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It’s no secret that marketing is essential for any type of business, no matter its size. Small business owners may be hesitant to enter the space — preconceived notions about the cost of marketing (and the effort required to keep up with it) abound. Sure, some organizations pump thousands of dollars per month into their strategies, but that doesn’t mean you can’t find a middle ground that fits into your budget.
In the spirit of decoding the wild world of marketing, let’s discuss what’s fact, what’s fiction, and everything in between.
You may be tempted to build your business purely through word of mouth — and it could work for a time — but it’s not a sustainable strategy. Your business might be able to rely on this type of advertising if you live in, say, a very rural area, but even so, you won’t be able to bring in new customers unless you’re very focused on it. There are going to be a lot of people who have no way of knowing who you are and what you do unless you invest in some serious boots-on-the-ground marketing. And, if you’re focused solely on that, other areas of your business will inevitably fall by the wayside.
While word of mouth can be potent, it’s not a one-size-fits-all solution. Small businesses need to complement it with active and proactive marketing strategies to reach new customers who might otherwise remain undiscovered.
Ruling: FICTION
Every business, regardless of its size, should engage in some form of marketing. The key lies not in being able to afford an entirely outsourced agency, but in planning and budgeting for marketing as an essential activity.
There is a wide belief that only businesses with deep pockets can afford external marketing. The truth is that there are solutions out there for every budget — determine your own. That could mean cutting corners elsewhere so that you can hire an agency, or making an effort to learn all you can on your own. There are a ton of great resources out there (check out Udemy, Coursera, or Skillshare) that you can lean on.
Ruling: FICTION
Should you dedicate 2% of your revenue to your marketing strategy? Not necessarily. If you have a healthy budget then spending 2% of it on a good marketing budget would be wonderful — until next year when your revenue is down. In that case, you would be spending less money on marketing because it’s only 2% of whatever your revenue is, at a time when you should be spending more than that on bringing in more (paying) customers.
If you follow this ambiguous 2% rule, it quickly turns into a downhill slide: you’ll continue to lose money because you’re spending less in marketing.
Assess your business’s individual needs and invest in marketing based on your unique circumstances. It’s a personalized approach rather than a one-size-fits-all solution.
Ruling: FICTION
Unfortunately, you do. Facebook is also a business with the aim of generating revenue. Only 2-5% of your followers see organic posts, which means that paying for placement is essential for broader reach. There is value in organic social, but businesses need to allocate funds for specific messages they want to be seen by many.
Ruling: FACT
Not all businesses are created equal, and the same goes for marketing agencies. This is good news for organizations that are looking for solutions that don’t require them to go “all in” on an expensive package filled with things they don’t need.
It’s important to tailor your marketing approach to fit your unique needs. Seek out agencies or even freelancers who are willing to work with you to give you exactly what you’re looking for. Some will specialize in Facebook, others in SEO. Don’t be afraid to shop around, conduct interviews, and reflect before you decide on the solution that works for you and your business.
Ruling: FICTION
Marketing may seem complex, but it doesn’t have to be if you bring on the support you need. Integrate it into your budget as you would any other important operation, such as HR, IT, or bookkeeping. In the end, it’s not about how much money you spend, rather, it’s about the strategies you implement. Embrace the right ones, and you’ll flourish — ignoring the need for marketing altogether is a recipe for disaster.
If you want to learn more about marketing your business with the hopes of selling it one day, that’s where we come in. Give us a call.
On today’s Apex Business Advisors podcast episode, Andy and Doug discuss a recent Offer to Purchase they received. The buyer took the Apex form and made some “adjustments.” The discussions revolve around how the buyer inadvertently waived their right to exclusivity, Apex’s ability to provide financial information to a lender, and the seller’s requirement to pay the commission, among others.
Looking to acquire a business? Check out the Current Listings or get in touch in with a Broker.
“The most important thing to do if you find yourself in a hole is to stop digging.” – Warren Buffett
The Oracle of Omaha, Warren Buffett, is one of the most revered investors in the world. His oversight, with the addition of Charlie Munger’s advice, has led Berkshire Hathaway to be a company worth almost one trillion dollars in net value.
While his quote from above suggests that he believes in calling it quits when you know you have a loser investment, he also regularly cautions any investor to invest for the long term and be vigilant through the down times.
So what is the right approach for someone who has an investment that is currently underperforming?
Well, if it is December, tax-loss harvesting may be the best way for you to accommodate both approaches while staying ahead of the government’s taxation requirements and winning in April through actions made in December.
