Chapter 5 - Your Marketing Doesn’t Work ( Total Business Turnaround Book )

Hey everyone, it's Mike Andes.

And today I'm gonna be reading chapter five from the Total Business Turnaround. It's all about marketing and this one's gonna be a good one, so definitely take some notes. Might want to listen to this one twice. If you know someone else that's struggling with their marketing and getting more leads.

If you could do me a big.

Favor and just share this episode. In making this book available for free on the podcast, our goal is just to get the message out to struggling business owners. I know a lot of them don't have the money, or at least they feel like they don't have the money to get the audiobook or get the hardcover. And that's why we made it possible on the podcast to have this for free. So if you could share it with them, any of your acquaintances, anyone in your friend circle, Facebook groups, WhatsApp groups that you might have with other entrepreneurs, I'd really appreciate it and I think it'll be really helpful for them. And just share the podcast link. It's completely free for them and I just want to see other business owners that are struggling be able to turn their business around. So let's jump right into it. Figure out marketing, getting more leads.

Chapter five, your marketing doesn't work. Why you don't have a million dollar business Reason number five, your marketing doesn't work. Music Mountain Compost operates out of the hills of Vermont. A man named Zach owns it. When I met him for a turnaround episode, his business was generating $187,000 in annual revenue. Zach did most of the work himself. Often seven days a week, he'd drive around the region picking up food scraps. Then he'd compost them and sell the soil. Zach went to customer's house twice a month. He would go and pick up the five gallon buckets of scraps for about $22 per month. He did this for over 570 customers. Some of his customers were commercial or government buildings. They gave him 55 gallon buckets each time and paid more. He would take the food waste back to the shop. There, he would turn the waste piles. Using his tractor. He would track the composting process with temperature gauges. The process made high nutrient compost. He could sell it for $100 per cubic yard. Zach was spending $300 per month on a single Google Ad, which he'd been using for three years with no changes. He also spent $8,000 per year on mailers and radio ads, but he didn't have any data. Zach had no idea of how well his advertisements were performing. His website was very simple. It featured a signup button and explained his pricing and service structure. Yet when the customer clicked the sign up button, it opened the email app. The app pre populated his email address by clicking sign up. It felt strange to be opening an email. Zach did not collect customer contact or payment information from the customer. He would get the email from the interested prospect. Then he would copy and paste an email back to confirm his pricing and service terms. Then he would collect the customer's address and contact info. Zach's problem was that he couldn't get enough customers to hire a second employee. He only got about 10 new customers per month. At his current rate of growth, it would take years before he could add another employee. He had tried a couple of times to build out his team. So far he'd only been able to keep people for a month or two. Composting is hard, smelly work. His rate of pay was competitive at $25 an hour. But he didn't have enough work to keep his new hires Busy. He needed 1,000 customers to justify a full time employee. The business itself was good. His profit margins were over 70% the past year. He made over $100,000 in take home pay while working for himself. But the workload was unsustainable. He wanted to spend time with his family and allow his wife to quit her job. To make things worse, his personal expenses were high. His personal savings were dwindling. Zach wanted balance. He needed to grow the business to the point that he wouldn't need to do everything himself. That way he could focus more on family. This wasn't possible with his current marketing strategy. It's common for business owners to look for that magic marketing hack. Google Ads, postcards, social media. Anything and everything that'll help the business take off. I did the same thing when I was starting out. Every year or two a new platform would come along and I would try it. Facebook ads, TikTok, Snapchat, door hangers. Here's the problem. I was not willing to calculate the actual return on my investment. I assumed that the more money I spent on advertising, the faster my business would grow. I had no notion of how efficient my marketing strategies were. To market effectively is important to understand how each channel is performing. It's easy to find bad advice. If you Google marketing tips for home service industry, you find no shortage of content. The problem is that the influencer you stumble across isn't talking about what will work for you in your market. They're explaining what worked for them in their service area. Small business marketing for home services is very localized. You need to understand your demographic, weather and climate, your target customer's age, their income level, their unique wants and needs. You then need to build an efficient campaign around that information. Sustainable marketing success is data driven and cost effective. It is important to understand what channels are most profitable for your business. Here's a very simple metric to apply to your marketing budget. You must spend less on advertising than you make from