Cheap Decisions Are Killing Your Business (Here's the Fix)

What would happen if in your business, the thing responsible for driving 70% of your revenue was being looked after by the cheapest person you could possibly find? Doesn't take a genius to work it out, does it? Probably not. Good things. And so in this video I want to talk to you about why marketing is the lifeblood of a business and why if you under invest in it, you leave yourself in a very sticky situation. So before we get into it, my name is Elliot. Welcome back to the YouTube channel. I've been marketing for well over 10 years now, despite my young appearance. And I started off, spent three years working in a big advertising agency running Facebook and Google Ads for some of the biggest brands on the planet. I then built my own agency. Over the next five years, team about 12 people generated over 150 million pounds of revenue for our clients. And then I exited that earlier this year when I joined Entrepreneur's Circle, the family business, as chief Marketing officer. And so we now currently help a whole bunch of business owners, entrepreneurs up and down the country and we're sat doing around a million pounds a month as a frame of context so you understand where this information is coming from. So I am a marketer through and through. And so yes, I inherently have a bias to towards lots of marketing. But my goal in this video is not to convince you to blindly spend on marketing, but to make you acutely aware of an issue, a challenge that I have seen strangle many, many good businesses that I have worked with in my agency and here at Entrepreneur's Circle. You see, the problem is that a lot of business owners, not all, but a lot, under invest in their marketing and that causes you a lot of issues. Okay? Because like I said, investing in marketing is the lifeblood of a business. And I'll explain why. So my plan for this video we're going to cover why this ain't a good move. We're going to talk about what to actually do instead and then how to actually do it. So you'll get the principles, but fundamentally the real tangible action plan as well. So let's get into it and I want to start by illustrating this with a story because the idea for this video has came from two conversations that I've had in the last five days all around this topic. So first story is of client A. And so this is a very lovely lady and she has a lovely business. Okay? The business actually does around 107 grand a month. So it's a very solid, decent sized business. Now 70% of her revenue, so about 73 of this 107k comes directly from ads, meta ads, Facebook ads in her particular case. And she's been having some issues with her ads. And so we got on the call, I was going to help her out and the first thing I asked was, okay, who's responsible for running your ads? And she told me she had a freelancer and she was paying the Freelancer £500amonth. Now, no slack to this freelancer, but if you have a business, hear me out, that's doing six figures a month, with the vast majority, 70% of that coming from ads. And you're paying someone £500amonth to look after those ads. So that person is responsible for that chunk of your revenue. Does that not make you feel uneasy just speaking that out loud? That is crazy. Okay, this lady, very successful, but massively under investing on these ads. And as a result, whilst this all sounds great, going through all sorts of shit, okay, some ants are good, some ants are bad, can't put their finger on it, very up and down performance, and it's because they're skimping on this poor marketing person. And so this leads me to the first big lesson, because this is a great example of what we call a false economy. And so a false economy is when you think you're saving money, but really the thing you're doing to save money is, is going to cost you more money in the long run. Okay, that is the very definition of a false economy. And in this instance, the inability or the saving of not paying an agency 3 grand, 4 grand a month, and that, you know, 3.5 K that we're saving by not doing that is actually costing this lady tens of thousands of pounds in revenue every single month. And that is the false economy. Oh, we're saving three and a half grand here, but you're costing yourself literally hundreds of thousand pounds a year by the inability to scale these ads up. Because again, 500 pound a month freelancer, nothing wrong with her. She's probably got some very good basic ad skills and clearly she's doing something right. But at that price point, I can pretty much guarantee they do not have the skill set to scale the ads past here because anyone who could would charge way more than that because it's a direct revenue generating skill and therefore the market would reward that with significantly higher rates. Okay, this is the false economy you've got to avoid. So that is story number one and the lesson here. Don't starve your critical business functions. Don't starve your critical business functions. A business will cease to exist if it no longer is able to generate revenue. Revenue comes from customers. We need customers. Therefore, if you run a business, you have to spend time, effort and energy on getting customers. There's no other more important thing. A great mentor once said to me, when you look at your business, you