What is influencer marketing? How much should your small business spend on new customer acquisition? And how do you balance any new clients you attract with your current clients? We answer these questions and more on today’s Small Biz Ahead Podcast with hosts Elizabeth Larkin and Gene Marks.
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- Vocal Fry video
- At Risk of Running Out of Leads? Here Are the Best Places to Discover New Leads Right Now for Your Small Business
- How Small Business Owners Can Keep Customers Loyal and Coming Back for More
Elizabeth: Welcome back to the Small Biz Ahead Podcast. Gene is here again with us in Hartford today. We’re very excited to have you here, Gene.
Gene: Very excited as well, Elizabeth. I want you to know I am almost caught up on Silicon Valley. I just thought I’d let you know I’ve been binge watching it over the past week. I don’t know why I’ve avoided watching that show. Do you watch it? It’s hilarious.
Elizabeth: No, I haven’t. I can’t stay up that late.
Gene: Well, anyway, it’s on on-demand on HBO. It’s just a hilarious show.
Elizabeth: Once I finish watching Game of Thrones, I’m done for the night. I have to emotionally step away from the TV for the most part.
Gene: Hodor. Hodor. Hodor. Hodor.
Elizabeth: Oh, god, that Hodor episode was terrible.
Gene: Horrible. Horrible.
Elizabeth: I mean, it was a great episode, but it was gut-wrenching.
Gene: Yeah, it was very upsetting.
Elizabeth: And then Veep comes on. Do you watch Veep?
Gene: Love Veep.
Elizabeth: Veep is the most insane show. I love it because I worked in politics for a long time, so I’m like, “Yep, that happens.”
Gene: Is it true? It is. You see that and you’re like, “Oh, great.”
Elizabeth: Yep. All true. It’s all true.
Gene: I say that with my wife, “This can’t be true, man. Jeez, this would be really scary if it was.” Veep is a great show and you can’t do anything else when that show is on. You have to pay attention to every word. It’s so fast.
Elizabeth: No, you have to pay attention and Julia Louis-Dreyfus is the most amazing actress.
Gene: Unreal. Isn’t she great?
Elizabeth: I’ve seen her in so many dramatic movies, too, and she’s so good.
Gene: Yeah, she’s great. Do you know that her family, like her great-grandfather or grandfather … They’re the Dreyfus Fund.
Elizabeth: Oh, yeah. She’s a socialite.
Gene: Oh, yeah. She comes from a long line of financial icons. It’s amazing. She’s great.
Elizabeth: Yeah. Must be nice. One time, I used to be … I don’t know if you know this about me, I used to be a television critic.
Elizabeth: Yes, and I interviewed Tony Hale, who plays her assistant on the show-
Gene: Really! Oh my god, he’s the best.
Elizabeth: He’s the best.
Gene: Is that when he was on-
Elizabeth: Arrested Development.
Gene: Arrested Development, that’s right.
Elizabeth: He is the nicest guy ever. He is so nice. After the interview, he said, “Oh, I just saw this show on Broadway. I think you’d really like it.” And like told me all about the show that had just opened and then sent me book recommendations. Such a nice guy.
Gene: Oh my gosh. Yeah, yeah.
Elizabeth: So, 2 thumbs up for Veep. This week we’re talking about 2 burning issues. We get a lot of questions about this, so I picked 2 that I think really encapsulate it and we’re really going to try to stump Gene on this first one.
Elizabeth: It’s from April in Texas and we’re going to hear from her after our first ad.
QUESTION #1: How Much Should You Budget for Customer Acquisition?
So, April in Texas asks,
“I run a small business based on online courses that teach people how to lose weight safely. How much should I budget for new customer acquisition? Should I be advertising? Should I be doing affiliate marketing? What’s a good budget to spend per new customer?”
Elizabeth: Gene, I’m going to let you dive into this one because-
Gene: Wait, before you even let me dive … So, first of all, how do you define affiliate marketing?
