Small Businesses Seeking Higher Growth Regret Not Investing In Marketing Sooner
The Small Business Administration reports that there are 29.6 million small businesses in the United States, representing every industry and covering a vast range of products, services and skills. This variety of businesses can mean diverse opportunities and challenges to grow.
In a recent study, our company, Kabbage, found that 72 percent of the business owners we surveyed expected to grow revenue by more than 20 percent in 2018. In light of National Small Business Week (April 29 to May 5), and the fact that we're more than a third of the way through 2018, it's a good time to ask, how can owners in this category better achieve their goals?
Partnering with Bredin, a small business research agency, we surveyed 500 small businesses of varying ages, across different categories, to uncover the lessons businesses need to achieve faster, more dramatic growth. The results offer insights for younger, growing businesses handed down by more established companies.
A primary finding? Many of thoses older companies regret not investing more in marketing sooner. That makes sense: On average, marketing/advertising spend is companies' smallest expense each year. However, marketing is a key investment for any business, and many wish they'd invested sooner. In fact, asked the number one aspect of their business they wished they'd been more knowledgeable about earlier, to prepare for greater growth, 28 percent said they wished they'd known more about marketing strategies and channels.
Specifically, the study found that, on average, marketing represents only 8 percent of total spend for companies from their first year in business to their 20th year, or longer. Yet in hindsight, the older companies surveyed said they wished they'd doubled, tripled or even quadrupled that expenditure at every age of their business in order to see greater growth. Specifically:
- In the first year, marketing represented, on average, 7 percent of their total costs.
- Alternately, they wished they had attributed 28 percent of their total costs to marketing.
- From years one to four, marketing up ticked up slightly, to 13 percent of total costs.
- They wished they had spent nearly double that amount, or 25 percent.
- From years five to nine, marketing spend decreased significantly, to 5 percent, of total costs.
- They wished they had spent more than three times that, or 16 percent.
The takeaway: Entrepreneurs must invest more into marketing early in their businesses' lifespan.
The marketing channels that deserve your attention
To dive deeper into marketing, as our survey suggests was a major regret of the companies surveyed, small businesses should look at specific focus areas to set themselves up for better growth in 2018 and beyond. Those areas are:
Customer communication. Online businesses don't have in-person experiences with customers, so it's important to develop a great outreach strategy. Customer communication matters even more than it would for a physical business.
Being proactive when communicating with customers. A proactive attitude should come across on multiple communications channels, including social media, phone, live chat and email. This kind of attitude builds loyalty and shows customers you truly care. A great example of this is Zappos, which executes a customer service strategy that brings human experience to its online-only store.
Reviews. Online customer reviews are a low-cost way to drive marketing efforts, so encourage your customers to leave positive reviews. Reviews compose a large part of your business's reputation and affect your business's legitimacy in search engine rankings.
Reviews are more important than you may think: Eighty-five percent of consumers in a BrightLocal survey, for instance, said they trusted online reviews as much as they did personal recommendations. What's more, 73 percent of entrepreneurs surveyed labeled positive feedback as the most rewarding aspect of running their businesses since their companies had grown.
Positive reviews, moreover, often mean more conversions, which search engines reward by giving better rankings in search-engine results pages (SERPS). Higher rankings mean customers and future prospects can more easily find your business. To help this process along, you should add any reviews you receive to your website, to support conversions on your site.
And while we're talking reviews, don't overlook their other benefits: 1) New tools and technologies for small businesses increasingly look at them. 2) And they may be considered by online lenders during the underwriting process: Having strong reviews might contribute to your likelihood of qualifying for much-needed capital or influence how much funding you can access.
Social media. Social media is another low-cost marketing strategy to drive growth, considering that 74 percent of consumers in a Sprout Social survey said they make buying decisions based on social media.
One mistake businesses make is being on all social media channels. You're probably wasting time and effort by maintaining a presence on a channel that lacks your audience. Instead, conduct a social media analysis through tools like Google Analytics to see how well each channel is working for you.
An analysis will uncover which channels your target audience uses most and determine both what they want to see and the type of content you should create. From there, you can continually analyze how well you're reaching this audience via analytics tools. You can identify what works -- and what needs help.
The takeaway: Start small to test your marketing strategies, and once you've determined that any work work, expand.