Value Any Business by Assessing Marketing? Ex-Gartner Analysts Breaks Down The Bottleneck

In many ways, especially for the small and mid market companies that we work with, traditional marketing has failed them. It's sailed them because it's all focused on execution. It's all focused on dive in and do stuff without any preparation, any strategy, any foundation for growth.

We're talking about adding value to the business. Clear price from octane growth. Got a background evaluating software vendors. When you worked at Gartner, you took that, used that to build octane growth systems to evaluate and improve marketing systems. And now you're mixing into that the certified exit planning where you really have this deep understanding of how to add value and how to use marketing in particular to build that value. And I should mention you've got a couple books, right?

My, my latest book is Smart Marketing Execution and prior to that I wrote a book called Remote Remote Work. So for people who were new to the remote work world, that was in 2020 when the pandemic hit. And I am working on a new book and it's tentatively working title is Marketing Wisdom for Exit Planners. And it's going to focus specifically on how exit planners can take advantage of marketing for their own practices for their clients and how they can best effectively work with a fractional CMO that they may add to their exit planning team.

That's such a great segue in because I think the question a lot of people have about marketing, is it like Mad Men where we have these creative things and we're Madison Avenue or is it a bunch of fluff? There's so much noise out there around marketing. Where do you like to start evaluating when you're evaluating the marketing that a company has Currently, I think the first.

Thing that you have to do is you have to start with perception. Perception of marketing is often very different from the reality of the power of marketing. And what I will say very boldly is in many ways, especially for the small and mid market companies that we work with, traditional marketing has failed them. It's sailed them because it's all focused on execution. It's all focused on dive in and do stuff without any preparation, any strategy, any foundation for growth. And when you do that, you always lose time and money even if you're eventually successful. A typical marketing agency who does not do any strategic planning and some do, and I will give high credit to many that I know who do, but those who do not, who simply dive in and do social media or do Google Ads, digital advertising, whatever, and dive into execution, they typically spend three to six months figuring out what's actually going to work before they can produce any kind of result for the business owner. Now if you're a large enterprise company company, you can usually bear the cost. And then of course, a large enterprise company has ways around that. They usually have a more sophisticated marketing team to support the agency. But the small and mid market companies do not have that and they end up losing time and money. So the failure point of marketing is very simple. Don't just dive in and do stuff. And we have three principles that we follow when we work with our clients. And I'll talk a little bit about the exit planning part of it, but this applies across the board. And that is the first principle is mindset. Do you come in with a revenue mindset or a value mindset? And those are very different because revenue at all cost is going to deliver you growth. You're going to see top line increases, but what you're not going to see is bottom line net profitability often. So a value mindset for marketing requires two things, not just one thing. It requires top line revenue. You have to maximize revenue generation. At the same time, you have to do that while controlling costs. So that's the first point.

Yeah, that's so relevant to so many business owners. It's so easy to get enamored with a tactic and just go. And it's so easy to lose from focus on are we trying to grow or are we trying to build profits and value?

And I think the other thing that fails mid market companies is that everybody's bought into this, for lack of a better term, fail fast or move fast and break thing. And for a mid market company, particularly one that has tight margins or tight growth, that is again a recipe for disaster. You need to do more upfront planning because you don't have the resources sometimes to fail fast and keep pivoting. You need to put a foundation for growth in place. As I said, our first principle is mindset. Our second principle is momentum. What we want to see from any of the marketing activity that we do, because we're going to build a strategic foundation for growth, and I can talk about that in more detail, Scott, is we want to achieve momentum, consistent growth over time, year after year, quarter after quarter. Now, depending on what the owner's goals are, whether it's initial growth, whether it's scaling growth or whether it's growth to exit, there are different value points and value levers that we look at for those. But the idea is sustainability. And you can only deliver sustainability if you systematize your business and systematizing your business in this Context for me is I'm gonna do a little play on the three legged stool. And in the EPI world we talk about the three legged stool being financial planning, personal planning and business planning. There's another sort of corollary, three legged stool that we like to use which is financial operations, business operations and marketing operations all need to be systematized and integrated in order for the company to actually deliver value instead of just roller coaster up and down growth.

Yeah, that's a pattern I've seen a lot as well, both the positives and the negatives. Things go so much better when you have it. Things are really difficult when you don't. And clearly it impacts the valuation you would get on your company and it impacts your ability to drive your company through intention. I think you mentioned the move fast and break things. It sounds really good as a sound bite and it works incredibly well in a unicorn market. And I think people misunderstand when we talk about unicorns. To me it has more to do with the market than it does with the company. You're not going to get a unicorn where there's no market and only when you're riding a unicorn market and by unicorn, billions of dollars in valuation like a Facebook or Google can. Those are the only situations where the market basically will carry you through all the challenges that happen. If you are mid sized business or especially a small business and you're not riding one of those markets that go fast and break things and go that can really hamstring you. And I was speaking with a founder the other day who's said to me like we're growing, but I feel like we're growing in spite of me. And I can see a cliff coming because he had not gotten those processes in place and because they didn't have the stability they need with that foundation. I'd love to hear you elaborate on that foundation more.

