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Monday, April 6, 2020

Lesson #325: Reset Marketing Campaigns as Market Conditions Change

Posted By: George Deeb - 4/06/2020

It is no surprise to anybody that we are living in a different business climate in the wake of the Coronavirus lockdown.  In the last fe...



It is no surprise to anybody that we are living in a different business climate in the wake of the Coronavirus lockdown.  In the last few weeks, many of us have seen customer demand fall, revenues decline, free cash flow dry up and the stock market crash.  Which means, we need to find every penny we can, to keep our businesses afloat.  I am sure many of you have already cut your payroll expenses, based on the record unemployment filings in the last couple weeks.  But, you may not have given your marketing expenses the attention it deserves during these troubling times.  This post will help you "reset" your marketing campaigns, to help ensure they are contributing positive cash flow again . . . as most likely, they are not today!!

Reset Budgets

Marketing is typically your highest expense outside of payroll.  In normal markets, you are spending around 10-30% of your revenues in sales and marketing related investments.  Which is fine in good markets, as it is mostly likely driving you a healthy bottom line profit (or at least breaking even).  But, let's say revenues just fell 50%; if left unchanged, your marketing investment just doubled to 20-60% of revenues, which most likely is going to result in huge losses for your business.  So, you are going to have to reset your marketing budget to "right size" the investment, in light of the reduced revenues.  In this example, you most likely need to cut your marketing spend in half.

But, which half do you cut?  Hopefully, you have good campaign tracking in place, and you know which campaigns are driving more profitable leads than others.  So, sort your marketing efforts in order, from best performers to worst performers, and take the hatchet out and cut all campaigns that are on the bottom half of the past success list.

In most cases, I would suggest not taking your budget to zero.  That could be the equivalent of slicing your own throat, as without marketing spend, new leads will not be coming into the business, and in turn, no new revenues will be coming into the business.   The only exception to that rule is if you are in an industry that has entirely been decimated by the market conditions.  Think the restaurant industry in the wake of the Coronavirus.  In that case, it may make better sense to put your entire marketing efforts on pause, putting the business into "hibernation" until markets improve.

Reset Campaigns

Once the budgets have been reset, now you need to reset the specific campaigns that were running within those overall budget categories, as most likely their performance today, will be behaving very differently from where they were in normal market conditions.

Let's use a case study from my Restaurant Furniture Plus business, as an example.  In the wake of Coronavirus, our contact rate (calculated as inbound calls/emails divided by website visits) cut in half.  That means on the same amount of spend, we are only going to see half the amount of sales as we were seeing during good times.  Which further means our cost of customer acquisition (CAC) just doubled!!  And, as most internet marketers know, if your CAC just doubled, you most likely just watched your campaign devolve from a small profit to a big loss, with the snap of a finger.

So, don't take anything for granted.  Don't assume your historical campaign metrics will hold up going forward.  You are going to have to restudy everything.  That may result in you re-optimizing each of your campaigns as if you were starting from scratch again, because that is in fact what you are doing . . . starting from scratch again to account for learnings from the new market conditions.  So, relook at every sub-campaign within a marketing channel and make sure it is still pulling its weight.  If not, change the settings or shut it off.

Reset Agency Expectations

If you have a good advertising agency that wants to protect its long term relationship with you, they will understand that market conditions have changed, and they should work with you in coming up with a win-win going forward payment plan together--both in terms of your contractual media spend, and their agency fees.  Just like the real estate landlords are working with restaurant owners to forgive rents, while their restaurants are closed.  So, this is a good time to change any fixed fee overhead at high levels, into variable fees that move up and down with your media spend, most likely at much reduced levels.  And, if you need to shut off your campaigns entirely, set up a month-by-month check-in meeting with your agencies, so when the markets do finally improve, they are all set to go, to get the campaigns restarted again.

Consider New Target Markets

Continuing with my Restaurant Furniture Plus example from above, as you can imagine, trying to sell furniture  to restaurants given the impact of Coronavirus, is like trying to push water uphill . . . it just ain't gonna happen!!  Based on our research, it could take up to two years post the pandemic ending for restaurants to get back on their feet, with enough cash flow to start investing in their businesses again.

