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All About Return on Your Marketing Investment

By Denis Jakuc 

Marketing return on investment, or MROI, is the measure of the amount of revenue generated by a marketing program compared to the cost involved. This ratio of revenue gained relative to the marketing cost is usually expressed as a percentage and tells you how effective your marketing efforts were. MROI can be calculated on the basis of either your overall marketing activities, or a specific campaign. Here’s how to calculate it. Take the revenue growth resulting from the marketing program, subtract the program cost, then divide that by the same program cost. For example, if sales revenue grew by $10,000 after you spent $1,000 on a marketing campaign, the MROI is 900%, or 9X the marketing budget. $10,000-$1,000=$9,000/$1,000=900%. 

Tracking Results

Today’s digital, telephonic marketing environment allows us to accurately track the results of our marketing campaigns.   Given you are using digital marketing you can use the background information to identify the number of registrations, leads, sales closures.  You can even characterize your customer demographics, which are often kept in the background by services like Google, Facebook, LinkedIn, and others.  For analogue advertising you can add low-cost custom 800#s to your newspaper, magazine, other point of sale promotions to provide you with information on leads, sales closures, and in many cases customer demographics.  If you use salespeople or sales reps you can also deploy Company cell telephones and track the number of telephonic sales calls they make and results.   Today, there is no reason not to understand the results of your various promotions.   With specific MROI results your business can focus on those promotion actions which yield the best results.

Small Business Marketing Challenges

Small business owners often tell us they’re unsure about marketing. Where should they spend money and how much should it be? How will they know if it works? Should they do local radio, TV, newspaper, or trade advertising? Online or in print? Which social media should they post on? Should they advertise there too? Should they create e-newsletters, email campaigns, and blogs? What about coupons and direct mail?  

To answer these questions, start networking with owners of similar businesses you don’t compete with, both locally and on national sites such as LinkedIn and Alignable. See what works for them. Then use the free Google Analytics tool to learn how people find your website and where they come from, which could indicate where you could market to them. Start small and experiment—just make sure you have a system in place to track leads, prospects, and closed sales. Then spend a small amount over a short period of time on a specific promotion and see how it works. In some cases, you may be able to take two approaches and compare the results. When you have those results, do an MROI calculation for each program so you know which marketing investment gave you the best return. 

Tracking MROI makes you accountable for your marketing spend and helps you decide which marketing efforts warrant further investment. Marketing is about delivering leads, prospects, and sales. Knowing the MROI of a marketing approach allows you to justify your marketing dollars before you spend them.  

MROI Challenges

MROI may be simple to calculate, but it can be complex to use. Let’s start with the marketing cost itself. You should calculate the full cost of a program, including creative development, media spend, and customer-facing staff time. Then there’s measuring the incremental revenue that can be attributed to the marketing program. To do this, you have to establish a sales baseline—what your revenue would have been if you did no marketing. This may be difficult. If you’ve always done some form of marketing, you never see a pure baseline. Another option might be to do a marketing program to one part of your target audience and no marketing effort to another part of equal size. This only works if your audience can be easily segmented and separately addressed. 

Sometimes the incremental revenue marketing delivers comes from its contribution to increasing customer loyalty and reducing customer churn. The challenge here is to calculate how much revenue was retained that would have been lost without the marketing effort. There’s also the challenge of lag time. The marketing money you spend today might take a few years to have an effect. This is especially true of high-ticket items purchased less frequently, such as vehicles, or products and services sold to businesses. 

If you’re running a mix of marketing programs, it may also be difficult to know which ones delivered the incremental revenue. Digital marketing makes this simple. You run an ad and they click or don’t click, buy or don’t buy. Some marketers like to attribute the sale to the last touch point—online ad, coupon, email, etc. The problem here is that the purchase may be the result of everything you’ve done to build positive brand awareness. Google search ads can look like they have high MROI, but they’re actually benefitting from the other forms of marketing you’re doing.

Beyond MROI 

MROI is based on incremental revenue over the short term, but it does not measure the long-term benefits marketing programs bring to the value of your brand. Marketing does more for a company than generate revenue in the short term. It also builds lasting brand value that drives long-term revenue. The longer-term effects of marketing result in the forward movement of the customer’s purchase journey. This can take a while, and the investment to get the customer there cannot be measured by MROI. 

Instead, you need to look at customer lifetime value. This shows the impact of your marketing spend over the course of your relationship with a customer. You can also measure other things beside incremental revenue to determine the value of your marketing spend. These can be increases in brand awareness and brand preference, which show that your marketing dollars are bringing customers and prospects closer to their next purchase.

