Is it possible you’re literally sitting on a fortune without knowing it?
In the past few months I put out a very weird offer to help market people’s businesses using my own money.
Turned out I couldn’t quite find one which matched my criteria, but I learned something fascinating in the process…
Something which highlighted a major opportunity for virtually all marketers in a very concrete way…
And gave me an even greater “gut level” feeling for the natural ceiling of most advertising auctions (including but not limited to AdWords)
Here’s the deal…
There are MANY, many people floating around out there who could double, triple, or even 10x their businesses if they only had two things: CONFIDENCE AND CASH FLOW!
You see, when I dug into the finances of many marketers’ systems I found myself scratching my head at their very conservative bidding position…
For example, many of them were making back 6 to 10 times their investment in advertising over the course of a year.
So why then, weren’t they opening the flood gates?
I mean, sure, acquiring a higher volume of traffic usually means bidding more and increasing your cost per sale…
But 10,000 sales x $10 profit leaves a LOT more money in your bank account than 1,000 sales at $20 profit ($100,000 vs. $20,000)
See what I mean?
When I asked these marketers why they weren’t just “letting loose” and buying up the traffic they stumbled and couldn’t quite answer me…
Until I eventually learned the reasons:
1) LACK OF CONFIDENCE IN LONGER TERM CUSTOMER VALUE: They only had a rough sense of customer value over the course of the year. They hadn’t bothered to set up the tracking and reporting systems to map it out with statistical reliability. Simply put, they only THOUGHT the customers were worth what they were telling me, but they hadn’t seen the evidence in black and white, staring them in the face.
2) LACK OF CASH FLOW: Even amongst those who really WERE confident in their numbers, there were few who were willing to open up the flood gates and go into the red for a few months in order to acquire the customers. When I asked why they said something like “because I’d be bankrupt before I made the profits back”. In other words, they simply didn’t have the cash flow to fund the roll-out, even though they knew it would come back to them in spades.
And then it hit me…
These two forces are omnipresent…
And they’re creating a kind of hard ceiling on the bidding price for any advertising auction…
Because they lack confidence and cash flow, the vast majority of advertisers are simply unwilling to bid more than they can make back before their credit card statement comes due.
And this creates a MAJOR opportunity…
Not just a market gap, but a GREAT BIG GAPING HOLE in most markets…
IF you’re willing to do the research, track your systems, and develop confidence in your LONGER TERM customer value…
And IF you’re able to develop the spreadsheets that predict with reasonable precision exactly how much money you’ll need to ride out the early period when you MUST GO NEGATIVE to buy customers in volume…
And you raise the cash (and the nerve) to carry this out…
Then 99% of your competitors will sit and watch, trembling to their cores while you proceed to dominate the market.
How could it be otherwise?
Now here’s the main point…
At SOME point in all of our marketing futures, if you’re going to achieve hyper-success, every marketer MUST face this wall of fear with courage…
At some point if you want to dominate your market, you’ll HAVE TO develop the confidence and the cash flow to brazenly go negative for several months while everyone around you looks on with amazement…
Confucius once said “Faced with what is right, to leave it undone shows a lack of courage”.. and I couldn’t agree more.
Of course, there’s also a fine line between bravery and foolishness…
I think that line is drawn on a spreadsheet with statistically reliable customer data, and in a bank account with money you can afford to lose…
But it’s a line we all owe it to ourselves to paint brightly, lest we wind up cowering in a corner while the fortune deserved us passes by.
What do you all think?
Let me know,
Dr. G 
PS – In month #8 of the hyper-responsive club I provide a very detailed spreadsheet for developing confidence in the cash flow of your whole advertising system over time.
{ 7 comments }
I find that dispensing advice is easy, but being where all those marketers are at is a different story altogether. When there is absolutely nothing (and I mean nothing) to fall back to, should anything fail, pulling that proverbial trigger is pretty d@mn tough. In the one-off market I’m in I have never been able to turn a profit with paid traffic, but organic traffic does very well. As such, I’ve pulled the trigger a couple of times in regards to SEO for traffic generation, and been shot in the foot every time.
As far as paid traffic is concerned, I’m sure there is a way to monetize it, but I can’t even afford to properly test anything. I think that is a problem for quite a number of people, which is why we keep on struggling. If I had a system that reliably converted PPC traffic into sales, I would gladly go $100,000 in the hole for a month, two, or whatever, while sales were piling up.
Fascinating Glenn.
You already knew I was kind of aware of this project (although not in any detail).
It’s my experience too that this is the rule rather than the exception – advertisers don’t know their numbers, and its infinitely worse if they have to depend on making their profit over time so that cashflow is crucial.
I’ve now started to move away from these kinds of advertisers – for me its all about “it works *now* – let’s do more!”
That rules out all lead gen clients that have to fulfil their own leads – fired one this week, never going to take another on.
Keep up the great posts!
Glenn, you are totally right on the mark here. A few months ago one of my companies was acquiring several new customers per day and the cost was making me nervous, even though the customers were being acquired at a profitable level.
Looking back the thing I should have been doing was cranking up the daily budget… but lacked the confidence to do it. I actually had the cash flow! 6 months later the market is different and that ad channel isn’t working as well. Lesson learned in missed opportunity.
Thanks for putting out your experience for others to glean from.
Jordan, you’re right, and you shouldn’t pull the trigger with funds you don’t have. (You’re also right that it’s easier to dispense advice from the pulpit than to fight it out in the trenches… please be assured I’ve done both and felt the pain) My major point is that we should all know where the line is, and what’s likely to happen when we do pull the trigger. This is a LOT harder with SEO traffic than paid traffic, because it’s usually so much more diversified and harder to control in terms of qualify. (I don’t really have a lot of experience with SEO myself, so my post above relates much more to paid traffic. I’ve always thought of SEO more like the lottery, even though I know there are very competent people who swear by there abilities to reliably garner the traffic)
PS – The other point is, if you DO have the confidence in the numbers (based on solid evidence) but you do NOT have the cash flow, that’s the perfect situation for which to seek investors.
Hi Glen,
I have been reading your stuff for awhile now and to be honest it all sounds pretty impressive but beyond my reach at the moment, what do you suggest for a small local service business in terms of PPC and getting the most bang for each buck.
Thanks in advance for any help!
Greg
Hi Greg…
1) Perry Marshall’s Definitive Guide to Google AdWords
2) Howie Jacobson’s AdWords for Dummies
You should also probably join the Make Them Buy club for a few months to help through your offer and persuasion arguments. (How you will distinguish yourself from the competition). First month is only five bucks here
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