The Word Of Mouth Infection Potentially Killing Your Business
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Jeremy Yang here, and today I just wanted to make a blog for you from this issue that I see that is completely rampant in the business community. This thing is like a virus that infects businesses and the founders of businesses and they don’t even know that they have it. That’s this issue of people wearing the fact that they don’t advertise or that they get all their customers from word of mouth as a badge of honour, and they shine it up and they just walk around with it on their chest as a complete badge of honour of pride. You speak to people and they’re like, "I don’t advertise, I get all of my customers from word of mouth". As soon as that comes out of somebody’s mouth, I know that they’re broke and I know that they’re not fulfilling their true potential.
It’s not that we have anything against word of mouth. We get a lot of word-of-mouth business in our line of work and it’s great. It’s the icing on the cake, but it isn’t the cake, it’s like having a bowl of icing. What are you going to do with this thing if you don’t have new customers coming in to fuel that word-of-mouth engine? If you think about your business, let’s say for instance you’re getting two to three clients per month from word of mouth and each client is worth a couple of grand to you. You’ve been doing that for several years, typically most businesses have a little nest egg or a safety net of cash that’s sitting in the bank account, right? And when you speak to most businesses that are being successful, that nest egg is at least a million bucks. Where they’ve just got kind of a million dollars sitting there in cash.
If you look around the world right now and you look at the interest rates that you get paid on that cash, it is abysmal. You don’t get paid … We’re talking about 1%, 2%, 3% max. However, when you factor in inflation, it’s costing you money to keep that money in a bank account. And most people don’t look at it that way. And if you have that money just sitting away and it’s not working, it’s just degrading and it’s regressing and it’s losing value. Money is energy and you want to pump that energy back into your business, re-feed it back in as a feedback loop and just accelerate your business. Because if you’ve got a bunch of cash sitting in your bank account, let’s just have a little look and kind of what the different investment vehicles are. If you’ve got a million bucks sitting in the bank account, or 100K, or 500K, let’s have a look at how you can put that money to work.
So we’ve already covered it. If you look at a high-interest savings account, 1% to 3% max. You’re putting one dollar in and getting a dollar and three cents back, right? So that’s not very exciting. Now, then there's property investment and stocks and bonds, let’s have a little look at those, right? Now, if you look at property as an investment vehicle, and if you look at it over the last 10, 20, 30 years, the average returns are 12%. Now, I know I’m going to have a whole bunch of property people jumping in and hating on this and saying, “oh, well look, my clients get a 200% or 300% return” or whatever it might be, and look, that may be the case in isolated incidents, right? Or that might be the case in a certain market. But if you look at … I’ve looked at the stats, and if you have a look over the last 10, 20, 30 years, the average returns are 12%.
Now, let’s take another one. Let’s go, for instance, and have a look at the stocks and bonds. That’s a way that you could invest money in and get a return back on that money, right? Typically if you look at stocks and bonds as an asset to invest in and get a return on your money, you’re looking at, again, 7% to 9%, right? A dollar is going in, you’re getting a dollar and seven cents back or a dollar and nine cents back. This isn’t the kind of thing that’s going to build generational wealth. It’s not something that’s going to elevate you to a whole new level.
So there are better ways to do it and that’s really by investing in your business, right? There’s no other vehicle that can give you the returns to invest in your business. You need to get attention. You need to get in front of your prospects to create an opportunity for more people to buy whatever the product or service is that you’re selling. And what is the way that you do that? You do that through advertising and specifically paid advertising. So if you can kind of have a machine where you put one dollar in and two dollars comes back out, or three dollars, or five dollars, or ten dollars. These are not unheard-of numbers. These are very common in online advertising and marketing and just general advertising to be getting those kinds of returns, where you put a dollar in and two dollars comes back out, or you put a thousand dollars in and two, three, five, even ten thousand dollars comes back out.
So the question that I pose to these people is that, yeah, look, word of mouth is great and it’s a fantastic way to get new clients in, but that doesn’t change the fact that I was in the market for the product or service that you sell and what am I doing when I’m looking for a product or service, right? Am I going and asking all of my friends and just hoping that they have somebody or am I jumping onto Google? Well, 94% of people are jumping on Google and looking for products and services. So if you’re not there, you are invisible to your marketplace, right? So while you’re getting the word of mouth, if my wife or my brother or my best friend or myself were in the market for what it is that you do and we jumped on Google and we couldn’t find you, how would you ever get our business? How would we ever be able to become a client with you? And that’s a question that I put to a lot of business owners and they just shrug and say, well you wouldn’t be able to find us, right?