Elizabeth: Affiliate marketing is, I’m going to give an example. I read a lot of fashion blogs, well, I don’t read them. You really just look at them and you say, “Wow, you don’t really do a lot of work for all that money you make.” In a fashion blog, the blogger will wear an outfit from Nordstrom, and after you look at the photos, they’ll say, “Okay, my skirt is from Nordstrom” and they’ll put a link in there and when you click on that link to Nordstrom, that blogger, if you make a purchase, gets a portion of that purchase. That’s affiliate marketing.
Gene: Right. So, in other words, to use it in April’s example, she could put ads on her websites and if people click on the ads on her sites, she would get paid for those clicks, is that correct?
Elizabeth: Exactly. Or she would offer to other bloggers, they could write about “Hey, I used April’s online course and I lost weight.”
Gene: So she would pay them?
Elizabeth: She would pay them to advertise her course.
Elizabeth: I think the best part of her question … I think a lot of new business owners and we have a ton of new business owners listening to this, how do you decide what to spend on customer acquisition?
Gene: First of all, let’s make sure that we’re in agreement here. Marketing is just you’re shooting fish in a barrel when you’re a small business owner. The big companies, they’re so data driven when they do their marketing. They have budgets where they can buy databases, hone in on them, target certain customers, and then measure, measure, measure until they figure out what works best for them. As a small business, we really don’t have those advantages. Honestly, April, for starters, it’s a gamble. It’s an educated gamble. What you’re about to do is trying to figure out with your hard-earned money, where do you spend it?
If I was in the online weight loss business, for starters, it’s not a new business. There have been weight loss programs online, television, books, whatever, lots of companies are out there that we know of that provide those kinds of services. The first thing I would do is, I would actually do a little bit of cheating. I would be looking at what those bigger companies are doing. Where are they advertising? How are they spending their marketing money? What audiences are they targeting? What sites might they be advertising on? Look at their ads that they might be placing online. What type of key words do you think that they’re using? And I think that your goal should be, you’re not trying to be a Fortune 1000 weight loss company. You want to grow your business. I think you should basically look to do a sliver of what some of those big companies are doing to figure out what is right for you. I guess my biggest advice is, don’t recreate the wheel. This is not something that hasn’t been done before. There are plenty of other companies out there in this industry that have done this already. Look at what they’ve done and follow them.
Elizabeth: Those large companies, because I work for a really big company, they have huge staffs, huge teams that focus on this. They’re not going to spend their money on things that don’t work. So copying them and putting your brand on things and putting your voice and your spin on those types of marketing pursuits, that’s great advice because they’re not going to waste their money.
Gene: Yep. They’re spending millions of dollars and blazing the trail for you. Believe me, you’re no competition to them. They’re not worried about you. At the same time, you can look at what they’re doing, and like Elizabeth just said, maybe try and do it a little bit better or fashion your message, your advertising that’s more unique for your business. I would definitely take that … I don’t know, I’m not an expert, I should be to lose some weight. In the online weight loss business, I don’t know. Is Facebook a great place to be? I don’t know. Is AdWords a better place to be? Should you be advertising in certain types of magazines or publications? Trust me, that’s all been figured out. That’s all been figured out. I’d pick an online … We’re using April’s example, but for anybody who’s starting a small business, unless you’re going into some business that’s never been thought of before and let’s all agree we’ve got thousands and thousands of years, tens of thousands of years of human history now, you’re not going to think of a business that hasn’t been thought of before. Somebody out there has already done this already, successfully and much larger than you. Copy them. Copy them and fashion your marketing around what they’re doing.
Elizabeth: The other part of this is you need to also figure out, which I’m assuming you already have, who your target audience is and you find out where they are. Then you use whatever is available to you. Are you a writer? So then you do some content marketing. You have a blog; you drive people through that. Maybe you do some influencer marketing, which is the new big thing, which is also becoming very controversial because-
Gene: Yep. Where’s the line that you draw?
Elizabeth: Exactly. If you’re not familiar with influencer marketing, that’s when you pay a celebrity, but in your case, you’d probably be paying maybe an Instagram celebrity to say-
Gene: Right. Somebody that’s in physical fitness. Somebody that blogs about weight loss or nutrition.