Tax-loss harvesting essentially means selling off a bad investment to offset the tax liability of positive investments you have made during the current tax year. The spoils of good investment benefit you, the investor, but the government also sees the capital gains as an opportunity to add to their coffers.
So when you have a win in investing, you need to look for ways to keep those gains to yourself for further investment or strategic use. Taking a stock that is currently operating at a loss, and selling it to offset your gains from other stocks, is the basic reason behind tax-loss harvesting. Besides reducing your taxes, tax loss harvesting also frees up cash so you can buy new assets that may be more likely to generate positive performance. Just make sure you don’t invest in something that only you love.
Some basic rules around tax-loss harvesting stipulate the timeline within which you can redeploy the money from the losing stock sale, or prohibit you from re-buying the same sold stock. You also have to be careful about buying almost identical stocks as those which you have sold.
Anyone who invests and sees losses, as well as gains, can benefit from tax-loss harvesting. While those in higher tax brackets stand to benefit more from this practice, everyone should take advantage of this legal opportunity to reduce the amount of taxes they may owe the government, assuming their situation meets the appropriate requirements.
This unique act shouldn’t be used simply as a means to save taxes owed, however. There is no point in selling off a stock that is expected to rebound or outgrow your initial investment, just to offset gains from another stock. A prudent investment strategy should be adhered to, and harvesting should only be set in motion when the benefits outweigh any potential negatives of your strategy.
To take full advantage of the tax-loss harvesting opportunity, you need to make sure that any sales of investments that have resulted in a loss are complete before the end of the current tax season. This is the only way to offset gains made in the current tax season, with your losses.
Additionally, you will need to know when the stocks of both your gains and losses were purchased. This is so you can confirm that your capital gains are accurately calculated, and then offset your gains accordingly with your losses. It should be noted that a business owner, who takes advantage of tax-loss harvesting, can potentially use a minimal amount of those losses toward their personal tax liabilities, once all potential uses for the business liability have been exhausted.
Again, you should make sure that your approach doesn’t run afoul of your current investment strategy, but down markets can provide the best times to take advantage of tax-loss harvesting. You can maximize the capital you have to reinvest in other stocks or assets by purchasing the ones with the most upside, while at bargain prices.
We prefer to help you buy or sell businesses at Apex, instead of stocks. But we know great people who can help guide you in harvesting your tax losses. If you need a referral, give us a call and we’ll connect you.
On today’s episode of the Apex Business Advisors podcast, Doug talks about the Apex Awards Banquet, Andy shares a story about a buyer looking for Creative Financing in a hyper-competitive market, and they unveil the latest tools to help Sellers understand the value of their business.
If you want to learn how “Sell Ready” your business is, take the assessment by clicking here.
You may also wonder what you need to do to prepare yourself. Take the “Owner Readiness” assessment to learn more by clicking here.
Selling a business is often portrayed as the culmination of an entrepreneur’s dreams — a big achievement that signifies success. However, the reality is that the experience is often full of complexities and challenges.
Michia Rohrssen, founder of Prodigy (now owned by Upstart), knows firsthand what an emotional rollercoaster selling a business can be. He initially viewed it as a straightforward process — little did he know the intricate web of negotiations, investor dynamics, and personal reflections that awaited him.
Michia founded Prodigy with friend Marty Hu to create a platform that would allow consumers to purchase a car all from the comfort of their own homes. The software was used by some of the largest auto groups in the world, and at the height of its success consistently processed billions of dollars in car sales.
Michia wasn’t planning on selling when he was approached with an initial offer of $110 million from Upstart. He faced a pivotal moment: as excited as he was, he realized the importance of maintaining a balance. Sharing this news with his team and ensuring a smooth transition required strategic planning. The delicate nature of handling investor dynamics was a lesson that played a crucial role in what happened next.
During the negotiation phase with Upstart, Michia and his team were also in the delicate process of closing a substantial funding round led by prominent investors, including a notable venture capital firm.
The stakes were high, and momentum was crucial. So when an investor who had previously injected $25,000 into Prodigy decided to demand a return on his investment, Michia was in trouble. They were on the brink of finalizing a $5 million round, a significant milestone for the startup and this investor’s sudden change of heart, seeking the return of a relatively small amount in the grand scheme, posed a threat to the entire process.
At this point, it wasn’t only about the money. Rather, it was about the potential disruptions to the larger funding round which could raise concerns about the stability of the company.
