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Why advertise if you're a small business?

Here are three reasons for your consideration:

  • To remind your current customers you're still around and desiring their business whence the need arises

  • Let more people know who you are so they'll add you to their "gotta check these folks out" list

  • Because sales were down last month.

If you've chosen the third reason (be honest, now), you have the right idea but not the right execution. If real estate is all about location, location, location, advertising is all about consistency, consistency, consistency.

Though the first two items are legitimate reasons for advertising and need to be executed concurrently, the true reason for advertising is actually this fourth option:

You advertise because you’re a business.

It’s that simple. The question is never “do I really need to advertise?” It’s when, where and how much?”

The correct answers to these three questions are:

• When? All the time, from day one.

• Where? This actually requires a two-part answer:

(1) where your potential customers are going to see you most readily/memorably;

(2) on channels in which you can rise above the clutter.

• How much? This one is the most important question to answer because it all comes down to money – how much you have, how much you can afford to spend and how much you want to make.

The most common mistake made by small businesses when it comes to advertising is that they take a hodge-podge approach – a little here, a little there.

The hodge-podge tactic yields hodge-podge results.

If you want to see results, you’ve got to make a commitment to advertising consistently.

Your advertising/marketing budget needs to be set as a constant percentage of your gross sales. Here's a tried and true "Ad Spend Ladder" that is worth considering:

  • 3-6% gives you voice among your competitors in your market niche. Spending at this level means you'll be one of the voices people hear when they consider looking into your service or product niche.

  • 7-10% moves you to the front of the pack. This spend makes you one of the dominant voices and helps you stand out from the crowd. But notice, you're still in the crowd....

  • 11-15% is where you need to move your spending if you want to be the leader in your niche/service area. This will put you out front.

How do you determine what spending rung you want to step onto? Before you say, "I want to dominate!" and jump to the highest rung immediately, there's one consideration that needs exploring: Capacity. How much more business can you actually handle over the next six months? The last thing you want to do is get too much business too soon. That's exactly how hard-earned reputations get eviscerated in 5 minutes.

What's one of the top reasons for small business failure? You guessed it, too much business too fast.

The marketplace is one of the most pure examples of Darwinism in modern life -- survival of the fittest. Do you want to succeed? Do you want to be the fittest? You need to make sure you are fit. To be fit, you must have a rock solid reputation. And that rock solid reputation is built on the four "Rs": Remember, Represent, Reliability, Respect....

With your reputation intact, when you sit down to determine what rung of the Ad Spend Ladder you're going to stand on, the very first thing you need to do is determine your company's current level of productivity.

The best way to do this is to look at every position in your company and determine at what level of capacity the person in that position is currently working.

In a small business, communication and trust are essential commodities. As an owner, you've got know exactly what is going on so you can make the proper strategic decisions. In order to get that information, your team members need to know they can be honest with you. They need to know they can say they're at 20% or 110% of capacity without fearing they will loose their job.

Now, if you're the owner of a business with under 15 employees, chances are you're going to have a pretty good handle on the productivity levels on your own. When you get over 20 employees, you're going to have to rely on your managers and supervisors.

If everyone in your organization is at 80%, the middle rung of the Ad Spend Ladder is a safe place for you. It will allow you to grow your business but also remind you that hiring needs to be priority.

If you're above 90% in productivity, freeze your ad spending at your current level -- because it's working! But know, too, you have little-to-no room for expansion and the chances of your reputation getting tarnished are growing exponentially. The more pressure there is to get the job done quickly, the more opportunity there is to screw up. Your top priority has to be: HIRING!

If you're under 60% productivity, it's time to aim high and start spending -- as long as your fundamentals are sound (as in, reputation) If you're at 60% or less because of issues with your fundamentals, focus on righting them BEFORE you make an advertising push.

If your fundamentals are sound and you’re at 60-80% productivity, you’re in the “sweet spot.” You have proper staffing. You have capacity. You have room to grow...and grow you must because you’ve got to get your overhead and profits more properly aligned.

Here's one more caution regarding productivity. In too many instances, the office support team is the last to receive relief via hiring a new person. Back office log jams can sink a business' reputation just as quickly as poor product or sloppy field work.

What’s been covered in this piece can be summarized in two easy-to-recall axioms:

• If you’re in business, you’re advertising.

• It’s better to receive new business than to catch up to it.

Advertising and growth are interwoven and, therefore, essentially inseparable. Understanding this and what it takes to keep them in balance is crucial to having a business that grows and thrives. Hold these two self-evident truths in high regard and you will be living the American Dream.

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