Many businesses face a difficult choice. To stay competitive, they need to invest in marketing but worry it will harm their cash flow. However, is it possible to do one while protecting the other?
Most businesses will run into cash flow problems at some point and, when they do, the first thing to get the chop tends to be the marketing budget. That’s a shame because good marketing can help you avoid these problems in the first place and may also offer a way out of trouble. Better still, in the digital world, technology allows you to access marketing in a more affordable way which dramatically expands your reach.
Cash flow management is one of the biggest issues facing businesses of all sizes, but particularly small and medium-sized enterprises (SMEs). A study from the payments platform WePay found that just over 40% of businesses said they had experienced cash flow problems over the past year. For many of them, a cash flow crisis can sound the death knell even if the business is going reasonably well. Around 80% of those businesses which do fail do so because of poor cash flow management.
Most of the resources dedicated to helping businesses avoid these problems focus on the accounts department, better planning and gaining a real-time view of your true financial position. These are all good pieces of advice, but these often have a glaring gap – marketing.
Designing your cash flow strategy
All of this is very easy to say but managers must work within financial realities. Sometimes it feels that they simply do not have the money or margin available to invest. Much as you would like to spend money on marketing, you just don’t think your finances can take the strain.
You can create an approach which works in tune, rather than against, your cash flow. Set a benchmark based on the average spending of your main competitors. If the market leaders in your sector are spending 20% of their revenue, you will likely need to spend more in order to catch up. Consider how big your company is and where it stands in its growth cycle. For example, a small business with relatively few overheads may be able to apportion a higher amount of its business budget to marketing than a larger business.
You should think about setting aside of pool of money from your income based on your marketing goals. This means you always have a pool of cash reserves which is constantly being replenished and should not compromise your cash flow.
One of the most common mistakes is to neglect customer retention marketing. It’s far easier to convince someone who has used your business before to come back than to go out and find new people (always assuming that their initial experience with you was a positive one). You should regard every customer you deal with as a potential marketing opportunity for the future. Furthermore, investment in marketing at scale is a proven strategy to continuously engage and connect with customers.
Newsletters and follow up contacts can be effective ways to engage those customers. Using their sales data, you may be able to identify new products which they might be interested in or craft personalized promotions which could attract them back to the business. Good customer service will also increase the chances not only that they will come back but also that they will recommend your service to someone else.
You can also invest time and effort into measuring the lifetime value of a customer. Not all will be created equal. Some may come back for just a few purchases of low-value items, while others could become regular buyers. Knowing where to focus your customer retention strategies will help you retain your business.
This will come at a cost, and you should set aside a dedicated customer retention budget as part of your marketing strategy, but it will save money in the long run. Data from the Harvard Business Review suggests gaining new customers costs between 5% and 20% more than retaining an existing one. Companies which successfully retain a high proportion of their customers also tend to be more successful at generating sustained and continued growth.
You should always assess your ongoing marketing efforts. You need to see what is performing well and what is not working. This can stop you from plugging away at an unsuccessful strategy but it can also prevent you from casting aside something which has been working well up until this point.
Embarking on a new project is all very well, but that doesn’t mean you should stop doing something that has been working. This is a good foundation on which you can base future growth. The aim should be to add to what is working rather than replace it.
Bootstrapping for growth
Of course, every business runs into the brick wall of financial realities. Indeed, many businesses will feel they could grow faster than they are if they had more money to set aside into a marketing budget. This is where businesses often turn to outside assistance in the form of investment, but to do so you will usually have to surrender some of your equity.
Marketing in the digital world today
Today though there are a number of alternatives thanks to the rise of digital marketing. DRVE, for example, provides an innovative solution by funding for digital marketing without asking you to surrender equity in your business. You remain in control while DRVE uses its expertise and capital to take a hands-on approach to boosting your digital marketing performance. Not only can it offer you access to funding but it can also free you and your capital up to concentrate on doing what you do best.
This can be particularly useful in a world in which digital technology is changing marketing. In many ways, it’s becoming more affordable. Traditional media such as television and print can be expensive and don’t always have a clear return on investment. Rather than a single column in a newspaper, you can have your own online shop and reach out across multiple media channels.
Digital marketing gives you an enormous amount of exposure and the opportunity to engage with consumers, leading to actual sales growth. Our unique approach at DRVE helps balance the need to protect cash flow while fuelling your hunger to grow your brand and business.