So, what does that mean--we need to identify new markets to sell furniture.  For our business, that may mean opening up the government, school or corporate furniture channels, which will recover faster than the restaurant channel will.  Or, instead of focusing our online marketing efforts to restaurants in Google's keyword search results, we focus our efforts on consumers that may need furniture for their homes in Google's shopping section.  So, study your individual businesses and figure out what works best for you, and pivot your attention into those new areas.

Concluding Thoughts

We are living in a crazy post-Coronavirus world today.  What made sense a few weeks ago, from a marketing perspective, most likely no longer makes sense today.  You are very much relearning your business metrics from scratch, much like a startup company would.   So, the sooner you quickly audit your current marketing efforts and reset them, the less time you will be flushing your limited and precious capital down the toilet!!


For future posts, please follow me on Twitter at: @georgedeeb.


Friday, April 3, 2020

Lesson #324: A Guide to Small Business Loans

Posted By: George Deeb - 4/03/2020

[Image source: https://cdn.pixabay.com/photo/2017/09/07/08/54/money-2724241_960_720.jpg ] As you know, in the wake of the Coronavirus, t...


[Image source: https://cdn.pixabay.com/photo/2017/09/07/08/54/money-2724241_960_720.jpg]


As you know, in the wake of the Coronavirus, the federal government passed the CARES Act in March 2020, an economic stimulus recovery package, where employers who retain their employees through June 30, 2020, will be rewarded by having their payroll and certain other costs paid for with the loan, entirely forgiven.  As I write this post, the application period is just opening today, and there is a mad rush for the potential of "free money" from the government.  So if you think you qualify, you really should be applying today.  As you can imagine, the demand is far going to exceed the supply of capital, even if government is shelling out hundreds of billions of dollars from this program.

So, when that capital runs dry, what are the rest of you going to need to do, to find your much needed capital infusion.  You are going to have to seek it out from traditional lending sources.  That will be a lot harder to do, and the loan won't be forgiven, but it may just be the lifeline your business needs to survive the current economic downturn.  This post summarizes the types of small business loans that are out there, the typical requirements and the typical process you should expect.

In helping me write this post, I wanted to give a special shout out to Luke Hayward, my colleague at Funding Circle, an online lending platform for small businesses, who is an expert in this space who shared his wisdom on the lending market with me.

An Introduction

Many small businesses may not be able to meet all of their financial needs with the money they have on hand. It’s not that they don’t make enough money, but circumstances often require businesses to borrow. Maybe it is just a slow time of year, or the business might need to buy a new piece of equipment, or in the current times--a national pandemic. Whatever the case may be, it is not uncommon for a small business to need a loan.

While the need to borrow might be common, it isn’t always easy for small businesses to get the funding they need. This isn’t just about getting approved for a loan, which is difficult enough task in itself.  But, many small business owners simply don’t understand all of their borrowing options, and this can lead to them taking a loan that is not a good fit for their business.

With this introduction to small business loans, owners can gain a better understanding of their borrowing options, for both in good times, and the current bad economic climate we are currently living in. This knowledge will make it easier to find a loan when you need one, and it will also help you find the lending option that is right for your business.

Types of Loans

Term Loans

A term loan is one of the more straightforward options for small business financing. The business owner gets a lump sum of cash and they have to pay it back with interest over an agreed-upon period. Term loans are a flexible option that can be used to cover a wide range of expenses, and the funding can often be released in as little as two days.

Business Line of Credit

This is a type of revolving credit. A financial institution gives the business a line of credit with a limit. As long as the line is open, the business owner can borrow up to the limit and they only have to pay interest on what they borrow.

SBA Loans

In addition to the Paycheck Protection Program, which is getting all the attention this month, the Small Business Administration (SBA) has a range of other loan programs that are designed to help small businesses. Basically, these loans are backed by the SBA. The intention is to help small business owners get loans that they might otherwise not be approved for and to help them get loans at lower interest rates.

Equipment Loans

These are loans that are designed specifically for helping small businesses finance the purchase of a piece of equipment or any other asset that is vital to day-to-day operations, where the asset is often collateral for the loan.

Merchant Cash Advance 

With this option, the business gets a lump sum of cash that is guaranteed by future credit and debit card sales. This can be a way for a small business to access money quickly, but a merchant cash advance usually comes with high interest rates.

