How not to grow your business

Hello again and thank you for joining us! For those of you who don’t know who we are, please feel free to learn about LocalLiving here! To summarize, we’re a startup focused on small business growth and empowering the businesses that our communities depend on.

We’ve spent some time learning about the different problems small businesses face that hinder their growth. Some of the most valuable insights we’ve learned have come from interviewing small business owners about the challenges they face and what they’ve done to adapt. We’d like to share some of our findings with you in a multi-part series of articles. Our goal is to share recurring themes that have come up in our discussions and findings. We hope that this information will give you things to think about for growing your business. As always, please feel free to reach out to us if you have any questions!

Growth isn’t easy

One of the biggest reasons small businesses get discouraged from actively growing is that they’ve tried things in the past that haven’t worked. Often this comes from paying someone to promote their business, increase their online presence, or even making flyers. While these experiences can be discouraging, they are great learning opportunities. It’s often hard to quantify the return on your investment (ROI) for buying or using products/services to promote your business. Since small businesses don’t have huge growth and marketing budgets, they have to be very particular on how they spend their money attracting new customers.

What things don’t work?

Spending money on growth and marketing are always investments into your business. Regardless of the tool, product, or service a business owner uses to grow their business, they do so as an investment into something they believe in. But, some investments are better than others. In addition, you can have different investment strategies for short term and longer term growth. The question then arises, what are some tools, products or services businesses owners invest in that may not have the best ROI? Below is a list of some of the most common things we’ve seen people try that often don’t produce good results. This is not an exhaustive list by any means, just some of the most common patterns we’ve seen.

1. Paper advertising (Junk mail): Many businesses pay for ads in local newspapers and flyers. While these seem like great investments at first, there are a few issues business owners will run into. How many people actually read their local newspapers or discount flyers? Most apartment mailrooms have recycling cans filled with these types of ads. In addition to this, how do you know if a customer came into your business because of the flyer? Unless you’re giving a discount or promotion where the customer would have to bring in the flyer, it’s hard to really know how much business these types of ads generate. These ads aren’t cheap as well, averaging around $150 and up. Coupled with the fact that they don’t provide much insights or data, it’s harder to recommend these products to small businesses.
2. Expensive custom websites: Websites are amazing tools to increase your online presence! Coupled with SEO (search engine optimization) tools, they produce an awesome way to bring new customers to your business. But, how much should you spend on your website? The answer to this question varies a lot depending on the type of business you own and your customer’s demographic. Additionally, you may want or need your site to have some premium features that are hard to find. The solution for MOST businesses is to use online tools such as Webflow, Wordpress, and Squarespace. They are great tools for creating beautiful websites without needing a technical background. We’ve seen businesses that have spent over $1,000 on a website that could have been built using the tools mentioned above. Most people think they need software engineers to create beautiful websites which isn’t true at all. All you need is to buy a domain, use a website building tool, and you’re done!
3. Random rewards to customers: Humans are wired to reciprocate acts of kindness, so why is giving customers random discounts (even free) on products and services on this list? The answer to this question comes in 2 parts. The first is that people are actually more responsive to the anticipation of a reward than getting a reward randomly. Think about the high people getting from gambling. Secondly, it’s hard to track the response of a person you gave a free reward to. Did they come to your business again? Do they spend more at your business now? These questions are hard to answer. An alternative would be to use a punch card system and give the customer additional punches. This does two things. The first is that it increases the anticipation of a reward in your customer’s mind. Secondly, it increases your customer’s investment in your business by pushing them closer to a goal.

Conclusion

You may have noticed that there was a theme when we talked about the tools that weren’t great investments for growing your business. Data, more precisely, the lack of data is what makes these tools unsuitable for small businesses. As we go on this journey of growing your business, data will play a huge role in the decision making process. We want to have all the facts when making decisions, especially when it comes to monetary investments. To do this, we need to answer some tough questions about our businesses. In the next article, we’ll pose some questions that will force us to think hard. The goal will be to have a better understanding of our businesses and use the tools we currently have to learn about customers and their patterns. Once we do this we can confidently take calculated risks and measure the outcome of our decisions.