The marketing dollars you spend hit your P&L today, yet they build your brand for the future. Marketing programs increase revenue this year, and that can be measured by MROI. But they’re also increasing your brand equity and strengthening customer relationships over time. That can’t be measured by the MROI calculation, but it very well may be your largest marketing return on investment.

Managing Explosive Business Growth: A Dozen Concerns

By Denis Jakuc 

Explosive growth is something many business owners strive for. The dream is to have their product or service achieve huge popularity, or see it go viral online, which will mean bigger profits and more customers. But rapid growth is something a business must adjust to, and that takes time. You need to have the right procedures in place to handle the scaled-up operations; you need to have team members who can keep up with the bigger volume of business; you need to add hires to help handle it; and these requirements are just the start. Here’s the range of challenges explosive growth can create.

Keeping Your Early-Stage Workers. A few of the people you hired to spark the growth you now have won’t relish working for a bigger company. You can retain some through sensitive communication, training, and promotions. However, you will have to replace others with workers who are more comfortable with and better qualified for your new scale. Hire people that will keep pace with the growth.

Outgrowing Your Workers’ Skill Set. This can happen when your growth is driven by developing skills beyond what you needed when you began. If this is beyond your workers’ expertise, the quality of your product or service will diminish. The best way to avoid this is to think ahead and hire a team from the start who are competent in the areas you want to expand into. 

Finding the Best Talent. This can be a challenge, but it’s easier if you can function with a remote workforce. If this is the talent pool can fish in, it will be much larger than that the one that only contains workers located within commuting distance of your business.

Hiring On-Demand Staff. You may worry about having to let some of your new people go if business slows. To avoid this situation, instead of hiring more staff, assemble a team of on-demand freelancers. If you spend some time training them, they can be just as effective as full-time employees

Dialing Up the Quality of Your Communications. Growth depends on being able to meet higher levels of demand. This requires that your team have clear and transparent communications with each other and with customers. Entrust them with this responsibility and put checks in place to monitor their performance.

Keep Ahead of Your Fulfillment Needs. In a product-based business, meeting higher levels of demand also means expanding your shipping capabilities. Increase your inventory space and your staff to pick, pack, and ship products. And do this before demand increases to a level where you can’t meet it in a timely fashion.

Instituting New Processes. As a business grows, you need to put repeatable processes in place to smooth operations. Don’t get distracted by this—keep your eyes on delivering the products and services that will keep you growing.

Expanding Procedures. As you expand, your procedures not only become repeatable, they also expand. You’ll want to address brand guidelines, HR policies, database organization, modifying and developing your business strategy. You need additional procedures for these needs as you grow, so everyone knows how things are operating.

Delegate Responsibilities. Now that you’re a bigger company, you need to act like one. Don’t do everything yourself—delegate! But don’t micromanage. The key is to hire people smarter than you who will have your back. Experts say growing from 10 to 20 people, and from 20 to 40 are the two most challenging growth phases when delegation is key.

Remembering Your Core Company Values. Even though you’re bigger, your core mission and principles remain the same. After all, they’re what got you to where you are now. You may be doing things differently, but why you do them stays constant. It’s what your customers value and expect.

Maintaining the Existing Culture. In addition to keeping to company values, it’s vital to maintain the company culture that has contributed so much to where you are today. Remind employees of the founding principles of the organization. Promote a sense of collective growth.

Establishing New Corporate Structures. If you get to more than 200 employees, decisions become riskier and profits may grow slower. You need to put more structure into financial decisions, evaluating risk, meeting regulations, and complying with human resource requirements. 

Keep in mind that the faster the pace of your growth, the more critical it is that you stay on top of it.

If you would like more help with finding the right solution for your startup, InnovatorsLINK offers a detailed Bootcamp course where you’ll learn the details about all your options. Register here. Review the Executive Summaries associated with each course prior to attending the courses.

Key Performance Indicators to Track for Success

  • How key performance indicators can help you evaluate your business and guide your decisions
  • Different types of KPIs, and whether the indicators are leading or lagging
  • Net Profit, Customer Acquisition Cost, Lifetime Customer Value, and more
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Human Resource Management for Entrepreneurs

  • Human Resource Management is an essential part of running a small business with employees
  • Understanding the documents you need to have on hand when overseeing a workforce
  • Mistakes to avoid and technology issues to consider
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E-Mail Marketing for Small Businesses

By Denis Jakuc

Email marketing is the digital marketing strategy of sending emails to convert prospects into customers and to develop customers who are occasional buyers into loyal fans. Among marketers, social media and unsolicited spam email (never a good marketing strategy) have risen in popularity. Yet email remains the most effective way to turn leads into customers and turn customers into fans—for three very strong reasons:

  1. Email is the communication channel people access most. At least 99% of consumers check their email daily, something that can’t be said of any other communication channel.
  2. You own your email list and therefore control it. On any social media platform, your account, with all your fans and posts, is controlled by the platform. So, it could be suspended or deleted at any time, for any reason, without notice. Since you own your email list, no one can take those leads and customers away from you.
  3. Email has the highest return on investment (ROI). Email marketing has an ROI of 4400%! The average order value of an email is a minimum of three times higher than the average order value on social media. Finally, people who purchase products marketed through email spend 138% more than people who don’t get email offers.