Invoice Factoring

This is a way for a business to get money for outstanding invoices. The lender gives you a percentage of the outstanding invoices and then they collect on the accounts. Invoice financing can be a good option for businesses that need income faster than the invoices are paid by their clients.

Peer-to-Peer Lending

P2P lending is a newer option. The business owner uses an online platform to connect with lenders. In most cases, the business would borrow from a group of investors who would all have a right to a percentage of the interest that is paid on the loan.

Venture Debt

And, I have previously written about venture debt as a a funding source.  Venture debt is a hybrid between debt and equity, and often comes at expected returns on invested capital somewhere in between stand-alone debt or equity financings.  I won't repeat the details here, but please re-read the above linked article.

It is important to note that the terms of the loan will vary significantly for different lending products. You could find short-term loans that are for just a few months, and there are also loans that can be repaid over many years. Along with that, you also have to consider the interest rates with different lending products and fees that may be associated with borrowing. Many loans also have penalties for things like late payments or for paying the loan off too early.

What a Business Needs to Get a Loan

A small business is not going to get approved for a loan just because they ask for one. Each lender has requirements that must be met for the borrower to get approval. These requirements vary from one lender to the next. Even with the same lender, the requirements may vary depending on the type of loan.

The following are a few of the things you will need to prepare in order to get approved for a loan:

Cash Flow/Income

Most lenders are going to want to see your cash flow and income before approving a loan. The better your situation is in the regard, the more likely you are to be approved. Higher income can also increase the amount that a lender is willing to approve.  Your operating income typically needs to be at least 2x the expected interest expense on the loan, and your business plan must show a reasonable path to repay the loan within 18 months or so.

Debt

It isn’t just about income – lenders are also going to want to consider your debt to income ratio. If it looks like the business is already overburdened with debt, it will be difficult to get approved for a new loan.  This works best for companies with under 50% debt to invested capital ratios, including any new loans that are being applied for.

Credit History

Your personal credit history is going to be a factor when applying for a small business loan. Check your credit report and try to improve your score before applying for a small business loan.

Business Age

The reality is that new businesses are more likely to fail. For that reason, lenders tend to favor businesses that have been in operation for at least a few years. If you have been in business for less than a year, it will be difficult to find financing.

Collateral 

It is possible to get an unsecured loan, but lenders view collateralized loans as less of a risk. If you have collateral (e.g., assets, receivables, invoices, real estate), it will be easier to obtain financing and it may even help to reduce the cost of the loan.

Turnaround Time to Get a Loan

The amount of time it takes to get approved and receive funds can be an important factor for many small businesses. This is especially true if you need the money in a hurry, as most of you likely are in today's market conditions.

Unfortunately, there is no straightforward answer concerning how long it takes to get a loan. The approval process will vary from one institution to the next. You will also find that different types of loans might have different approval times.

You will find some financing options that offer cash in as little as 24 hours, but there are also situations where it might take weeks for a loan to get approved. In general, the options that offer fast cash tend to have higher interest rates and more fees, but they can be a good option if your business needs money right away.

How much can a business borrow?

You may also wonder what your borrowing limit is for different types of loans. Different lenders have different limits. Furthermore, the lender is going to consider things like your income and debt to determine how much they are willing to lend.

On the high end, you could potentially get a loan that is for a million dollars or more. Looking at the lower end of the lending market, you also have options like microloans that can offer a sum of just a few hundred dollars.

What is the process of getting a loan?

If you want to get the financing you need and find the right loan, you are going to need to be prepared. The following are some of the steps you should take when looking for a small business loan:

Create a Business Plan

You need to be able to show lenders you have a viable business plan. Not only that, but you want to be able to tell them why you need the money and show them your plan for paying it back.

Get Your Credit Report

Check your credit score and get your credit report from the three major reporting agencies. You should also review the reports for any issues. If you find any problems, try to get the reports fixed before applying for a loan.

Compare Options

Your business plan should provide you with the information you need to know which type of loan is right for your business. Look at the available options and find lenders that offer products that are suited to the financial needs of your business.

Apply for a Loan

Once you find a lender that offers the best loan for your business, start the application process. You should try to have a few options available since you might not get approved for the first loan you apply for.

