01 Mar Is Digital Marketing Your First Step?
It’s the era of start ups and individualism. I sat at a lunch table yesterday where everyone was an entrepreneur. Literally. Some running more established businesses. Some starting up. Some about to launch their dream plan. I meet a lot of these people. To be specific, I mean young entrepreneurs with a big dream. I love them. They remind me of my younger years and we usually have a lot in common. The difference is that I’ve already failed in some of my ventures, I’ve had the privilege to learn from some successful leaders during my corporate years and now, I have the honour of sharing my successful entrepreneur experience in building an established small business (finally!).
Whenever I tell people that I run a digital marketing agency which helps small businesses, this is almost always the first question:
“I need help with online marketing and my website. Can you help?”
I love the passion and willingness to learn about online marketing. In this digital age, it is mandatory. But is this the first step?
The answer is NO. Listen again. Digital Marketing is NOT your first step.
It may be your NEXT step. But it’s certainly not your FIRST step.
Far too many times when I give this response, I get raised eyebrows and confused looks. Sometimes I get looks appearing embarrassed, taken aback and even, defensive. Well, if I’m a digital marketer and I’m telling them digital marketing is not their first step, I guess it’s natural that they don’t quite know how to respond!
Before it gets too awkward, I am quick to let them know that I WANT to help their business and I want them to succeed. My goal is to help them build a strong foundation to pave for long term success.
Whatever happened to business school and business planning 101, I’m not sure. No offence to what you are about to read: If you don’t know how much revenue you need to generate for your business each month and the associated costs (i.e. your gross profit), forget about how to market your business.
In short, FINANCIAL MODELLING is your first step.
First, you must know your numbers. The number of units you need to sell, the hours of services you need to provide, your overheads, your own salary, and all the core expenses are the critical ingredients to be able to sustain a business. Digital Marketing is an investment that goes into that financial model.
Believe me when I tell you that 90% of my clients come to me asking for digital marketing and branding help having done little or no robust financial modelling. If this sounds like you, don’t take offence. Instead, be motivated by the next steps in this post to GEAR YOU TOWARDS SUCCESS.
Here is a basic starting point:
- Work out your monthly REVENUE number i.e. the number of clients you can service or the number of sales you can make. Translate this back into a dollar amount.
- For example, you sell gift hampers.
- The average price of a hamper is $75
- At maximum capacity, you can make 100 a month
- Your monthly revenue is 100×75 = $7,500
- Work out the COST OF SALE i.e. the total costs required to make those sales.
- The average cost of each hamper is $35
- The average delivery fee for each hamper is $10
- The total cost of sale for 75 hampers is $(35+10)x75= $3,375
- Now, work out the OPERATING EXPENSES, i.e. the expenses required to run your business.
- Here is a simple list and I suggest you list as many expenses that you can think of associated with your business.
- Bank fees
- Accounting / Contractor fees
- Insurances (related to your industry, workers compensation)
- Subscriptions for the business
- Office Rent / Venue hires
- Office expenses (electricity, water, cleaning, etc)
- Simple equipment
- Business set up costs, e.g. Website development, company registration, company logo, etc.
- Let’s say they total an average operating expense of $1,000 a month
- Then, surely you don’t want to work for free forever. Put in your wages! Don’t forget superannuation and tax!
- Monthly wage
- Say this totals: $2,000 in wages a month
- Here’s the fun bit…calculate your net profit before tax.
- REVENUE minus COST OF SALE minus OPERATING EXPENSES minus SALARY
- In the above example, your net profit comes to ($7,500-$3,375-1,000-2,000) = $1,125
With this in mind, you can confidently say that you need to make $7,500 in sales and take a meagre wage of $2,000 (including super and tax) and spell out the costs of making the sales and other expenses.
THIS, is where you need to get to as a FIRST STEP.
The $1,125 profit is what you can then invest into marketing!
You didn’t need to be an accounting wiz to do that, did you? There aren’t any fancy accounting jargons. It’s simple and it helps give your start-up the bare bones.
So, the first question isn’t how much you have to spend on marketing. That’s the NEXT question. I work with plenty of young start ups and solopreneurs on financial modelling. If you struggle with this FIRST step, find help. It’s the best investment you will make for your business.
Leave us a comment / question with your experience as a start up! We love sharing and learning from the community.
Alternatively if you wish to contact us for more information on the FIRST step, email us at [email protected]