before handing over the leads), until sufficient business is closed to hire additional sales resources. Depending on the sales approach, partners, resellers, or consultants could also be used during this process. In other words, this is a nice problem to have, there are multiple ways to handle it, and most people involved would be pretty jazzed up about this situation.
Now flip it the other way…leads are not coming in. Salespeople are frustrated and are being asked to go further and further “back” in the sales cycle, often being asked to do a high percentage of their own lead gen. Make X number of cold calls per week/day/hour…we’ve all heard or seen the drill. I’m not saying salespeople should not be hunters and bring in net new opportunities, but in many cases, this is not the most effective, at least not for a large percentage of their time. Continuing with the scenario, there are many ideas on how to generate leads (in a good situation, or none in a bad situation that requires even further resources), but all of these take money, and there is no budget left to apply further resources to the lead gen. This does not present a jazzed up team scenario as above. In this case, people are often very frustrated and losing confidence in leadership, the organization, the product, or some combination thereof. As I said, stepping back from the situation and seeing it as generic company ABC, it is much easier to see a pathway to resolution. Chances are in this scenario, budgeting needs to be juggled to put more into marketing than other areas until the problem is resolved.
These same principles apply in B2B, B2C, ecommerce, and other go to market strategies. It doesn’t matter how many products you have or how good they are, if no one knows about them and the messaging is not strong enough or on target to turn those prospects into leads and ultimately buyers, the company will never be successful. We are not all Apple or Nike. We are not in a situation that whatever we put out in the market, people will at least try it because of the name brand that’s on it…and oh by the way…why do you know when there is a new “i” anything? Yes, marketing budget!
No matter what business we are in, money is required to develop the right message and touch prospects. If all money is spent in other areas, this problem will never be resolved. Marketing does not come free and takes time, attention, and tweaking, particularly in early stages of a product, to really hit the mark. It is also not stagnant so what worked a couple years ago is not necessarily the same as what will work today so it has to be changed. This requires constant investment (i.e., marketing it not a one-time cost). The bottom line being, watch your resources and your ratios carefully. Don’t get overly caught up in one area. There is one thing that is absolutely true no matter what way you look at it…
It takes money to make money. Yes, another orange peel.
Let this become your mantra.