MBA1915 Q&A Wednesday: I’ve lost thousands on paid ads and can’t get new customers. Can you help?

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Hey O. Welcome to the the $100 RMBA show. With you along the way your business journey every single day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company I started back in 2014 with my co founder and today's episode is Q and A Wednesday. On Q and A Wednesdays I answer a question from one of you, one of our listeners. If you got a question you want to ask, just email me over@omar100mba.net Today's question is from Michael and Michael asks, hey Omar, I run an e commerce store and I've spent literally thousands of dollars on paid advertisements. Over $20,000 in total on Facebook ads on Google Ads, ads on Instagram, ads on YouTube and I just can't get new customers. I'm starting to feel like I want to give up, but I thought I'd email you and ask if you have any advice. Any insights would be super appreciated Michael. Thanks Michael for sending in this important question. I want to start by saying Michael is not alone. Lots of people spend a lot of money on paid advertising and don't get an roi. There are several reasons but today we're going to Outline what are the big reasons why you are not getting a return on investment on your paid ads and most importantly, what to do about it. How to turn this around so we're not throwing good money after bad money. So let's get into it. Let's get down to business.

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So Michael writes in and asks about paid ads. He spent thousands $20,000 on paid ads on Google, on YouTube, on Instagram, on Facebook. And he's just not getting new customers. So in today's episode, I want to answer Michael's question while outlining the things you need to make sure you have right in your business, in your marketing and the way you're running your ads to get the return on investment you're looking for to get your customers. The first thing I want to say is whenever a new entrepreneur starts a business, I actually discourage people from running paid advertising. Why? Because you need a baseline. You need to understand your business and your numbers without the influence of paid advertising. What does this mean? I want to know if I'm running a business, if I'm starting a business, how much traffic I get with that paid advertising, what my conversion, conversion rate on my website is from visitor to buyer, what is the lifetime value of the customer? The ltv, which means how much money does the customer spend on my website? These are critical numbers I need to know before I start spending money on advertising because it will tell me if ads are helping me get better. This is like you weighing yourself and doing all the measurements before you go on some sort of diet or health program. You need to know where you're starting, right? So you can see progress. You see what you're doing is working or not. And this takes me to the first point. You need to know if your product sells without putting fuel to the fire, without actually accelerating it with paid ads, if people actually want what you're selling. Now Michael mentioned he has an E commerce store. I'm all about going old school. You need to find out, do people actually like what I Have are people willing to spend money? And when I say money, I mean the amount of money you are charging for the products you're selling. And I'm not going to recommend anything I haven't done myself, right? I had an E commerce store myself. I had a clothing line over a decade ago, and this is what I did. I started going to trade shows. I had my own table at a trade show with my own products. I went to Sunday markets, you know, at the flea market and had my own table. And I just. The whole point of this was not to make as much money as possible. It's just so I can see if people actually like the products I have. Which products do they like, what color do they like, what styles do they like so that I can really know what was working and what's not. If you can't get traffic to your site, then go to the traffic. And that's why I'm saying go old school. Go to these trade shows where, you know, people will be there. Go to the flea market. Heck, I was selling men's clothing, dress shirts, things like that. And I rented a table at a community basketball tournament, right? They're playing basketball, but hey, they're guys and they might want to see and ask some questions about my products. I was just hungry to find out, do people want this stuff? And you need to get that answer first because if not, you don't want to spend money on driving traffic to your site if it ends up in a bounce. People leaving your site, they don't like what they see. Now, I don't mean to be harsh here, but this is just the harsh reality. The facts I need to give you because I need to do this. I needed to do this when I got started. And this is gonna save you a ton of money, a ton of headaches, a ton of time. Because in this process, you're gonna find out, okay, people don't like these products, but they said they'd like this, this, this. Let me make some changes, let me make some tweaks, let me change a few things and then go at it again next week, go at it again at the next show, go at it again the next opportunity. Sometimes you'll be surprised you have a product maybe that you don't pay attention to, you don't think is all that great, but your customers love it. And you realize I should just, you know, sell more of those products. So you need to find out, do people actually buy what I have? Not. Like, not are impressed by. Because a lot of people do this where they ask their friends and family, hey, do you like my stuff? No. We want people to exchange their hard earned dollars for your product. That's the reality of the marketplace. We need to know if people are willing to buy and will buy my products or services. So that's step one. And hey, by the way, if you don't have physical products, if you have like a digital course or software, the same applies. When we started Webinar Ninja, my software company, I went to a ton of trade shows. I went and sponsored conferences which would have the audiences that would be interested in