Elizabeth: “I love this product” and they talk about your product and then they drive people to that, probably with an affiliate link. You’re going to pay them to do that promotion and then you’re going to pay them a portion of any customers they drive to you.
Gene: The best example of that is Kim Kardashian, right? If you watch Keeping Up With The Kardashians, which by the way, I watch every week and absolutely love it.
Gene: Yeah, great show. And you’ll notice on the show itself that when the Kardashian girls are sitting around and they’re eating or drinking, and they’re always eating or drinking on the show, sometimes the labels of stuff are blurred out on the show. If a label or something is not blurred out, somebody has paid to have their product on their show because as an influencer they’re, in a sense, giving that. And if it’s blurred out, it means they haven’t paid to have their product on the show.
Elizabeth: If you’re such a big Kardashian fan, how come you don’t speak with vocal fry?
Gene: They do suffer from vocal fry. That’s a Howard Stern coined term, as well.
Elizabeth: If you’re not familiar with vocal fry, I will link to a great video from CBS Sunday Morning about vocal fry. It’s so funny.
Gene: It’s so true. Well, you see it on The Bachelor and The Bachelorette. That’s where you see a lot of vocal fry.
Elizabeth: Oh my gosh, you watch The Bachelor and The Bachelorette?
Gene: Oh yeah, those 2 are also fantastic. I have a lot of free time. On the Kardashians, that’s a whole other … We’ll have a conversation someday about why I think Kim Kardashian is an amazing entrepreneur.
Elizabeth: Amazing. So coming up with a budget to spend per new customer, so you’re saying, you just say “I’m going to say $50 and go with that.”
Gene: That’s really, really tough to determine what your budget is going to be per new customer. However, you are asking the right thing. Sometimes people just say, “How much should I spend on marketing?” That’s such a general question to ask. Good marketers, they break it down per lead, per click, per customer. That’s exactly the mindset that you should be thinking is, “Okay, what should I be spending per lead or per click or per customer?” Again, we’re back to the weight loss business, we’re back to April’s business. I don’t know. What does Jenny Craig spend per click or per lead?
Elizabeth: A lot of money, probably.
Gene: I’m sure they do, but on a per click basis, what is that number? That would be interesting to try and research and find out. What are other people in your industry spending? Because it depends on the business and depends on the industry. Again, if you’re in a business where your pay per click is a lot higher because it’s a very searchable term type of thing, you’re going to have to pay higher than if you’re in some niche industry where maybe the key words don’t cost as much.
Elizabeth: Okay, we’ll be right back, after we hear from our sponsor, with another question. That’s a really hard question.
Gene: I think it was a good answer because you just can’t say, “Yeah, $50.”
Elizabeth: You’ve got to kind of feel it out.
Gene: That’s like $50 per customer. I mean, it depends on the business that you’re in. If you’re selling a $10,000 …
Elizabeth: After 5 years, you should know that number, right?
Gene: You should be getting close to it. Yeah, there’s no doubt about it.
Elizabeth: They always ask that on Shark Tank. They’re like, “Well, how much are you paying for your” …. Sometimes people are like, “I don’t know.”
Gene: Oh yeah, yeah.
QUESTION #2: How to Balance New Clients with Current Clients?
Elizabeth: Okay, our next question is from Brent from Mississippi and this is a good one, Gene.
“I spend all of my time dealing with my current clients that I don’t have time to work on acquiring new clients. Should I hire a part-timer to work on this?”
Gene: Boy, Elizabeth, talk about a huge issue. If you’re a freelancer, if you’re an independent person, if you’ve got a very small company, that is the biggest issue that we all face. We get the big client. We’re working away on the client, everything, that’s great. Then the project ends and you’re like, crickets. You’re like, “Oh no! I’ve got no more work left to do.” Everybody battles with that issue. Before we put aside the question about whether you hire somebody because hiring somebody … Actually, let’s not put that aside. Hiring somebody, even a part-timer, that’s going to take a lot of time. It’s not just the money that … You’re not going to just hire somebody and they’re just going to come in and hit the ground running and be able to sell new projects for your company.