Absolutely, Scott, and thank you for that. From a. I'll go from a holistic picture and then dive down into marketing. In, in looking at valuation for exit, you want to have a strong financial foundation and that means you want to have your books clean in order prepared for a buyer to do do diligence with them. You need to really, you need to get first step in any kind of exit planning and even I would suggest in real growth planning is to get a true business evaluation of your business. Know what your business is worth today. Because if you're going to sell your house, you're not going to put it on the market without going out and getting columns and comparables. Same with your business. You want to know what it's worth today so you can have a realistic picture of how to get to where you want to go. The second thing you need to do.

One question on that just quickly. So getting that valuation, is that something you do as a SEPA or is that a different.

That is something we do as a sepa. Typically the best way to get that valuation is to bring in through a business valuator, a business broker or a value growth expert who can do all the financial reductions and the business evaluation. There are two assessments that EPI recommends that we always do when we start after you get the evaluation, that's what we call a triggering event. Which means now we know what we have to do and start to. We start to plot the journey. So the second step then is to do two critical assessments. A business readiness assessment, which is the business and more importantly in some ways is the owner ready to exit. And then secondly there's a business attractiveness assessment which is how attractive will that business be to the outside market? Whether that's coming in as a PE M&A kind of sale, whether that's a sale to a competitor or even if it's a sale to an internal, internal group or family succession, you need to have know how attractive that is to that group. And for with Oqtane, what we've done as part of our alignment with the value acceleration methodology is we have created our own marketing assessment which is aligned to the value attractiveness assessments, our revenue maximizer scorecard that we use that has about 16 points on where you stand on your market, your brand, your sales, your customer. Success is part of that kind of an adjunct or complement to the business readiness assessment that EPI provides.

So when you do, when you add the marketing assessment in, like if you were going into a new customer, would you start there? Would you do the full. The business assessments?

First, from our position, from my position, what I would do if I have an owner, when I have an owner who is saying I want to start thinking about my exit, the first thing I'm going to do is I'm going to bring in one of my business valuation partners and have them do that full valuation, the second thing I'm going to do is I'm going to bring in a value growth advisor to do the business readiness and the business attractiveness assessments because they have the real expertise in the financial and business operations part of it that we're that Oqtane supports. So we see that as part of a team that we're going to bring in so that the business owner has the best trained and experienced experts that they can in all those areas, which is business operations and financial and marketing. And so then we will come in and say, okay, let's now dive down deeper into the marketing area. Because frankly when you're looking to build value the way that you're going to build value, marketing is your primary lever. It's the biggest value booster you have. It doesn't get used properly in a lot of cases. For the reasons that I talked about before, for just the lack of understanding or a lack of resources in the market, which is one of the reasons that I created Octane was because I wanted to provide strategic marketing operations resource to mid market companies that I did not see available prior to the launch of Blockchain.

And I know from looking at the assessment and supporting it in result maps there's a set of challenges that you identified. Is there any one of those that people experience the most?

I think the big, I think there were, there's three and I'll put them in priority order. I think biggest challenge is they don't have a message that connects to their customers. The messaging is usually off. It's usually too product or company centric. And even if it's customer centric, often it's not really talking to where the customer is today because there's a lack of understanding of not who the customer is. Every business owner knows who their customer is, know what industry they're in, they know what kind of products and services they need and they're very confident they are. But what they don't understand often what kind of gets uncovered a lot when we're working with our clients is the needs, wants and desires of that customer. What do they needs? Again, needs is painful, so everybody focuses on pain points but they don't look at okay, what does that customer want? And when we clarify want we mean what does that customer want 12 months from now? And then when we qualify desire it's what is that? What's the end goal that customer really desires to have as an outcome of the work that they're getting from you? So they're really three different things. And then we tie that to values and motivations. So you really want to know what is motivating that customer to buy and most importantly what it's motivating that customer to buy from you and not your competitor. And so those are the things that we really dive deep into that I don't think get as much attention from a lot of other different marketing approaches.

So what are the most important principles in your mind that drive marketing?

With Optane, we have three principles. The first principle is mindset. We want to have a value mindset, not a revenue mindset. I mentioned that earlier, but just really zero in on that point. You want to have a mindset that says revenue and then cost containment or cost control. That's the first point. So that's the value mindset. The second point is momentum. You want to have a sustainable marketing momentum where you are seeing growth month after month, quarter after quarter, year after year. And you can only do that when you systematize your marketing. And the third key principle that we follow is measurement. We have five metrics that we track for every client to hold the client, us as a vendor, and any vendors we work with and the entire team accountable. And also make sure that on a weekly basis we are really seeing the change and the return on investment. A couple of the key ones. You want to measure customer lifetime value. You want to measure cost per lead. You want to measure churn. That is very important because. And by churn, I mean our customers leaving or customers staying, because we know that the cost of acquiring a new customer is at least 5x the cost of retaining a current customer. You also want to measure, and this is very underutilized in marketing, you want to measure the net profitability of each of the marketing campaigns that you're doing. So those are the key metrics that we want to look at. So we're looking at top line, but we're also making sure that we have a direct connection or correlation to bottom line and gross margin.