my product. I talked to customers, I sold my softw face to face with people. I got on calls one on one with people and sold Webinar Ninja like I'm selling a service. I couldn't get traffic, so I went to where the traffic is. I actually did it slowly and methodically. But I wanted to verify if people actually like what I have and are going to buy it. Right. They actually are willing to buy it. That's step one. Once you've confirmed that you know your product is a winner, you know people are buying it, they're happy, they're hungry for it, you might think the next step is, all right, let's put some money into advertising. No. Right. You don't want to invite people to your website until you know your website is ready for conversion, for sale. This is like inviting somebody over your house and not having anything to offer them, not even a drink or a cup of water. You need to be ready for guests. This means you need to take a look at your site and make sure it communicates your values, communicates what you offer. Clearly, they know what you're selling, they know how to buy it. It's not confusing. Like they say, a confused mind never buys. Many of us, we love our products, we love our services. We're in the weeds and we have a hard time communicating clearly simply what we offer. This is why it's incredibly worth it for you to have somebody audit your site, audit your copy, your sales copy on your website, on your homepage, on your sales pages, on your feature pages, on your product pages. I personally believe writers, copywriters, these people are really worth what you're going to spend on hiring them, because they're going to change the way your business looks and appears just by using the right words. The right words will make all the difference. Even if you hire a freelance copywriter to edit your site, to do an audit and edit everything, and you spend a few hundred dollars, this is going to be so worth it. Okay, let's say this project takes 20 hours to go through a whole site. And this writer is really good. And they charge $50 an hour. That's $1,000. That's $1,000 dot. That's going to pay for itself over and over and over again for as long as your business is around. So worth it. Okay, go to Upwork. Go to freelancer. Find a great copywriter, a sales copywriter that can really audit your site and give you some amazing suggestions. Don't overcomplicate it for yourself. You don't have to like, say, oh my gosh, how am I going to get my access to the site? I don't want them to tinker around or mess things around. What about passwords? Do not worry about that. They can go through the site and give you suggestions on a word doc, and then you could pass on the suggestions to whoever edits your site. That might be you, that might be, you know, somebody that manages your site. But the point here is that don't worry about it. They can do it without access, without you worrying about any of that stuff. Now that my site is ready, I'm ready for visitors. I now need to find out a magic number. What is this magic number? Well, this magic number is called cac. Cac? Cost of acquiring a customer. You need to find out how much it's going to cost you with paid advertising on average to acquire a customer. One customer. Okay. And you don't need to spend thousands of dollars to do this. You can actually do this with a few hundred dollars. You're going to choose one platform. Let's say you start with Facebook ads. And this is where we go back to those numbers I talked to you about. We know our baseline traffic, our baseline conversion rate, our baseline ltv, how much a customer would spend on our site. So your LTV lifetime value is a big important number. Why? Because your lifetime value cannot be less than your cac. Or better said, your CAC can't be more than your lifetime value. You can't spend more money to acquire a customer than what they're going to give you.

Right?

Your customer's actually going to pay you. This is called losing, right? This is called not making a profit. You need to make sure your customer is going to be spending more than how much you paid to acquire them. Now, obviously we're working in an averages here, right? Your ltv, your lifetime value per customer is an average of all your customers. So say, for example, somebody spends $50 at your site, another customer spends $100. This is why our baseline numbers are really important. Another customer spends $75, you average out. You say you have 10 customers and the average is $70. $70 is the LTV. You can't spend more than $70 to get this customer to be profitable. And in my book, if you want to really have a great profitable business, a well oiled machine when it comes to paid advertising, you want to go at least half of ltv, meaning you don't want to spend more than half of your LTV to make a sale. That means that you spend 50% of your LTV to acquire the customer. Now I'm saying this is the minimum. If you can go even lower than that, that's even better. But that's when you know you have something working. Now, when it comes to running your paid ads, you have a couple options here, okay? And I'm going to give you my recommendation. But you have the option of running them yourself, right? You can run the ads yourself. You can learn Facebook ads, you can learn how to run Instagram ads, you can learn how to do YouTube ads, you can learn to do Google Ads. You can do Google display and Google search and all that kind of stuff, right? You can learn how to do all this stuff and you can test this out and you can do this whole experiment I talked about with the LTV and the CAC and try to acquire customers on each platform, right? That's option number one. Option number two is you hire an expert. Both have their challenges, but both also have investments. The first one, you're going to invest a lot of time, a lot of attention, a lot on learning this stuff and making sure you tweak it and maintain it and optimize it and all that kind of stuff, right? The second option, hiring an expert. There's a financial investment here and there's going to be some work and time because you're going to have to explain your business and help them out to create some great ads. But overall, it's a financial investment.

