Hands up if this sounds familiar.
You have a brilliant idea. It’s so brilliant, in fact, that in a moment of madness you put your life on hold, take a leap of faith, and decide to bring the idea to life. You ask your professional mentors for their advice, you refine your idea, and determine your underlying mission. You perform hours of market research and pay for legal advice. You fill out endless piles of paperwork, form a legal business, and finally raise the necessary funding to get yourself off the ground.
Good news! You’re probably exhausted and in serious need of socialization, but you’re finally up and running, and are ready to tell the world why your product or service is the best thing on the market.
But here’s the catch. You know nothing about marketing your business in today’s ever-changing digital landscape, and you’re not in the position to bring on an entire marketing team.
So what do you do?
You hire an agency, of course. Or you DIY it by watching a few youtube videos on how you can pay premium prices to get your name in front of your target audience by using a self-service advertising platform like Facebook or Google.
Even though you made this decision with only the best intentions, chances are you have just unknowingly drained the lifeblood of your business: your equity. You might as well pull a Jesse Pinkman from Breaking Bad and drive around the neighborhood chucking cash out of your car window.
Okay, that was an extreme analogy but it’s a topic we’re really passionate about. Why? Because so many people put in all of the hard work needed to build a business and raise enough money to get it off the ground (usually by handing over equity to investors) only to take that cash and literally hand it straight back to Zucks or those peasants over at Google.
Let’s back up and look at the bigger picture.
The global advertising landscape.
Nowadays, the market is completely saturated and consumers are overwhelmed with advertising content: it’s estimated that the average person encounters between 6,000-10,000 ads every single day.
For context, that number was between 500-1600 per day back in the 1970s.
It’s increasingly harder to have your message seen by your audience, and the common assumption is that you have to dump a ridiculous amount of capital into your marketing efforts to guarantee a reasonably good shot in the dark. This is especially challenging for emerging businesses with smaller budgets, who are often forced to turn to their equity to support these pricey initiatives. But they do it anyway because, well they literally have no other choice.
The real kicker is that these huge tech companies are making billions of dollars off the small businesses who are struggling just to have their name recognized by a handful of consumers. Literally. In 2020, Google’s ad revenue amounted to 146.92 billion US dollars and about 98.5 percent of Facebook’s 70.6 million dollar global revenue was generated from advertising in 2019.
Let’s get back to your new startup.
The #1 startup mistake.
So as illustrated above, the task of distinguishing your business from the rest of the crowd is challenging, multifaceted, and downright overwhelming for the majority of small business owners.
No one can be an expert in everything, so it makes sense to turn to external resources to help you effectively market your small business. The problem is figuring out exactly how much of your financial resources you should dedicate towards your marketing pie and everything that must go with it.
Unfortunately, there’s no scientific formula to calculate what will work best for your business. But let’s take a look at what others are doing and what small business advisors suggest.
What should be happening vs. what’s actually happening.
According to The Balance Small Business, a successful retail startup should spend between 3% and 5% of sales on marketing. They go on to explain that a higher number will cause dependence on advertising and any less would cause traffic to suffer because you may not have enough of a presence. So the sweet spot is 3-5%. Great! That sounds reasonable, right?
So why do the majority of startups spend 40% of funding on advertising?
It could be for a couple of reasons:
- It might be because very few people have a deep understanding of how to look at marketing spend, or even how to calculate the key metrics to track marketing efficiency.
- It could be because you’re paying mega agency fees to some really smart folks that get your business, but perhaps don’t necessarily share the same risks that you do.
- Or it could be due to the fact that our dear friends at Facebook and Google are charging you an arm and a leg to use their self-service advertising because, well they can.
So let’s pretend you fall into the majority of startups that spend 40% of their funding on one of the reasons above.
What does this mean for your emerging business?
If we’re being honest, it’s not looking too rosy…
We know, it sounds harsh but a number one reason that small businesses fail is due to lack of funds, which far too often were recklessly spent on agency fees or ineffective marketing efforts that served only to help out our poor friends at Facebook and Google. It hurts, but it’s a fact.
What if there was another way – a new and better way to pay for content?
You need a cost-effective solution that allows you to hold on to as much equity as possible, while simultaneously generating consumer awareness around your new product or service.
A better way to pay for your content needs.
Contrary to popular belief, there is a smarter way to approach your creative marketing efforts. The Kaddie Model allows you to keep as much of your equity and your budget as possible, by producing your content for free.
At Kaddie, we scrap the fees and tell you to “save your cash for media.” The old adage of compounding also applies to media: every dollar you spend upfront if done right, can help yield greater returns down the road. Our pay-as-you-go framework gives you the ultimate control over your marketing budget, by allowing you to pay for the content that works and turn off the stuff that doesn’t. Another way to put it, is that Kaddie allows brands to achieve a better ROI by focusing their budgets on the performing content rather than paying for all the stuff that does work.
“Content for free and I pay only when I use it?” Yep, that’s it. Our promote-now-pay later premise works only because we believe in the power of our content over and above all of the competition. Why? Because Kaddie was founded by a team of successful entrepreneurs who were once in your shoes. We understand that starting a business is hard and it’s our mission to give all businesses access to world-class creative content, customized to help grow your business.
Everyone’s a winner they say.
Regardless of how you choose to execute your marketing efforts, if you take only one thing away from this post, it should be this:
Equity is the most valuable asset you have and should seldom be given away.
Go back and read that sentence again. Highlight it. Write it down on a sticky note and put it on your fridge. Incorporate it into the series of pep talks you give yourself in the shower each morning.
You got this.
Sure, there are times you need to raise funding to build a product, infrastructure, or scale, but it’s imperative that you don’t blow it on media spend or even worse – agency fees.
Besides, the head honchos at Facebook and Google have enough stock to go around.