Popular Online Lending Platforms

The internet age has made it easier for businesses to find and compare loans. You have a range of online lending platforms that can help to ease the process and many of these platforms cater to specific types of loans.

There are many online lending platforms that invest their own capital or are a marketplace where lenders compete; these include Kabbage,  BlueVine, SmartBiz, OnDeck, QuarterSpot, FundBox and Street Shares.  Sites like Funding Circle and LendingClub are two of the top names for P2P lending. Kiva and LoanMe are good sites for microloans. And, that doesn't even talk about industry specific sites, like Fundrise, which is an online platform focused on the real estate market.  Or, sites that have a specific purpose, like Currency, for equipment loans.  And, don't forget about your crowdfunding options.  So, do your online research and figure out the best funding site for you.

Depending on the needs of your business, you should be able to find an online platform that offers loans that can meet your needs – you just need to take the time to find the right option for your business.

Concluding Thoughts

As you can see, there are plenty of small business loan options to consider; you simply need to know where to look!  Thanks again to Luke Hayward for his help here on helping me write this post.  If you think Funding Circle could be a good option for your business, feel free to email Luke at luke.hayward@ fundingcircle.com, and he will help point you in the right direction.  I know the current market conditions in the wake of the Coronavirus may feel bleak, but I promise you, there is a path forward with a light at the end of the tunnel.


For future posts, please follow me on Twitter at: @georgedeeb.




Tuesday, March 17, 2020

Lesson #323: How Your Business Survives A National Crisis Or Pandemic

Posted By: George Deeb - 3/17/2020

Welcome to our new grim reality in the wake of the Coronavirus pandemic; the days of “wine and roses” and never-ending increases in busi...



Welcome to our new grim reality in the wake of the Coronavirus pandemic; the days of “wine and roses” and never-ending increases in business success and stock market price increases are officially over.  Sure, you are now feeling the impact of the “baseball bat” smashing through your “glass house”.  But, continuing with the baseball analogy, we are still in the “early innings” towards recovering to any sort of normalcy.  So, what do you do now, to help “batten down the hatches” to make sure your business survives this tumultuous blow?  Lucky for you, I lived through something very similar in the wake of the September 11th crisis in 2001, recapped in this article.  And below, I share my suggestions on the immediate steps you need to be taking with your business right now.

Forecasting Revenues

Your future revenues will materially vary based on your business and how badly it is impacted by the Coronavirus quarantines and other impacts.  As example, if you are in the travel industry dependent on tourism, assume the worst.  You may not have any material revenues in the next six months, at least (about the same length of time my iExplore business was impacted by September 11th).  That includes businesses that are specifically tied to an effected industry (e.g., selling furniture to restaurants).  On the flip side, if you are in the hand sanitizer or home-based entertainment business (like Netflix), your are probably going to see a big upside in your revenues, with more people needed those types of products or services during this time.  With most other businesses ending up somewhere in the middle.  For example, as the stock market crashes, people have less wealth or people lose jobs, and then they spend less on just about everything.  So, the more “discretionary” your product, the more you are at risk, as compared to “must have” products.

So, to be safe, if you are in one of the hardest hit industries (which I will continue to focus on in this article), be conservative and ask yourself what you need to do to if absolutely zero revenues comes in for an extended period of time (e.g., six months).  That would be a crippling blow to most any business.  You most likely aren’t sitting on excess cash that can fund six months worth of operating expenses, and raising capital from outside lenders or investors will be close to impossible, unless the government steps in with a big bailout package.  So,  you are going to have to get creative here, which typically means cutting expenses down to the bare minimum, “keep the lights on” levels.

Downsizing Expenses

Effective immediately, there is no time to wait, you need to “right-size” your expenses to a level that will get you through to the other side.  That could mean cutting all marketing efforts, at least for a period of time, as your return on marketing spend will be a fraction of its former levels, which will put further negative pressure on revenues.  And, more likely it means cutting way back on your payroll, either by reducing positions or paring back on salaries.  Which will be a big blow to your company culture and morale, so there has to be a clear message to your surviving staff that “cuts have ended” and they are safe and we need to keep them focused on the future.