see all these problems. You know, we've got operational challenges, we've got customers that we need to get good results for. We need to hire all these people. And he said this fantastic line to me, he said, look, if we took all of your problems, what is the one single problem that if we solve that, then pretty much every other problem will solve itself or give us the time to solve all the others. And that one problem for the majority of businesses is getting more customers. Because if you can do that properly and actually market your business properly, then my God, then you can have all the time in the world to do everything else. But if you're not able to appropriately scale your business and get these customers, then business just becomes a nightmare. It's problem number one, which is why we don't try and fix it by spending £500amonth. Okay, client B, this was literally all within the same five day period. They have an info product coaching business and they've been pretty successful in the UK. They're planning to launch in the US because they know their market in the US is 20 times bigger than it is in the UK and so they've been operating in the UK for a while. Pretty much max it out, they want to go to the US and so the question this lady gave to me was I found a fantastic Filipino who can run ads for $300 a month. I'm thinking of just letting them handle everything for our US launch. What do you think? I said, okay, interesting. What is at stake with this launch? How significant is it? What is actually going to, you know, what's the risk if it goes wrong? She said, ah, well, quite a lot. It's a big market. We've invested a lot in the website, the collateral, you know, building a whole new part of the business in the us so probably quite a lot. And I said, okay, well what's at stake if it goes right? If we blow this out the park, what's going to happen? Oh well, it's going to tap into a market 20 times bigger. It's probably going to generate hundreds of thousands of pounds of revenue per month. I said, okay, so why the hell then would we want to risk that on A$300 a month person in the Philippines that makes no sense. That is a poorly calculated risk around a strategic decision that is massively impactful. Okay, now again, big love to the Philippines. I love the Philippines. There's some amazingly talented people out there. I'm not saying don't use people in the Philippines. We love those guys. I'm saying don't bet the farm on a decision that could potentially be worth hundreds of thousand pounds per month with someone you just come across on the Internet that's going to charge you $300. Because let me tell you, these sorts of asymmetric business returns where you spend 300 and generate hundreds of thousands are very rare, okay? And so the probability of them paying off are quite low. And so if the opportunity is to generate hundreds of thousands here, well, then let's invest appropriately in the right people in the right resource to drastically increase our probability that this very positive outcome occurs and that we avoid the very negative one. That's what this is all about. It's about rebalancing your probabilities and not messing things up. So, key lesson, marketing leads directly to revenue. And therefore, as a business owner, your priority should be on increasing your level of investment into your marketing. That should be your priority. Number one, you need to see this. Okay? A lot of business owners, they don't believe this to be true. And I don't blame them because they've never done this in the past. Because they grow their business, they have some luck initially because they either find people in the network leads to referrals, or they find one channel that they get a bit lucky on, have some social media posts that take off and they get a bunch of customers without having to spend any money to get them. And it sets a really unfortunate baseline in their head that that is an appropriate way to operate forevermore on. And you need to get comfortable with being able to spend money and get customers. And that when you spend on marketing, you're not just pissing money away, but you are directly driving revenue. And that's the place we should get in, because once you are, then you become like me. We love spending money on marketing because we know we're turning that money into more money and it becomes a magical thing. So I'm addicted to spending money on marketing. I've spent millions and millions and millions in my career. Now I love it, not because we're wasting it, but because we are generating more revenue. So that is the big, big lesson. Now that is much easier said than done because if we could just believe that and spend on marketing and make more revenue, then we don't fucking do that. Great point, viewer, great point. So let's just touch on why that is much easier said than done and why this is a problem. Because no one meaningfully, you know, does this and I do, I empathize greatly. And so the reason this is a problem and the reason why this happens is that business owners, a lot of the time, unless they come from strong marketing backgrounds, which most don't, they simply don't know any better. No one ever taught you about marketing. No one ever showed you how to spend money on ads and turn it into customers. Okay, For a lot of