Why Budgets Are Killing Your Business Growth
Last night I was playing with the kids. Connor (the 3 year old) is finally starting to become a little more athletic and likes to kick this little blue ball we have. It’s one of those really light ones you’ll find in a grocery store.
So I decide I want to “show off my soccer skills”…
I start showing Connor how to kick the ball as hard as you can, while keeping it just a few inches off the floor – like a line drive.
He loves it and starts cracking up, so I call Katie into the room to show off. I do it again, putting even more power into it.
… damn thing hits the wall so hard it knocks TWO picture frames down, smashing them all over the floor!
Remember, this ball weighs probably 1/10 of a pound. Worst part is, I didn’t actually hit the frames with the ball. They were about 8ft away.
Just my luck…
Thankfully today is our 5th anniversary so I’ll be doing more than plenty to make up for it 😉
ANYWAY, I need to talk to you about something important…
Have you ever set a “budget” for something marketing related? Let’s just say, for example, getting a sales funnel built.
And let’s just assume for a second that you have the actual capital to get one built properly. I understand sometimes you literally just don’t have enough cash. Obviously understandable.
But let’s say you DO have the cash, yet choose to set a budget anyway.
Question: Why?
Sometimes people put a mental limit on what they think something should cost. They can only spend “XX” to get something created which is going to increase their sales while reducing workload, reducing employee cost, and increasing average order value.
Here’s the problem with that.
Let’s say you get two quotes from people.
One person estimates $10k. The other estimates $30k. We’ll assume that you believe the $30k guy is going to do a much better job.
Which would you go with?
The answer is – it depends on your estimated returns.
If you’re above $500k or so, the increased revenue you get from the guy charging you $30k is going to absolutely crush the results the $10k guy gets you.
Yes, you’ll “save” $20k in the beginning.
But do you understand how much money you will LOSE by not maximizing your sales funnel?
No? I’ll show you.
Let’s assume you’re only doing $1M and you expect the $10k guy to increase sales 20%.
You think the $30k guy will increase sales 40% due to better strategy, maximizing more of your sales funnel, and better copy throughout it all.
Pretty reasonable I think.
That means $10k guy gives you $200k in returns in the first year. That means $190k in gross revenue.
It means $30k guy gives you $400k in returns in the first year. That means $360k in gross revenue.
If you went with the “more affordable” guy – you just LOST $270k.
More scary: The higher your revenue, the worse this gets.
At $5 million….
$10k guy increases sales $1 million…
$30k guy increases sales $2 million…
(That’s a $980k difference)
At $10 million…
$10k guy increases sales $2 million
$30k guy increases sales $4 million
(That’s a $1,980,000 difference…)
See what I mean?
Sometimes, if you’re small, it makes sense to go with someone “in the middle” who isn’t the bottom of the barrel but doesn’t charge high fees. You just need to get something going. But if you’re over $500k in revenue, it’s a HUGE mistake to work with people you know, deep down, won’t get you the best results possible.
I hate seeing people lose out on so much income because they want to set budgets on their marketing campaigns. Such a horrible waste.
I hope this made an impact and gave you a little clarity.
If this all makes sense to you, go here.
Be extraordinary,
Jeremy Reeves