Lowering Payroll Costs

There are other creative solutions for dealing with payroll.  Perhaps you move your sales team from salaried to commission-only.  That keeps them with the business, but in a structure that they get paid only if revenues from their efforts are coming in to afford their costs.  Or, pay your team with equity instead of cash.  Tell them salaries will stop for this month, and instead they will get extra shares in the business to offset the difference.  Or, tell them we don’t have cash to pay you now, but we will do our best to pay you back in the future, creating a long term debt which will repaid whenever the company can afford that.  But, this last path could be creating an ever growing noose around your neck, and may never get repaid and opening yourself up to legal liability down the road.  Only do that, if you think it is a short-term plug to a known repayment plan (e.g., some known financing in the works).

Bootstrap Financing Options

Guess what, your profitable established business, may have just returned to unfunded startup land.  So, you are going to have to be creative in figuring out ways to fund your business in a world where investment and bank capital will be scarce.  So, re-read this article I wrote on the best ways to bootstrap finance your business with non-traditional sources, to make sure you are exploring all options available to you.  This could be anything from friends & family, to credit cards or home equity loans, to name a few.

Keep The Faith—Stay Positive Minded

No matter how bad it gets, perseverance will successfully get you through the end of the dark tunnel you now find yourself.  If you look at this situation from a negative, “glass half-empty” mindset, your business is doomed to fail.  So, you might as well shutter the business and stop the bleeding right now.  If you look at this situation from a positive, “glass half-full” mindset, that positivity will infuse itself into the culture of the business, the team will rally around you and you will survive with flying colors.  That said, always be honest with your team.  Don’t cherry coat reality, and keep it realistic, as your team is not stupid to the world that is going on around them.

Closing Thoughts

So, as you can tell, I am pretty bearish on the next few months, for most all businesses.   As is the public stock market with stocks down around 30% in the last few weeks.  So, take the hint:  it’s time to strap on your mud boots, as it is going to be quite the long and arduous slog getting through this very difficult period.  And, if there is one most important nugget to leave you with—the longer it takes you embrace this grim reality and make the tough decisions or immediately cut expenses, the shorter the runway you are leaving yourself on the backend.  Don’t wait too much longer, as you don’t want to deplete whatever minimal cash reserves you are currently sitting on.  I am not being an alarmist, as that is not my style; I am simply being a realistic based on past first-hand experience.  Good luck to us all!


For future posts, you can follow me on Twitter at: @georgedeeb.


Friday, March 13, 2020

How to Strategically Generate Search Engine Traffic

Posted By: George Deeb - 3/13/2020

It's easy for a newcomer to the world of search engine marketing to assume that the search engines (e.g., Google, Microsoft) are all...



It's easy for a newcomer to the world of search engine marketing to assume that the search engines (e.g., Google, Microsoft) are all the same and that clicks from them all behave in the same ways. In order to optimize your efforts, you need to know the differences between Google and Microsoft, their search engines and shopping engines, mobile vs. desktop and much more. Learn about what you're doing wrong and how to do it right.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.



Thursday, March 5, 2020

Lesson #322: Need Venture Capital? Take Your Company Public in Canada!

Posted By: George Deeb - 3/05/2020

I was recently introduced to George Khalife , a Chicago-based Vice President at the Toronto Stock Exchange.  In Canada, there are two ex...



I was recently introduced to George Khalife, a Chicago-based Vice President at the Toronto Stock Exchange.  In Canada, there are two exchanges; the TSX which is the senior exchange suited for later stage, more established businesses and the TSX Venture Exchange (TSXV) which allows earlier-stage companies to raise public capital--for companies that otherwise would be too early stage to go public in the United States and are typically more dependent on traditional private market financings funded by venture capitalists.  It was an eye-opening conversation, that I didn't even think was possible, and I wanted to share those learnings with all of you.

TARGET COMPANIES

The Venture Exchange is targeting companies with $5MM-$50MM in revenues, with valuations of $5MM-$50MM, that are trying to raise $5MM-$25MM in capital.  Companies can be in any industry (although many are in the technology industry) and the business can be headquartered anywhere.  If that sounds like your business, keep reading.