you, that's just not a thing. And so you just don't know what you don't know, which is a very dangerous thing in business. We must constantly seek out the stuff that we don't know. And so your first job, when you do run a business, and I empathize, you know, having run the business myself, there is an awful lot on your shoulders. But you need to know enough to be dangerous. You need to know enough to be dangerous. I love this phrase. And this applies to pretty much every core function of a business, from your finance to your operations and fulfillment to your marketing to your sales, to your customer success as the business owner. You need to know enough to be dangerous enough to about all of these areas. Because if you don't, then you're going to find it very difficult to find and manage the right people who do. Okay, so you have to know enough to be dangerous. What does that mean? It means that you don't have to be an expert on any of these things. And you should build a business where you employ people and work with partners who are significantly better at you in every single one of those aspects. That is exactly what you should do. But in order to do that, your baseline level of knowledge around that particular function, it just needs to exist. You need to be able to tell if someone is telling the truth and if they are actually capable of these things or if they're just a Billy Bullshitter. That's why you need to know enough to be dangerous. Because I have lost count of the amount of people that have come to me, especially in my agency days where nearly every one of our client would come to us off the back of a bad experience with the previous agency where they'd been promised all this stuff and it had massively failed. And I'd go do some snooping and look at these agencies and it was just obvious from the get go they don't know what the fuck they're doing. And it's because when you're a business owner and you've never used an agency, you've never done marketing, I don't blame you. You're not going to know about Facebook ads or how to create funnels and optimized landing page and all that kind of stuff, and that's understandable. But you need to know enough to be dangerous. So part one is your acceptance that marketing equals revenue, and therefore you need to increase your investment. And if you want to do that sensibly, you need to know enough to be dangerous. Which means you're going to have to watch some YouTube videos, talk to other business owners, find a mentor, pay for some coaching, pay for some training, so you understand the world in which you seek to grow in. Because only once you've done that can we begin to work properly with people. And this is where growing and scaling business starts to become very fun. So once you know enough to be dangerous, we can now actually comfortably and safely begin to work with other people. So I want to talk now about how to vet an agency or external partner or even a new hire, okay. When they are coming in to perform a critical function such as leading your marketing. Okay. Which is the most critical function, as we've discussed. So here's how to vet them properly. So if I'm looking to bring in someone to help with my marketing, first I'm going to look at all three of those. I'm going to look at an agency, I'm going to look at freelancers and potential partners, and I'm going to look at potentially new hires to see what the right fit for me is going to be. Once I found a good option that I'm comfortable with, I'm going to ask them for these five things. The first thing should be pretty obvious, but it's case studies. I want to choose a partner, ideally, who has already done the exact thing I want them to do in my business. Because if someone has already done it and they have the receipts or the evidence to show for it, that completely demitigates all of the risk that I therefore have, or it largely does anyway. So you ideally just want them to be able to show you some clear case studies where they have done the thing that you want them to do to you. Now, the more granular, the better here, especially when it comes to numbers. Okay. And you want to see as much proof as possible. You know, people can show you inside ad accounts, screenshots, all that kind of stuff. That's better. Then when I'm speaking with Them, I test them for their knowledge around cause and effect. Because especially in the world of marketing, there are so many Billy bullshitters out there, okay? It's a very popular thing to do, start an smma, get into a marketing agency, and as a result there are so many people out there and there's no barrier to entry to start an agency or a marketing company because there's so much stuff on YouTube and so many people sending you a cheeky little course. I ask them about cause and effect. If they tell me they got these amazing results, I ask them what were the specific things that you did that drove that result? And I stress test their understanding. Because the signal of a good marketer is someone that not only knows the right actions to take, but knows these specific metrics that those actions actually improve. And so when they present a case study, it should be very evident and they should be able to talk it, not just read it in the case. So do you want them to talk it and test their understanding as to