In your landscape business you spend $1,000 (in marketing) to acquire a landscape customer that will provide $750 in net profit for the first year. You expect to have this client on for the next 4 years. Would you continue this method of marketing?
The above question was posted on our social media channels.
Overall, 28% of respondents voted that they would scale this method, and 72% respondents voted that they wouldn’t.
We also got varying comments on both sides, and it was very surprising on how strong each side felt.
Some were for it:
“Of course yes all day long!!”
“Yeah, I’d go for it.”
“How many investors are going to pass up a 300% ROI on a 4 year investment?”
Some were against it:
“I would probably not scale this marketing channel”
“More than likely not”
“That sounds like a terrible investment from all angles”
My initial thoughts based on this data and feedback:
- Marketing may not be the bottleneck for most of these landscaping businesses.
- Some landscaping businesses weigh heavily into doing great work, and building their brand through their reputation vs. paid marketing methods.
- There is more opportunity to invest into your landscaping business marketing strategy for profit.
- Some businesses have a highly effective marketing strategy.
Investing $1,000 to get $3,000 (total over 4 years) doesn’t sound too bad! In fact, not many investments outside running a business can yield this level of a return on a consistent basis. However, for your business there may be investments into your growth strategy that may yield a higher return on investment. The question becomes, where does your business fall? You may be able to gain customers more effectively, so what are some factors that would make this investment worth considering:
1) Think about the value you are creating! You are not just creating $750 in profit, you are creating a multiple of that if you sell your business.
2) If you are looking to grow faster, then you may want to spend more in marketing, even if the return isn’t as good as obtaining business through word of mouth.
3) It may allow you to rely more consistently on these predictable marketing leads, which could be beneficial when entering a market downturn.
This question highlights one of the beautiful aspects of business, that everyone optimizes in different areas of their business to become successful. Some may be more effective with marketing, while others may be more efficient in the field. We see this often when we benchmark the financials of our client’s, there are many ways to get to the finish line of a profitable company!