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The Relationship Between Funding and Marketing

The bucks behind your business has considerable impact on reaching the right audience.

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How you fund your business will determine everything from speed of growth, to accrued debt, to the percentage of ownership you retain.

But one factor that founders rarely consider is how funding can impact their marketing decisions. It could mean reaching a larger audience but having less control over your brand. It could also mean that you have complete control but significantly less cash to spend.

As you weigh your own options for funding, consider which scenario is more important: fast cash plus growth or equity plus control. Your decision will help determine which path is right for you and how you can make the most of your marketing dollars.

Related: No Money? No Problem. 30 Low Budget Marketing Ideas for Your Business

Money still talks

Ultimately, your business's growth will be determined by marketing. Warby Parker, for example, created a business model that hundreds of other companies have replicated, but its use of influencers and gorilla marketing is what catapulted the brand into a company worth billions.

Using equity financing (including VC funding) means giving up control of a portion of your business. The greater percentage of ownership you give away, the less control you will have. If you bootstrap your company or take out a loan, you will maintain 100 percent ownership.

Your funding method will also determine how cautious or aggressive you can be with your marketing. With bootstrapping, your marketing dollars will initially come out of your personal investment capital. In these cases, you must be able to show a strong ROI from your marketing efforts because any expenditure will eat into your bottom line.

VC-backed companies have their own set of challenges. Venture capitalists usually have high growth expectations -- sometimes unrealistic ones. Rapidly scaling a company requires a large marketing spend rather than the cautious approach you would use with bootstrapping.

Stretch your marketing dollar

Whether you have millions in VC funding or $10,000 in personal savings, your brand messaging will remain the same. The execution will vary.

It cannot be overstated how important it is to know your audience. Customers will appreciate it and investors can see quicker ROI. A study by Innovid found that 43 percent of respondents prefer ads targeted to their locations, interests and behaviors.

If you decide to fund the company yourself or with a business loan, the best way to compete with companies spending billions is to create highly targeted campaigns. Fortunately, there are a variety of tactics that allow you to be laser-focused with your advertising and messaging.

Pay-per-click ads are terrific because they allow you to place ads in front of a very specific audience and tailor the messaging to those groups. Influencer and affiliate marketing also allow for precision targeting. As states reopen, in-person events will once again be a great option for meeting your ideal customers where they are.

Go beyond demographics

You hear a lot about Netflix and Spotify's algorithms and the roles they play in audience suggestions, because the services they provide improve when they listen to what customers like instead of figuring out which boxes they fit into.

To create these highly targeted campaigns, you must understand your customers. When working with a limited budget, targeting college-educated women ages 25 to 45 is too broad. You cannot afford to waste money putting your message in front of the wrong customers.

You need to understand the buyer's journey and where your customers are in life: What drives them and how do they make decisions?

Once you have an intimate understanding, you can more easily determine which tactics will work best and which messages will influence them the most.

Related: Demographics Alone Are Not Enough to Position a Brand

As your budget grows, so should your tactics

Following down years in spending, 66 percent of marketers expect to up their budgets noticeably this year. More financial flexibility should mean more effort to broaden your strategies.

Increase your ad spend and/or expand your tactics, such as advertising on more platforms, adding in-person events or using traditional media such as radio and TV.

Your Facebook ads will look different from your Instagram ads, which will look different from your TikTok campaigns and YouTube ads.

Stick to your brand values

Most of the time, investors want to see aggressive growth, and it can be easy to compromise your values for the sake of sales.

For startups and small businesses, it comes down to the product. It must live up to its promise. One advantage to funding your company through personal savings and loans is maintaining greater control. In my experience, founders who retain more ownership over their companies often opt to work with smaller agencies so they can have greater control over the marketing assets.

What you say when you spend your money is just as important as how you spend it. Sometimes, communicating your brand values in an unconventional way is more impactful than using mainstream marketing channels. Last year, organic food delivery company Daily Harvest switched to home-compostable containers. Despite increasing packaging costs, this shift aligned strongly with the brand's mission to deliver healthy food made with the earth in mind. Their VC was also committed to sustainability and supported Daily Harvest's move to a more sustainable product.

Once your product is out in the world, fulfilling your promise to customers will do more for your brand than marketing. The key is getting your product into the hands of those first few thousand people. It all comes down to your company's needs and what you value most.

Related: Do Your Marketing Messages Target the Right Personas?

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