Michia decided to gather the other investors and emphasize the critical nature of the ongoing negotiations with Upstart. They needed unanimous support to address the lone investor’s claim and secure the future of the deal.
Ultimately, his team’s resilience and the swift (and positive) response from his other investors played a pivotal role and prevented a potential derailment.
While joining Upstart and achieving his lifelong dreams was exciting, Michia knew the earnout specifics were equally important. Mentors had warned him about the importance of advocating for a shorter earnout — beyond monetary concerns, they urged him to think about his future interests and whether or not they align with the acquiring company’s plans.
The earnout dilemma demands a delicate negotiation, balancing immediate gains with long-term commitments. The emotional high of sealing the deal can make it easy to overlook details, but this part of the discussion requires careful thought.
Looking back, a more assertive discussion about the earnout terms could have added a substantial $4 million to the deal. It’s a lesson Michia learned the hard way, and now shares as a cautionary tale for other entrepreneurs who are navigating acquisitions.
Ultimately, Michia accepted Upstart’s initial offer of $110 million. After the sale, he and his wife moved abroad and now travel frequently, enjoying the break from the hustle and bustle of Silicon Valley.
From handling investor dynamics to navigating the earnout dilemma and embracing post-sale emotions, Michia’s story is a testament to the multifaceted nature of creating, building, and selling a business. Beyond the financial gains, the decision to sell involves a delicate dance of negotiations, self-reflection, and ultimately, choosing a path aligned with your values.
If you need help along this journey, we’re here for you. Give us a call today.
The Entrepreneurial Myth, or E-Myth for short, is a term coined by Michael Gerber that describes the misconceptions that most beginner entrepreneurs have when they start on the road to creating their own business. Gerber has parlayed his success with the first book, The E-Myth, into an entire series that either simplifies or dives deeper into the concepts of the E-Myth, even delving into specific career fields and industries.
The E-Myth Revisited is an attempt to update the original book and provide more concise answers for the beginner entrepreneur. The primary focus of the author is to answer what to do when your passion project is no longer your passion.
The Apex Book Club previously covered Michael Gerber’s book Beyond the E-Myth, about building a business so that it is ready to sell at a time of your choosing, specifically because it is built to be scalable and therefore a prudent investment opportunity for any potential buyers.
Before we scale, we must be personally satisfied with our investments in the business, whether they be financial, energy, or time investments.
What does a business owner do when they have lost the drive to grow the business, and it is yet to have become marketable to buyers? They look inward.
Creating a business typically arises from a desire to work for oneself or turn a passion into a profit. Of all the books written about starting your own business, 99.9% of them would agree that you need to maintain passion for what you are doing to overcome the ups and downs of owning your own business.
So what is the secret to keeping passion in a business that will envelop so much of your daily life?
You need to understand the three archetypes of a business owner that exist, define which type you want to be, and then act accordingly. That means hiring others to fulfill the remaining roles of the business.
If you choose to be The Entrepreneur of the triumvirate, you need to be prepared to handle driving the business forward as your primary responsibility. But you also need to have a capable Manager to manage the business and a skillful Technician to make things happen from the nuts and bolts side of the business. Otherwise, you will find yourself wearing many hats and looking great in none of them.
Most business owners don’t get into a business to work more hours for less money than they may have made in their previous careers as employees. They want to create and build a successful business that provides for them financially and gives them the freedom to live a life not chained to a desk or a storefront.
One only needs to look at the meteoric success of Tim Ferriss’s The 4-Hour Workweek to understand that people of an entrepreneurial mindset are looking for less time at maintenance work, and more time doing inspiring work. Or maybe they just want to get away from the people or roles they don’t like.
Simplifying your business start-up can be achieved by either buying into a franchise or buying an existing business that has been proven as a good investment. You remove the need to design an entire business strategy platform from scratch, saving hundreds of hours that would be better spent on the profitability of the business, or life outside of the business. Yes we are brokers who want to help you buy and sell businesses, but many of us have built businesses ourselves so we know it’s almost always better to buy than to build.
The E-Myth Revisited is a very helpful book for those who have started their own business but are questioning what they have gotten themselves into. The key focus of the book is to help you take a breath, delve deep into what you want your role to be, and then delegate the rest through either employment, partnership, or a renewed drive and purpose.
If you are looking to skip the start-up and buy into a business that has already proven itself, give us a call. It’s what we do.
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