If you want to make sales online, there is simply no better way than through email marketing. Here’s how to proceed.

Start building your list

To get website visitors to sign up, don’t just put an opt-in form on your home page and hope people will fill it in. You need a compelling offer—a lead magnet. This opt-in is something appealing you give away for free in exchange for the visitor’s email address. It can be anything you want that will provide value to your visitors for free:

  • The promise of special deals only available to email subscribers
  • PDFs of tips, resources, case studies, or white papers
  • A free quote or consultation
  • A free webinar
  • A self-assessment quiz
  • A link to a podcast or video
  • A coupon
  • An e-book

Hire an email service provider

These services send emails, automate scheduling, and provide services such as audience segmentation. Here are some to consider:

  • Constant Contact
  • Sendinblue
  • Drip
  • AWeber
  • ConvertKit
  • Mailchimp
  • MailerLite

Decide what type of emails to send

Certain types of e-mails have high open rates, and offers included with them generate up to six times more revenue than other email formats. These include:

  • Promotional emails with sales and special offers
  • Loyalty programs where dedicated customers can earn special discounts
  • E-newsletters providing useful information on a regular basis
  • Transactional emails providing receipts and shipping notifications.

Create valuable content

Research what your audience needs that you can provide. Answer questions, allay concerns, offer useful information. Segment your audience into target categories, based on differentiators, such as demographics and past purchase behavior. Tailoring content to these segments will increase open rates. Always include a call to action (CTA) that relates to your email topic.

Make your emails mobile friendly

People do a lot of email access on their smartphones and tablets. So, make sure your content is formatted to be readily accessible on all devices.

Establish a schedule and stick to it

This makes for consistency, but respect your readers’ preferences. The leading reason people unsubscribe from email campaigns is they’re unhappy with the frequency. Make contact more than once a month, but not more than a few times a week unless you’re providing daily updates readers have asked for.

Some research says the best day for email opens if Tuesday. The best times are during natural breaks in the day—morning break, lunch time, end of day, and when lying in bed with smartphone or tablet at night. Start collecting data to fine tune your schedule.

Track performance

Email marketing gives you the ability to learn from your readers. Tracking various metrics lets you analyze the success or your effort and make quick changes to improve performance. Small businesses should track the following:

  • Open rates—how many emails were opened versus how many were sent
  • Click-through rates—how many times links were accessed
  • Conversion rates—sales made versus emails sent
  • Referral traffic—how many site visits came from the email
  • Bounce rates—email addresses that are rejecting the emails
  • Unsubscribe rates—how many are opting out of your contact list
  • List growth rate—how frequently you’re gaining new subscribers

A few tips

  • Send a test copy to yourself first. Check for message errors, typos, broken links including CTA buttons, and how content appears on mobile devices.
  • Only email people who opt in. Don’t register people against their wished and avoid purchased email lists, which just give you high unsubscribe rates and can hurt your reputation.
  • Make it easy to subscribe. Use several CTA approaches on your site to capture contact info. Use autofill features.
  • Make it easy to unsubscribe. Not everyone is going to find your emails useful, and that’s okay. So, make unsubscribe links obvious and make the wording friendly. People who opt out may refer you, or could return later.

 

If you’d like more help with finding the right solution for housing your startup, InnovatorsLINK offers a detailed Bootcamp course where you’ll learn the details about all your options. Register here

Review the Executive Summaries associated with each course prior to attending the courses.

This Expert Summary is © InnovatorsLINK. For republishing, please contact dlangeveld@innovatorslink.com.

Forecasting New Business

  • Business forecasting helps you identify who will buy your products and services, and what demand you can expect
  • Accurate forecasting helps you find the right markets and avoid wasting money
  • Defining the overall market size, deciding which segments you want to target, defining characteristics of targeted market segments, and more
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Using the P&L to Really Understand Your Business

By Denis Jakuc 

Your company’s profit and loss statement (P&L) shows the financial strength and earning power of your company over time. It’s the one statement that delivers a clear picture of whether your company’s operations are resulting in a profit or a loss after accounting for all the expenditures. 