Elizabeth: Yeah, that might be 6 months of pain before it starts paying off.
Gene: Yeah. You better prepare for that and if you’re going to hire somebody, it should be with the intention of this being a long term thing. You’re going to try to groom somebody that’s going to be a, which is great, but just make sure you’ve got the attitude for doing that. Otherwise, if you’re not ready to hire somebody or don’t want to make that commitment, you need to be thinking ahead. That’s what good business people are doing. You need to be saying, “This project is going to end. How am I going to eat once that’s over?”
Elizabeth: What is a good balance of time, then, ff you’re a freelance person, you’re a sole proprietor? Let’s say you design websites and you’ve got website, website, website and then you’re looking ahead to July, and you’re like, “I don’t have any projects then.” What do you say in March, April, and May, when you’re busy?
Gene: How much should I be spending? Right.
Elizabeth: So I’m spending 70% of my time with my current clients and then I’m dedicating 30% to pipeline?
Gene: First of all, I think it just depends on the individual. I think the most important thing is that you are going to commit time to sales and marketing, whether it’s an hour a week or 30 hours a week, you have to make sure you’re committing it. Now, then it’s up to you. I know some people, man, they can get stuff done in 1 hour that it takes somebody else 5 hours to do. So maybe you’re one of those people and you’re like, “Listen, all I need to do is if I spend just a couple of hours a week doing marketing, I’ll be good. I’ll be able to generate some work for when this project ends.” Or maybe you’re that person, you’re like, “No, I really have got to devote a full day a week or more because that’s just the way that I work.” So, know thyself. The most important thing, though, is to make sure that you absolutely do commit time to sales and marketing and don’t get too absorbed in just that one client project.
Elizabeth: I think Gene hit on something really good. If you really do want to expand your business, which it sounds like you do, then I don’t think you should hire a part-timer. I think you should get a full-time employee to work with you.
Gene: Just takes awhile. And one of the thoughts is for full-time … We were just talking about an individual here at The Hartford, very, very common for big companies and small to bring on somebody as an independent contractor first. If you are trying to groom somebody for the future, you’re not ready to fully commit to that employee, not unusual to bring somebody on and say, “Look, you could be a contractor. Give me 10 hours a week. We want to expand that relationship.” Do it for 90 days or something like that or 6 months and you can evolve it into a full-time employee.
Elizabeth: I don’t think you’re going to be able to grow with just yourself.
Gene: Oh, no doubt. It’s funny that you say that, too. I love the fact that he wants to think about hiring somebody and growing the business. I never really became very profitable in my business until we brought on employees. You only have a certain number of hours a week and you can make a living as an individual person running a business. You can make a living, but if you really want to make some money, some serious profits, the only way you can do that is by profiting off of others and bringing people into your company that you’re managing. So you can have 10 people doing the work that just you were doing and that increases your business ten-fold.
Elizabeth: That also allows you to diversify a little bit, so maybe you’re not just … When you started, you were selling CRMs.
Gene: Actually, what I started was just a counting system. It just me and my dad. My dad was selling and it was me implementing the system. It was just the 2 of us and it was like the world’s worst accounting system ever. It was my dad’s accounting system. It was absolutely horrible. But we were limited. I had 40, 50 hours a week of chargeable hours and nobody’s ever chargeable 50 hours a week because there’s always non-chargeable. You’re just limited, so you can make a living. Again, easier said than done. I’m not saying you can just start hiring people and grow your business. These are all very challenging, but I’m just telling you, that’s why when you hear CEOs of big companies making all this money, it’s because they’re managing thousands and thousands of people and to be a good manager is a skill unto itself. Successful business people are successful because they’ve grown organizations and they’re profiting off the resources off their organization, the resource being people.
Elizabeth: Brent and other listeners, I will link back to some of our previous podcasts where we talk about … I feel like we get this question over and over again and we will never stop talking about it-
Elizabeth: Because it is difficult to say, “When is the right time to expand the business and hire someone?” I feel like you can’t expand your business until you hire someone, but in order to hire someone, you need to expand your business.