the customers those ads bring in. Otherwise, what's the point? When the text, picture and video in your ads are well thought out, acquisition costs go down. If you have variations of the ad instead of one singular gamble, the chances of success increases. If you have two pictures, two video and two text options for an ad, you can make eight different variations. Mix and match the pictures, videos and text options to see which ones outperform and get the best results. It doesn't cost any more to create more variations of the same ad. If you treat marketing like a black hole, you will throw money into it. You will likely disappoint yourself or waste your ad budget with your results. Interpret your results often. Follow up with every lead you get. I learned this after throwing lots of money at online ad platforms. For each platform, I needed to track the cost per click, the cost per lead, and the cost per customer. The numbers will be different for every marketing channel or advertising platform. I think of it as a marketing funnel. At the top of the funnel, I pay for clicks. We're assuming these ads are online. Those clicks are then taken to my website. At my website, some percentage of those clicks will fill out an estimate, request form or contact me for work. I call this my conversion rate. From this number I can calculate my cost per lead. This is the money I have to spend on clicks. I spend it before someone asks for work and qualifies as a lead. Then some percent of those leads that come in accept the estimate I give them. That is the close ratio. If two out of three estimates are accepted, I would have a 67% close ratio. Based on that number, I then can calculate my customer acquisition cost or cac. This is the amount of money I have to spend on clicks to get one customer out. @ the bottom of the funnel. Recognize that all leads are not created equal. You can get a click for $0.10 from one platform with a conversion rate of 1 to 100. For every 100 clicks to your site, one visitor will request an estimate. This means that you are paying $10 per lead. But if you only have a 5% close ratio. It means that you would need 20 leads to get one new customer. Your customer acquisition cost would be $200. Another platform charges $2 per click, but if half of them convert into leads on your website, then you are paying $4 per lead. And if you have a 50% close ratio, you'll only pay $8 in customer acquisition cost. The cheapest clicks don't mean the lowest customer acquisition cost. You still need to convert them to leads. The cheapest leads don't necessarily mean the lowest customer acquisition cost. You still need them to accept their estimate and become a paying customer. It's important to take the entire funnel into consideration. The goal is not clicks. It isn't leads. The end goal is paying customers. Remember that a lead means the customer wants an estimate. It doesn't guarantee that the estimate will be sent out and seen. We talked in an earlier chapter about how leads can slip through the cracks in a leaky sales process. Remember the marketing funnel? Think about the flow of your marketing strategy. It takes a lot of steps between the moment a customer clicks on an ad and the day you show up to their property to do work. This is why it is so important to have a great website. When the prospective customer clicks, they should see a simple form. It should be attractive and focused on requesting estimates so they don't get lost. Your site should load fast. It should rank well on Google. Pictures and videos are nice, but they aren't why prospective customers come to your site. They want an estimate. They saw your truck. They saw your ad. Someone mentioned your business. Make it easy. Have a web chat. Display your phone number in an easy to see spot. Make sure the customer knows if you service their address. In short, know their needs, expect pitfalls and help the sale go smoothly. Want examples of great websites and inspiration for best practices? Go to homeservicewebdesign.com or longcarewebdesign.com My company has built hundreds of sites and shows some of them off there. But what if you don't have money? Your business has a cash problem. You can't spend big on clicks. Well, if you don't have money, there's a chance you have time. This is when you would adopt Alex Hormozy's rule of 100. The rule is that every day you do some sales action 100 times. Knock on 100 doors, hand out 100 flyers, log into social media groups and comment 100 times in local groups. Direct message, cold call or email local residents. It will take time, but with persistence you will start bringing prospects into your marketing funnel. But what if you have neither time nor money? Well, then you are running a very busy, unprofitable business. That business is not profitable enough for you to put money into advertising. In that case, it's time to enter profit mode. Raise your prices, improve your margins, make more money while offloading some of your worst paying jobs in the process. This will reduce the number of customers. It will give you time and increase profits. Then you can afford advertising. Saying you don't have time or money is a poor excuse for not getting more customers. Often not having the time for marketing is a big red flag. It may show that you aren't prioritizing the right things. What's keeping you so busy? Are you out in the field working? Doing a task you could pay someone $20 per hour to complete? That's not going to contribute to building your business to a million dollars. As the business owner, you must focus on high value tasks. Getting more customers is a higher priority than supplying the labor to