The P&L is an excellent financial tool for measuring performance over any timeframe. P&Ls are typically done quarterly and annually, but you can run a P&L report weekly or even daily. Shorter time frames allow the P&L to function as an early warning system for problems. This lets you spot them when they’re more manageable, giving you more time to correct them.  The simple P&L is truly a valuable “business” diagnostic tool.  Much like the readings of an airplane Dashboard you can use the P&L to really guide and manage your overall business, segments of the business, and products & services within your business.

A Tool for Decision-making

The P&L is also a very useful tool for looking at the performance of any part of your business, down to individual products or services. This makes the P&L a very useful decision-making tool. It helps you decide which businesses you should invest more in—and which should get less of your attention—based on the net profit they’re contributing. For example, a product may have a big gross profit (sales revenue minus cost of goods sold). However, when you deduct sales expenses, the net profit margin may become really small. A P&L on that product will reveal this problem.

Of course, profit isn’t the only reason to keep a product or service in your arsenal. For example, you may maintain a less profitable offering because it rounds out your product line capabilities, or allows you to provide customers with the convenience of one-stop shopping. You should still do P&Ls for individual products and services so that you know how each part of your business contributes to your bottom line. 

A Tool for Tax Prep and Funding

In addition to helping your make decisions about your operations, your P&L can help you arrive at the figures required for filing statutory tax returns. The net income number on the annual P&L statement is the base for calculating how much tax the business will have to pay for that year. Finally, P&Ls from a few recent years are required when borrowing funds from a financial institution, or when looking to raise capital from investors. Several annual P&Ls help lenders and investors gauge the earning potential and steadiness of your business. This then helps them decide on the amount of money to loan or invest. Of course, if your business is brand-new, it won’t have these prior-year P&Ls. Therefore, you’ll have to prepare a pro forma, or forecasted, P&L, covering a few years into the future. Lenders and investors may also ask you for other statements and documents.

The Structure of the P&L 

The P&L statement includes:

  • Sales or Revenue. All Sales over the measured time period, both cash and accounts receivable. Any discounts, product returns, or allowances given, must be subtracted from Sales.
  • Cost of Goods Sold. This covers the direct costs incurred in producing what you sell—the materials, labor, and overhead costs that are directly used to produce a product or service. The indirect costs of delivering a product or service, such as your selling and marketing expenses, are not counted here. 
  • Gross Profit or Margin. This figure is arrived at by subtracting the Cost of Goods Sold from total Sales.
  • Selling, General and Administrative Expenses. Selling Expenses include: the salaries, commissions, and bonuses of sales personnel; marketing costs, including advertising and publicity; shipping and transportation charges; and any other costs associated with selling your product or service. General and Administrative Expenses cover the indirect expenses of running office, factory, and warehouse facilities. These include the cost of: staff salaries, rents, phone and utility bills, IT services, office supplies, maintenance and repairs, legal fees, insurance, fees for statutory compliances, and any other overhead costs. These expenses are then deducted from your Gross Profit.
  • Depreciation and Amortization Costs. Depreciation is the decrease in value of a physical asset because of its usage (wear and tear) over time. Amortization is the lowering of the book value of a loan or other intangible asset over a set period of time. Both of these non-cash expenditures are then deducted from Gross Profit.
  • Interest Income and Expenses. Interest Income earned from deposits or other holdings are added to Gross Profit. Interest Expenses paid on loans and other forms of borrowing are deducted from Gross Profit.
  • Taxes. Current and deferred tax liabilities are deducted from Gross Profit.
  • Net Income. This is the final figure the P&L arrives at. It’s either a positive number, a Profit, or a negative one, a Loss.

Additional P&L Insights

Reviewing P&Ls can tell you a lot about how your company is doing financially, and where it can improve its profitability. In addition, comparing different annual P&L statements will tell you how your business is progressing over time. You can also compare your P&L with industry benchmarks, or with the P&Ls of other players in the industry, if available. This will help you assess your position in the marketplace.

If you would like more help with finding the right solution for your startup, InnovatorsLINK offers a detailed Bootcamp course where you’ll learn the details about all your options. Register here. Review the Executive Summaries associated with each course prior to attending the courses.

Why Your Small Business Needs an Interview Process

  • When hiring for your business, it’s important to have your interview process planned out instead of just “going with your gut”
  • Selecting candidates and deciding on the best questions to ask
  • Tips for assessing which applicant is best for the role
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How to Be a Great Small Business Leader

  • Entrepreneurs often only work for themselves, but leadership skills are a must when you have majority ownership with your partners or when you bring on employees
  • How leadership skills can give your company direction, set the tone of your business, and create and maintain a cohesive company
  • Clear communication, developing a vision, and other advice for stepping into the role of a leader
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Risk Management for Small Business

  • Risk management is vital for preserving your company in the face of unexpected circumstances
  • Understand different scenarios for internal and external risks
  • How to develop a risk management plan, and prepare for unpredictable risks
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