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So you can grind it out. You can learn how to run these ads yourself and you can optimize and maintain all these ads or you can hire an expert. You're going to spend some money to do it and have them handle it. I advise you to go with Option number two. Why? Because I've done both. Okay. And option number one, learning it. Not a bad option, but it's a tremendous amount of work and time to learn this stuff. And it keeps changing, it keeps evolving. And I'm talking about, I just focused on Facebook ads. If you want to advertise on Google, if you want to advertise on YouTube or any other platform, there's such a learning curve. And you will waste money in the beginning on ad dollars because you're still learning. Right? But more importantly, you are a business owner. You are a leader. Your job is not to be an expert at everything. Your job is to find people that are better at certain things than you are and get them to do it. You're an orchestrator. And that's why I recommend option number two. You got other things to do in your business. You got to make big decisions. You need to motivate your team, hire great talent, drive your vision home. Now, I understand that option number two may be more expensive. You could start small. Not every expert's going to charge thousands of dollars. Once you start spending hundreds and thousands of dollars a month on paid advertising, those costs are going to go up. You know, hiring somebody, hiring a firm is going to cost you 5, 6, $7,000, even more a month. But in the beginning, you can hire somebody who manages a lot of small accounts, a freelancer who knows their stuff, and they might charge you $500 a month. Well worth it. You're going to save that money in the first month in the money, they're going to save you their first job. And you're going to just see this as a trial. You're going to say, hey, I want you. And you can find these people on upwork, on freelancer, on all the different kind of job board sites. And you can say, hey, I want to run paid ads on Google. I want to run paid ads on Facebook, whatever it is. This is the budget I have to spend on paid ads every month. I'm happy to pay you $500 a month, but I need to see a result before I pay you all the money so you can pay them 250 upfront and 250 after you see results and what result you're looking for. Yes. If you've been paying attention, you guessed right. You want to see the CAC be at least half your ltv. This expert's going to help you. They're going to help you with the ads themselves, but also how to convert better on your site. And they might even advise you hey, you need to tweak your prices a little bit so that we can make this work. And that's a good thing because you need to be profitable. You need a systematic way to bring in new customers at a cost that you can afford. There you have it. Michael, you asked today's Q and A, Wednesday's question. Thank you so much for putting your hand up and asking such an important question. I hope I've helped you and hoped I helped everybody who's listening who has a similar concern or has been thinking about this for some time. This is the way to do it, in my opinion. If you got a question you want to ask, go ahead and email me over@omar00mba.net I'll make sure to answer it right here on Q and A Wednesday. Before I go, I want to leave you with this. I want to give everybody a little perspective. Paid advertising has actually been incredible for us as business owners in recent years. Digital advertising on these social platforms, banner ads, sponsoring podcasts, all these things are incredible ways to advertise. They're so easy and so cost effective compared to the way we used to have to advertise for our businesses. Our options were like radio, tv, billboards, newspaper, that's it. We couldn't see conversions. We couldn't know what the cost per acquisition is going to be. It was really hard. It was just like spraying money at the problem and hope that it works. It was just the awareness game. Today you have so many options to get in front of people, to target your exact demographic, your market. Now, having said that, it doesn't mean that it's going to be a total cakewalk if you try it yourself, that this is why having an expert to really take your dollars even further is a good idea. That wraps up today's episode. In tomorrow's episode, we talk about the great resignation and what it means for your business. What are some things you need to be prepared for as this movement, as this change in the economy and the workplace takes place in the next few months? Tune in tomorrow to find out. Thanks so much for listening and I'll check you in tomorrow's episode. I'll see you then. I'll see you. Take care.

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