do the work. You will not be able to do enough manual labor yourself to build a $1 million business. You will need to get more customers to build a $1 million business. Can you hire someone for $20 per hour to do the physical labor? Then you can go knock on doors, cold call or distribute flyers. Getting one new customer per hour by knocking on doors or holding a sign near the road is the best use of your time. This is true if you are trying to grow the business. Often when I go in for turnarounds, I hear business owners complain about their market size. Many of them are operating in communities with a population of 10,000 to 100,000 people. It is true that building a big business in a small town has its challenges. There are technical limitations to how big you can get. That said, in the 50 plus turnarounds I have done so far, I have never met a business owner that had fully saturated their service area. None of them had capped their market. If they had, it would likely mean they control a large part of the total addressable market. It was it would be easy for them to raise prices and increase profits. They wouldn't need a turnaround. They would have complete pricing power. Let's say you are a unicorn scenario. You have capped the market. You've raised your prices as high as you think you can. You still have not built a $1 million business and are unprofitable. What's left? Cross selling and upselling. Convincing your current customers to buy more of your services. It's amazing how many people fail to See the value of their existing contacts. Keep in mind that you've already paid those acquisition costs to get those customers. It's cheaper and easier to tap into them than it is to chase the next shiny customer. Keep your relationships with existing contacts warm by presenting season specific offers to them. Stay in touch At Augusta Lawn Care, we use One Click Estimate emails. These are emails meant to upsell customers. We also use them as a way of making contact at least once per month. We use Copilot CRM for this. We create email templates. Each email pitches a single service with a single call to action. For example, in the fall we send one Pitching Leaf Cleanups. The email contains pictures and graphics. They explain what a leaf cleanup is and how it will help their property. The One Click Estimate email ends with a single call to action to click the link. The link says click here to get a free Leaf Cleanup estimate. When they click the link, it notifies the office. The customer receives a message saying that they will receive a quote within a couple business days. Our goal is to actually do it in a matter of hours. Keeping those contacts warm will let you win back old customers. You can also sell more stuff to your existing customers. It helps you nurture a steady and reliable source of leads. When work is slow, you can send a One Click Estimate email. It will get you jobs fast without spending on ads. Remember, the close ratio for selling to past customers is usually higher. It is also higher for existing customers. It is higher than approaching strangers who have never done business with you. At my original Augusta Lawn Care location, We have over 12,000 contacts in our database. We got them from 10 years of doing business. We send one click estimate emails from Copilot CRM. They generate 50 to 100 new work requests within 48 hours. When you can generate leads for free, you will be more profitable. Most of your leads come from upselling, so you will spend less time advertising and more time growing the business. Like most marketing concepts, simplicity is key to mastering the One Click estimate. Have a clear call to action. Avoid pitching every service under the sun. Think about the way you read emails. Do you read every single word? Likely not. Neither do they make it clear that the reason you are sending the email is for them to click on the link. Keep the process as frictionless as possible. I sent marketing emails asking customers to reply Y e yes for estimates. The problem was that they had to hit reply type ye yes and press send. It took five clicks. Making it harder for customers to buy from you is a surefire way to get less customers. Making it easier and faster for customers to buy from you increases the odds you will build a one million dollar business. With Copilot CRM, it's easier customers click one time. The estimate process begins immediately with very little friction. I look forward to the day when customers can blink using AI glasses to start an upsell process. That said, it's important to be careful about adding too many new services. People think that adding new services will boost their revenue. They think it will attract more customers. They are correct. In my experience, adding services and expanding service area are the least profitable ways to grow revenue. It's almost always better to focus on your core competencies until you pass a million dollars in annual revenue. Expanding geographically or into new service areas takes time and money. It's not nearly as profitable to dominate market share in your current area as and then raise prices and profits. Adding services usually means more equipment costs. It also means more time to train new employees. Most people don't even know what their market share is. To figure this out, you need to find the TAM or the Total Addressable market. This is a fancy term to describe how many customers could buy your product in your area. If you serve as homeowners, that would be a good measure of your tam. Unless you know what the TAM is, you are making up your market share. Small businesses often use this as a scapegoat. Owners