Now that’s an opportunity, right? That’s an opportunity that you can take that money that’s just sitting there and rotting and you can put it to work and you can start to multiply that. Now in my business, if our ads go down for some particular reason, I am running around these offices like a mad man and I’m like, we need to get the ads live. Call our rep, call our rep, call our Facebook or Google rep, we need to get back online immediately. Now, that’s the mindset of somebody that wants to grow, that wants to push and wants to scale. I’m not looking at if my ads go down for a day or a couple of hours, like awesome, I get to save some money. I look at what it costs my business to not be out there in the marketplace and getting new clients in. Because I know unit economics, I know how much a lead is worth to my business. I know how much running traffic is worth to my business. So when I don’t run it for a day or an hour, it’s costing me money and that’s the way that you want to think about it is all this time that you go without pushing and shoving and getting your message out there to the marketplace, you are losing so much money.
It’s not … You’re not winning. You’re not in an incredible situation because you get all your customers word of mouth. No great business was built by word of mouth alone. Do you know what I mean? That’s a lot of a viral loop that gets businesses growing and growing quickly, but at the end of the day, it comes down to how are you getting that initial customer base? How are you going out there and fuelling that fire to come back in to then it kicks off a lot of word of mouth customers coming in from referrals and other people talking about you in the marketplace.
So, we do SEO at Honey Whale. We do Facebook ads, Google ads, remarketing, Gmail ads, YouTube, every single avenue that you can do. You’re not always going to get the same return on each channel and that’s okay, as long as you are out there multiplying money. Because growing a business, if you sit down and just think about it, most people have these esoteric ideas and they’re like, “how am I going to grow my business?” I want to get to this scale in my business. Growing your business is mathematics. That’s it! Once you’ve got a firm grip on those numbers and you know how much a lead is worth to your business, what you can do is, you can pick a goal, a financial goal for your business that you want to hit, and it might be a million dollars a year. Once you start some ads for a while and some advertising and start getting attention and getting leads coming in or getting sales coming in, you can find out what it costs you to get a customer. Then you can divide how many leads you need to get in order to get a customer and you can work out exactly how much a lead is worth to your business.
Then if we come back to that one million dollar target or a ten million or a hundred million dollar target, and then you can just back into that, you can reverse in and say, “Okay, cool. I want to get to a million, this is how many leads I’m going to need, this is how much I’m going to need to spend in order to get those leads, and this is how many customers it’s going to generate for my business.” So when you’re looking at growing your business, unless you are advertising, you’re going to be operating by whatever fate just falls in your lap that month. Like, “Oh, I had a great month, I got three referrals this month”, right?
No, that’s no way to look at growing a business, because as I said, you want to get to a million dollars, how many referrals are you going to need to get that and then how are you going to just generate those referrals like clockwork, where you know without a shadow of a doubt they’re coming into your business. That predictability and that consistency are what you need in your business for you to have the peace of mind to be able to go out there and hire people and pay salaries and get an office and start investing in your business as a vehicle for wealth. You need that predictability, otherwise, you’re just going to be up at night tossing and turning and you’re going to wake up at 3:00 AM in a deep sweat, panicking like holy shit, how am I going to make pay run right now?
If you’re kind of having these thoughts right now, I can tell you right now that’s because you haven’t found a way to predictably and consistently go out there and buy customers. Yes, buy them. Go out there and spend money to buy them and bring them into your business where you make more than what it costs you to buy them, enough to sustain your business in high enough volumes that you can repeat that cycle, and you can go and hire more people and then generate more leads and more salespeople and more people to deliver the work. And you can start building a machine that runs without you and will ultimately help you to get to where you want to go.
So if I’ve got one piece of advice it’s, in terms of word of mouth, that’s fine if you want to be doing that in your business and every business should be doing that, but what you need to do is find out a way that you can hire somebody or you can run ads yourself and you can get people in… you can get your message in front of people, get them to generate a lead or do whatever it is that you’re asking them to do. Bring them into your business consistently where you know exactly how much they’re worth to you and your business over their lifetime and how much it costs you. Then it’s all a matter of where do we want to go. We can just turn the dial-up and scale this puppy up to whatever it is that I want to do. You’re not just sitting around thinking, how am I to do that? I wonder what is the next steps for me to grow my business? You will know without a shadow of a doubt, this is exactly how much you need to spend in order to get you to your target.
If you’re one of those people that looks as not advertising as a badge of honour, you need to get that badge and you need to burn that sucker. Because that’s holding you back. It’s a limiting belief, and that’s not going to allow you to get to what your goals are.
To design is much more than simply to assemble, to order, or even to edit: it is to add value and meaning, to illuminate, to simplify.
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