what exactly they did that drove the results? Because if they're not clear on that, if they can't articulate it properly, then that is a major red flag. Number three, is that technical knowledge? Again, you can't test for this if you have zero technical knowledge. So this is where asking them things around the new Facebook ad algorithm update, Andromeda, which again, as a business owner would take you not very long to interface with an AI and learn about recent updates to platforms. What do they know about it? What's their opinion? Okay. And other technical questions that just check if they're up to date. Because again, that's a great question. What you know about the Andromeda update? How was your strategies changed since this update has rolled out? Because if people don't know about it, if they can't express what it is and the changes caused their strategy, it's a major red flag. Number four, this is mission critical. If it is helping you out with your advertising, what is your creative strategy, your creative engine? You see, if you're running any kind of ads now as a result of this algorithm update, which I've spoken about in other videos on this channel, you're much more reliant on the creative. That is like the biggest lever that you can pull. So if someone is saying they are simply going to take your organic posts and just repurpose them and maybe create 5, 10 ads a week, that's just a major red flag. There is nowhere near the volume, the intent, the skill that will go into that that will drive you any meaningful results? Again, all little things that you can learn in your quest to know enough to be dangerous. And finally, this one catches people out all the time. What is your conversion tracking setup? Describe it to me. How are you going to make sure we are tracking things properly, feeding the algorithms and ultimately reporting on accurate data? Because let me let you in on a little secret. I A lot of great marketers, they go and work in these big agencies where they're responsible for managing huge budgets and running ads for big companies. What those people get very good at is managing the ads, but they're largely fed the creative from their creative teams and they have no impact or touch points on the back end setup of pixels, of conversion APIs of the other measurement infrastructure. And these are the people like me who go and start an agency and they're amazing at doing all the ad stuff, but their conversion tracking sucks because they've never done it. And so that can be a major red flag. So you're looking for proper pixel setup, conversion API is a must have and you just want to get clear because that's another way to identify them properly. So those are the five things. Now once we have done some appropriate vetting, because we know enough to be dangerous and we've gone through those five things and someone passes the test, we can now begin to structure relationship with them in a good way. Because again, one of the biggest things that irks people out is having to spend a lot on an agency or a big hire and then what if it doesn't work out? I don't want to be committed to this long term relationship. I don't want to risk too much money in fees for it to not pay off. And when you structure relationships like this in the right way, we vastly mitigate that from happening. Because my point here is that when you invest in marketing, you should invest it in the right way. And if you invest it in the right way, you turn the money into more money so it becomes profitable very quickly. Now I appreciate the risk because you don't know what you don't know. And so what I'm talking you through here is how we completely mitigate that. So we do the vetting and then we can structure the relationship properly so it's going to be successful from the start. So we do this and this is how I've always done it in my agency, but this is what we now look for as well. I call it the transparent approach. We want to be very transparent from the outset and this is how we can greatly de risk so step number one of the transparent approach is we are going to share. You need to share your core business numbers and you need to hold nothing back. You need to share, you know, your revenue, your margins, your cost to acquire a customer, what that is that you're happy to spend, and really anything else that they ask for because they need to have a complete picture of your business, of your commercials. And you need to understand that because you need to set the guide rails here because you need to know what you're willing to spend to acquire a customer that is profitable and makes sense in your business. That number changes. I'm sure I've covered that in other videos before somewhere. But you need to share all that data with them because then what you do is instead of dictating exactly what you need, you ask them, you say, right guys, these are my numbers as it stands. This is what I'm willing to spend to acquire a customer. This is how much we want to grow over this year. That's reasonable. What do you think we can do here? If I work with you, you know, how much do you think you need to spend to generate X result or just blank canvas? These are my numbers. What can we do here? Okay, if we work with you, how much can we reasonably expect to grow? And you get them to create the