Building a Business Takes Investment: No Shortcuts Allowed

For two decades, I’ve seen business owners yearning for growth, only to baulk at the necessary investment. It’s a common tale—people want results without putting in the financial resources required.

Let me share two anecdotes that highlight this point.

One prospect of mine dreamed of global sales but budgeted a mere ￡500 monthly for his go-to-market programme.

Another wanted his yet-to-be-built gym filled with members before construction even began.

Both situations scream a common misconception: expecting miracles for peanuts.

So, how much should you spend on marketing?

Many believe it should be a percentage of turnover, with figures ranging from 5-20% often thrown around. I disagree with this generic approach. Here’s my method for determining the right investment.

First, I analyse the business model, pricing structure, and packaging of offerings.

This allows me to repackage the services into high, mid, and low-ticket items.

By understanding Customer Acquisition Cost (CAC), Lifetime Value (LTV), and conversion rates, I can predict the return ratio.

A 2:1 ratio means you invest ￡1 and get ￡2 back. If I don't see a positive ratio, I walk away.

I never overpromise, ensuring I always overdeliver. Recently, a client enjoyed a 120:1 ratio, though generally, you should aim for at least 3:1. This kind of return doesn't happen by chance, especially if you are looking at upwards of 10:1; it requires a strategic approach and careful planning.

To illustrate, let’s reverse engineer.

If you want 10 extra customers worth ￡10k each annually (￡100k total), and agree on a 10:1 ratio with a 50% conversion rate, your marketing team needs to bring in 20 quality leads at this level to convert 10 customers.

This clarity in numbers helps in setting realistic expectations and crafting a strategy that works.

Investing wisely is crucial for growth. It’s not just about throwing money at marketing but understanding where and how to spend it to get the best returns.

If you're unsure about your CAC and LTV, check out my articles where I delve deeper into these metrics. And if you’re ready to discuss a tailored approach, let’s grab a virtual coffee and chat. https://calendly.com/dean-tqk

Book a time on my calendar for a relaxed 30-minute chat over coffee. We’ll discuss how you can transform your business by investing wisely and strategically in marketing.

At Elevate, we offer a comprehensive service to analyse your revenue model, repackage your offerings, and deliver a consistent stream of opportunities for your business.