will say they stopped growing because they live in a small town or their population is low. Everyone wants to have something to blame when their marketing doesn't work or they hit a plateau. Yet I noticed that they have 500 customers with a TAM of 5,000 homeowners and there are 20 other competitors. Speaking of that, what does it mean to plateau? Many people assume it just means that they aren't bringing in new customers. That's not always true. Growth stops when the number of new customers joining equal those leaving. For example, at Music Mountain Compost, Zach was getting 10 new customers per month. He was also losing about 10 customers per month. So his business wasn't growing as many customers left as joined each month. The only way to grow will be to raise prices, increase new leads, or reduce the churn of customers leaving. Some repeat customers will leave. They will do so because they moved or passed away. But you could reduce your churn rate by keeping quality and customer service high. Train your team. Respond to customer complaints. Answer clients communications quickly. Make payment processing simple. Be professional. Churn is expensive. Let's look at an example. Your CAC is $300. You average $1,600 of revenue per customer Per year, your Profit margin is 20%. With these conditions, it will take you about 11 months to earn back your customer acquisition costs. Or with profits in those 11 months, your business will have grown, but you still won't have made any profit. You are just earning back the money you spent to get the customer. This is why growing businesses can still go bankrupt. Your overhead increases as your business expands. New trucks, more employees, more equipment. But if you aren't recuperating your acquisition costs fast enough, you could still go out of business. Growth sucks cash. That's why understanding your churn rate is key. If it takes 11 months to recover your acquisition costs, that means you won't make any profit at all until then. If the customer churns before the 11 months are up, you'll have actually lost money on the customer. To find your churn rate, add up all the customers you lost. Then divide by your total customers. You then multiply that number by 100 to get your churn percentage. For example, you have 100 customers on June 1. Fast forward a month. On July 1, you had 110 customers. You gained 20 new ones and lost 10 existing ones. The number of new customers is irrelevant. We take the number of customers that left 10 and divide that by the number of customers we had on June 1st. 110 divided by 100 multiplied by 100 gives us a 10% churn rate for June. It's important to make sure you aren't paying for a bunch of new customers and then throwing them in a leaky bucket. You'll never build a million dollar business if people leave before you can even recoup the cost to acquire them. Remember, your goal is to run your business efficiently. You want it to become a money making machine. If you put $10 into the marketing machine, you want it to quickly and predictably return $20. That's what makes a business so powerful. We have full control over the machine. The question is, how can I turn $10 into $20? How can I turn this ad spend into profitable customers? When I go in for a turnaround, I first look at how much of their revenue comes from one time projects. I compare this to the share of recurring work. Then I check to see if they are actually making money from their marketing. Are they getting back their costs or are they churning out customers before they can even make a profit? For businesses that sell recurring services, I know there's a marketing problem. It's when it takes over three months to earn back acquisition costs. Usually this means your ads are very bad or your prices are too low for one time projects. It's a problem when CAC is more than 5% of the total project value. If your project value is less than 20 times the acquisition cost, your marketing is failing. It's important to understand these numbers. If your ratios aren't right, you'll never make money regardless of how busy you are. This is why so many home service business owners are drowning in work, growing fast and have no money in the bank. I often hear people complain that their marketing doesn't work. In reality, there are a whole lot of broken systems within their money making machine. They are putting a dollar of ad spend into the marketing machine and it is giving them 90 cents in return. Or they are putting in $1 of ad spend and getting $2 out. Many years later the money machine is not working from an input output equation perspective. It could be your pricing, your retention, your close ratio, your churn. Something that's keeping your business from being profitable. Advertising will get you more customers. It will put more leads into the top of the funnel. Putting money into the machine will give some return. The question is, will the return come fast and be big enough? Will it keep growing the business beyond a million dollars? Before we continue, I wanted to ask for a quick favor. Could you leave an honest review on the book on Amazon? This is the best way for other struggling business owners to hear the message inside of the book. Once you leave an Amazon review, send a screenshot of it to bookikeandys.com I will then give you free access to an online course. The video course has 8 plus hours of content with me teaching the concepts of the book in greater detail. The course costs $599 but if you leave a review, screenshot it and send it to bookikeandys.com I will give you free access. If you have enjoyed the book so far, the online course will take it to a whole new level.