We're continuing on to #7 of 10 of our list of some of the worst pieces of business advice that a handful of CEOs have ever received, as reported by fundera.com :
“Put All Your Resources In”
“The worst advice I’ve received as a business owner was when someone told me that to beat our big-name competitors we need to ‘go all in.’ From that advice, we decided to invest a lot of money each month in Google advertising to try and increase awareness for our business over our competitors.
After a few months of doing things based on that person’s advice, we were deep in the red and struggling. Instead of closing our doors, we took things in our own hands and pulled those ads. To our delight, we saw we brought in just as much traffic organically through other marketing efforts. From then on, we took other people’s advice with a grain of salt and go with our gut instinct!”
– Nellie Akalp, CEO of CorpNet.
There’s probably nothing worse, as a Colorado small business owner, than spending money on advertising that doesn’t work for you. Anything you spend on advertising SHOULD repay you AND make you more money – that’s the whole point. Unfortunately, what works for one company might not be right for another.
Take video, for instance. You’re probably expecting me to say that video is something that will work for every business. Wrong. While I truly believe that promo videos will work for MOST businesses, there are some companies that really wouldn’t benefit from a promo video or commercial. Off the top of my head, I’m thinking of quilters – sure I could put together a collage of photos of your quilts set to music with some text overlays, but for the most part, you could do that yourself quite easily, and you can portray the same message with photos and text on your website. Quilters probably won’t get much use out of a video unless they have a unique start-up story that they believe would be useful for drawing in more business through a heartfelt, emotional pull on video.
Spotify advertising won’t work for that quilter, either….along with several other similar business types.
On the flip side, if you are a DJ, band, or voice-over talent, you ABSOLUTELY need a video and/or a Spotify ad. It’s all about building a model of your typical client to decide where they might spend their free-time and when.
BTW – when I say “build a model of your typical client” I DO mean build a complete model. Start with a fake name, then complete that character – what does he do for a living? How old is he? Does he have a family? What does he do for a hobby? When is he online or watching TV? Does he ever read the paper or listen to radio? Does he attend any expos, continuing education for work, or conferences? Keep going like that until you have a fairly well-rounded character as if you were using this character in a novel that you’re writing. Once you have that character, it should help you decide where and when to start advertising.
When you start advertising, be sure to test out that advertising mode for about 6 months to a year and keep a written record of how many sales have come from those advertising modes. If the sales have compensated you for ad cost AND made you a profit, keep doing it and keep improving it. If it hasn’t panned out that way, ditch it and try something new. Keep tinkering until you get a good plan working for you.
“Don’t Take Out a Small Business Loan”
“The worst piece of business advice I ever received came from my bank manager. I was considering purchasing new technology for my consulting business and went to the bank to discuss loan or lease options. The bank manager looked at the balance in my account and advised, ‘You have the cash, you should pay cash.’
There were several unfavorable outcomes: I lost operating capital that I needed for other aspects of the business, I could only expense 20% of the equipment value and thus had to pay income tax on 80% of the value of the equipment, and the equipment’s value—as collateral for a loan—was significantly less than it would have been at the time of purchase.
A better solution would have been to borrow the funds to purchase the equipment because I would have retained sufficient working capital to soften the blow of reduced cash flow.”
– Anne Miner, President of The Dunvegan Group.
Hmm…I’m kind of iffy on this one, and if you’re a graduate from a Dave Ramsey financial course, then you probably are, too. I don’t like loans as a general rule because it means you now owe interest and have to try to pay back the loan, even if your business doesn’t work out as you’d expected. That being said, I would be more likely to get a loan if I was 90% sure I was going to be able to pay it back quickly with no problem.
My best suggestion on this is that you ask one of your financially smart friends to go with you as you discuss loans with your bank so that you don’t get ripped off.
As a general rule, though, debt is bad. Almost always. So – I have to disagree with this guy, for the most part. Before banks started offering loans, businesses had to succeed or fail on their own merits. That sounds harsh, but being free from financial ties and owning most everything in your life outright is a beautiful thing that will keep you stress-free. I think being stress-free is worth a little patience and saving on my part.
So, in summary, spend smart and borrow less. That should be a good life mantra for all of us! For more info on advertising helps for your business check out our social media help page or our video production help page.