plan, you let them do some digging, let them understand your business and they create the plan and they come back and they say, look, you know what? We believe over the next few months we can spend this, it will generate this and they'll give you these results that they have come up with. So they will now be able to own them because you've not just force fed it down them, but instead you've let them create it. And so hopefully if your numbers here are clear and you say, look, my, my CAC equals X, that's what we're working with, then the numbers they come back with should be reasonable because they're not going to, they come back and say, oh, we can do it, but my CAC is X squared. Then you can tell them they're not the partner for you anyway. So that's how you understand, okay, that's what we're going to get clear on what you're going to achieve together. Third thing is we can then begin to bake in some performance based measures because if they present back to you what they believe they can reasonably achieve, that then gives you a leg to be able to agree some performance based barriers. So this is normally in regards to the level of fees that they're going to charge you. And so you can then begin to negotiate and say, okay, well, if you're confident you can deliver that, then let's create some milestones where actually a proportion of my fees that I pay will be unlocked. When you've hit this performance milestone and you can work with them to make them very fair, very realistic, there'll be lots of good frameworks and use some AI tools to create these as well. But you want that performance element because you need to agree this relationship is based on performance. That is the fundamental thing with any level of performance and figures. We need a timeline. We must agree when we expect these results to happen. Now, you know, advertising can change. Things are never perfect, so it's not. You're going to hold them 100% to this, but you need to agree a reasonable time frame, by which point you'll be seeing the results and you'll be ROI positive. That is super critical because again, that then enables us to create our exit loops, okay? And so our exit loops are our key avenues in which we can correctly exit the relationship. Because whilst we begin the relationship with every intent that we're going to, you know, stay in it forever because they're going to be generating us money. We agree this at the start because we agree, look, you're agreeing to these numbers now. If we don't meet this performance by this date, then I'm out. And actually, this is where I bake in guarantees. Because if we get to this point and we spent a bunch of money in marketing and we're really behind on target, then guess what? I'm going to refund your fees or you're going to get a portion of them back. And you are able to agree that at the start based on the numbers that they've said, because you've entered a nice fare, honest negotiation. So in my experience, that is the best way to structure it because then you go in with clear expectations as to what needs to happen and then it's not awkward and it's not painful if they miss it, because they will know to God we're missing the results. Obviously, we're going to break our criteria and that's going to lead us to lose this client boom. So with that in mind, we have now reached the climax of this video. To recap, marketing is the lifeblood of a business under invest in it at your peril. And remember, false economy. Do not fall victim to the trap of thinking you're saving money when actually the very act is costing you significantly larger amounts of money. Largely in the lost revenue, but then also the additional money you need to spend to get that back. No, enough to be dangerous. Not the best acronym, but a very powerful phrase. You just have to accept the fact that as a business owner, you're going to need to learn about marketing. You're going to need to learn enough to be able to tell if people are telling you the truth or if they're telling you the little porcupines. It's a lot of work, but hey, I'm sorry, you're a business owner, you chose this life. So we got to tackle it, tackle it with vigour. We've got to then be able to vet people properly. Every bad relationship, every bad hire starts with poor vetting. Do that process well. It's very simple, especially once you know enough to be dangerous and you greatly protect yourself from things going wrong. And it will enable you to focus more on the upside of when these great decisions go right versus just the downside. And finally, just remember the transparency approach when you are actually agreeing to work with these people, okay? Share your numbers, ask them to present what they think they can do, tie in some performance elements, agree timelines, and make sure you agree on your exit routes as well should things not be met. And by doing so, that should empower you as the business owner to. To invest heavily in your marketing in a way that completely mitigates a lot of the risk and enables you to grow your business to the moon to help your customers, help your employees, save your family, and just have an epic time whilst you're at it. So I hope this was useful. If you like this video, press like, give me a thumbs up, drop a comment, I'll see you in the next one. Boom. Peace and love.