HOW IT TYPICALLY WORKS (on the TSX Venture Exchange)

The most common way to go public on the TSX Venture Exchange is through a Capital Pool Company (or CPC). This is a unique listing vehicle which introduces investors with financial market experience to entrepreneurs whose companies require strategic capital. Unlike a traditional IPO, the CPC enables seasoned directors to set up a public shell company with no assets other than cash.  The CPC then uses the funds to seek out an investment opportunity - and once the operating company has been acquired and meets the listing requirements, its shares begin trading regularly on the Venture Exchange.  Here is an example typical structure of the ownership of the company after going public.



THE PROCESS YOU WOULD FOLLOW

If you are a company in the Midwest U.S. doing at least $5M in revenue and are interested to learn more about raising public capital, get in touch with George Khalife at the TSX who can help walk you through the process in more detail (email provided below).  He will likely set up an intro call to learn more about your business and figure out from there the best course of action - this might involve you sending an investor pitch deck which George would review and assess which introductions to the investment community make the most sense based on your company’s profile.

If approved, your pitch will get circulated to potential investors (the founders of the CPCs described above).  If any of them like your business, those CPC founders will act like your investment banker to do all the work in helping to get your funds raised through their public shell company.  It would typically require a day or two of investor meetings in Toronto, and the process from start to finish is around 3-4 months in length.  The total cost to the issuer (your business) would be $100K-$500K depending on the deal size, which would be deducted from the funds raised in the round.  All monies raised can be in US Dollars.

THE ADVANTAGES

The advantages here are that this is a creative way for early-stage businesses in the U.S. to raise capital, especially if they are having trouble getting the attention of the U.S. venture capital firms.  And, once you are public, raising your 2nd and 3rd rounds, graduating from TSXV to TSX, are materially easier than trying to "pound the pavement" for new venture capital investors.

The important factors to focus on is the “why” of raising public capital - reasons like; (1) access non-dilutive growth capital to execute against strategic growth plans, (2) improve company profile from both a community and customer perspective, (3) ability to make the right acquisitions by using shares as currency, and (4) added credibility that comes from being a publicly-listed entity, etc. 

THE DISADVANTAGES

The disadvantages here are that now you are a publicly traded company.  Your financials will need to be filed quarterly and they will be openly visible to all your competitors.  And, the costs of the financing are materially higher than doing a private round with a venture capital firm.  But, maybe you don't care, because you ultimately were able to raise capital that you otherwise could not have raised.

KEY CONSIDERATIONS

Going public is a major milestone for any company and is a decision that requires careful consideration and advice. To start, ask yourself the following questions when thinking about listing:

Does your management team have expertise in your industry sector and experience running a publicly-traded company?
Is your management team committed to the implementation of effective corporate governance measures?
Does your company have an attractive track record or a product or service that has a readily identifiable market / significant growth potential?
Have your management team and board of directors invested their own capital in the company?
Has your company developed the appropriate internal controls that are needed to meet financial reporting requirements?

If you have answered yes to the above questions, you should be a viable candidate. It’s certainly not the best fit for every company, but it is surely a right fit for some - and as founders, it’s important to consider all the financing options on the menu before making a definite decision of which path to take.

CLOSING THOUGHTS

Anyway, I thought this was unique and worth sharing as a potential funding path for you.  Thanks George for introducing the TSX Venture Exchange to me (and our readers).  If anybody desires to reach out to George, feel free to email him at george.khalife @tmx.com.


For future posts, please follow me on Twitter at: @georgedeeb.



Friday, February 14, 2020

Lesson #321: Marketing is Still an Art (and a Science)

Posted By: George Deeb - 2/14/2020

Data driven decision making has been the mantra of most good CEOs and CMOs over the better part of the last decade.   They want all ma...




Data driven decision making has been the mantra of most good CEOs and CMOs over the better part of the last decade.  They want all marketing decisions to be based on solid data, which had previously not been available, but is today in high amounts.  But, data can be deceiving.  It may lead you in one direction, when in fact the right answer may be completely in the opposite direction.  Allow me to explain with this case study from my Restaurant Furniture Plus business.

The Marketing Strategy When We Acquired the Company

We acquired Restaurant Furniture Plus in 2018.  Up until that point, the founder was largely dependent on advertising in the Google Shopping section, with product listings of all their SKUs.  I was curious why they were not advertising in the Google Search section with keywords, and her response was “we tried for a few months, but the data could not prove it was actually working, so we pulled the plug.”  I was hopeful, that was an upside opportunity for us, if we could figure it out.