Gene: I will tell you this. When we took on our first employee, it was a risk and a gamble like anything else. It could have been catastrophic and it wasn’t. It wasn’t like a super home run, but it was good. I’m just telling you like what do I know? You’re going to make your best choice. You’re going to take a shot at it and it might be a bad decision. Hopefully, it’s a good decision. It’s worth the gamble in my opinion.
Elizabeth: I love that you always talk about how now you have an employee who ended up better than you at implementing things.
Gene: Oh, they’re all better than me.
Elizabeth: Which allows you to really think about, “Where’s my business going to be in 5 years?” You have that time now, instead of just constantly trying to keep your head above water.
Gene: My mindset has changed now that when new work becomes available… It used to be like, “Oh god, when am I going to be able to get this done?” I was almost just like dreading new work because it was like “Ugh.” Now, when new work becomes available, my first thought is “Who’s going to do this for me?” It’s a total change in mindset. The people that work me … I used to implement CRM systems and all that. I was just horrible at it. The people that work for me are so much better at it than I am. More technical.
Elizabeth: I’m sure you were pretty good.
Gene: No. I’m not very detailed at it. I don’t know.
Elizabeth: You’re like, “Just sit down and figure it out.”
Gene: Oh my god. I don’t even want to think of it. It amazes me that I actually was able to do some of these things when I look at the people working for me now are so much better.
Elizabeth: Oh my gosh. All right, we’re going to hear from our sponsor 1 more time and then we’re going to be back with a word of brilliance from Gene.
Elizabeth: Do you have your word of brilliance?
WORD OF BRILLIANCE: Instagram
Elizabeth: Okay. All right, we’re back and we’re ready to hear Gene’s word of brilliance this week.
Gene: Oooh. So my word of brilliance this week is “Instagram.”
Gene: Instagram. We all know … Well, do we? I don’t know. I guess if you’re over the age of 14, you don’t know Instagram. Instagram, hugely popular service owned by Facebook. It’s for your, obviously to send out photos, share your photos with all of your Facebook friends and people in your community and that’s all well and good. Well, very recently, Instagram has announced that they are allowing businesses to set up accounts and set up business profiles for themselves as well, so that businesses can be sending out and sharing photographs and also communicating because it integrates with Facebook and therefore provide another way to provide customer service and support and outreach to your community. If you’re a business that’s marketing to people that are on Instagram and it’s very popular with millennials and teenagers, it’s a place that you might want to consider investing some time in and some resources. You might find some leads and new business there or be able to service some existing customers using their new tools that they are providing.
Elizabeth: It works on me and I’m not a teenager or a millennial, but I see businesses on there. Restaurants will show some beautiful food photography and I’ll put them on my list of place I want to go.
Gene: Now people can comment on there and you can comment back, right? And it integrates with your Facebook page. It’s fantastic.
Elizabeth: The other great thing, too, is that they now allow you to post videos. Let’s say you have a new product. You can do a little video about that new product and it doesn’t have to look that great. It can be pretty homemade-
Gene: People don’t expect it to look that great, actually. It doesn’t have to be a professional thing. They get it. But great way to, again, engage with your community and, again, Instagram, is recognizing this and they’re giving you the ability to sell ads now on Instagram as well. It’s another place to spend your money but if your users are out there and your community’s there, it could be a real opportunity.
Elizabeth: I think you can do it for free too. You can have a free account.
Gene: Yes, you can. The ad buying, obviously, is a little cost. My recommendation is to just Google “Instagram for Business” and look at the business tools they are providing. It’s all new. I mean, they’re growing. It’s a huge community for you to think about.
Elizabeth: We’ll link to that in the show notes. Thanks for tuning in for another weekly installment of the Small Biz Ahead Podcast. If you would like to submit a question, find us on Twitter at @smallbizahead and submit your question there. We’ll be back next week. Gene, thanks for being here.
Gene: Awesome to be here, as always. I’m going to go back and watch some Silicon Valley. See you guys later.