Our Marketing Strategy Soon After We Acquired the Company

One of the first things we did when we started our own marketing efforts was to build out our list of keywords and begin advertising in the Google Search section (while keeping our Google Shopping campaign live).  We thought of all the possible keywords around our products, including chairs, tables, stools, etc., and all variations of those words, including extensions for restaurant, hospitality, wholesale, commercial, foodservice, etc.

Our Initial Results Were Not Great

We were perplexed; our initial results were exactly the same as the founders’ results when she had tested Google Search.  The conversion data in Google was telling us it wasn’t working and our agency recommended we shut it off.  But, that made no sense to me.  I know we had tripled our marketing spend overall, and I could see our revenues rapidly growing with that spend.  So, I decided to dig a little deeper into the data.

What We Learned from the Original Data

When I started to “peel back the layers of the onion”, interesting insights were identified.  First of all, the overall campaign was not working, but there were pieces that were.  For example, generic words like “dining chairs” were not working, because it was largely consumers looking for furniture for their homes, and all the competitive bidders for that space, like Wayfair, Pottery Barn and Pier One, were talking the advertising costs up to unprofitable levels.  But, specific words like “restaurant booths” were doing much better in helping us get to our desired restaurant targets.  So, we decided to put all our efforts on those more directly targeted words, and shut off everything else.

Secondly, we uncovered a major attribution problem.  Our customers were using multiple devices, starting from a Google search with their mobile phones, but buying from us from their work computers when they got back to the office, where we losing the tracking of where the lead really originated from.  So, we immediately turned on Google attribution modeling tools for them to help us learn that our return on ad spend (ROAS) was closer to a profitable 6x, than the unprofitable 2x the original reports were showing, with the proper marketing attribution tracking in place.

And lastly, we were managing our agency to optimize the wrong data metric.  We were pushing them to drive an immediate ROAS.  The problem with that was the only transactions that happened immediately, were the small ticket online ecommerce orders worth $500 each.  Not the big $5,000 offline orders we wanted to be closing, which had a longer 2-3 month sales cycle.  We immediately shifted gears, and told our agency not to worry about immediate ROAS (we would track that in 3-4 months).  Instead, the only data point we care about, is driving big ticket leads into our sales pipeline (that we know won’t close for 2-3 months).  In this case, patience for proving ROAS would be a virtue.

What Happened After We Changed Our Data Focus

Once we uncovered the above learnings and implemented the above changes, amazing things started to happen.  Instead of us leaning towards stopping our Google Search marketing efforts based on the initial poor data-driven results, we actually uncovered the true power of the Google Search campaign and started to accelerate our efforts there (completely the opposite of what we would have done based on the preliminary look at the data).   And, as a result, our revenues started to accelerate with more big ticket leads coming into the business.  Yes, we had to be patient, waiting for those leads to close over 2-3 months, but our pipeline had never been bigger or healthier, and revenues soon followed.

An Interesting Twist

With these changes, our desired leads were accelerating so fast, that our sales team asked us to “pull off the gas”, to let them catch up.  That allowed us to test something we had never done before in our history—what would happen if we shut off Google Shopping, the main driver of the business to date.  I’ll tell you what happened.  The business got materially more efficient.  Our marketing spend went down, our average order size went up, our quantity of phone calls and orders went down as we lost low-ticket consumers (allowing us to operate with fewer staff), our ROAS started to grow, and our revenues/profits started to grow with a clearer big-ticket focus.  We were doing a lot more, with a lot lower investment.  The Google Shopping channel that had been our focus for years, was never turned back on, and we doubled down on Google Search.  Completely the opposite from where we were heading, all with a little bit of common sense and a clearer analytical lens.

Concluding Thoughts

So, yes, data is really important for your business.  But, which data points you manage towards, and how you study the data, can make or break your success.  For as much as we would like to turn our marketing efforts into a science, it is still very much an art, knowing the right probing questions to ask and still following your internal gut.  This case study was an example of Leonardo Da Vinci (art) trumping Albert Einstein (science).  Take these learnings into your own business, and make sure you have a good balance of both art and science in your decision making.



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