Today, a story of one of the biggest mistakes I made in my early days in marketing…
… And a lesson learned, in hindsight — that would make me try to make the same mistake all the more often.
Before I started my own business, I worked in marketing at an IT training publisher based in Oregon.
As I’ve written before, it was my testing ground for my copywriting and direct marketing skills.
I was being paid to learn — and it turned out to be a really good investment on the part of the company.
But sometimes my ambitious nature rocked the boat a little more than everybody was comfortable with.
95% of the time (or more), I reported to the President of the company. He’d run the marketing department before me. He and I think very much the same way about marketing. And since he was in charge of most of the day-to-day operations, he and I were able to do most of the marketing without ever consulting the Owner.
It wasn’t until the President went out of town that I totally screwed things up!
I don’t remember why he was gone, but I know he was out of the office for a few days.
Fortuitously, the ad sales rep for a regional newsprint computer magazine called me up. They were shutting down operations. It’d been a good run. But they were going to press with their last issue within a couple days.
They had a little bit of remnant ad space they’d like to fill. And because they were in a bind, they offered a really good deal.
I do remember that it was $1,200 for the ad space. And I had to have the fully-written, fully-designed ad to them within the next couple days — before the President was going to be back in the office.
I took the deal to the Owner of our company. Who was much more compulsive in making decisions about these things than the President was.
He said “Yes!”
I turned around, and agreed to the space — on the condition that I could get the inside cover spot in the magazine.
And I dove in, excited about the opportunity to flex my chops and prove myself.
I decided I’d write an advertorial ad about our library training product…
I wrote what looked like an article. It was all about our comprehensive training solution. About what a good deal it was, to be able to get full access to our library of training for $1,200 for a full year. (Note: the same price as running the ad.)
Then, I transitioned into our offer. Call the sales department to get started.
The process went surprisingly smoothly.
I wrote the ad. Got the okay on the copy from the owner, with a few tweaks. Laid it out. And got the artwork in to the magazine, in time for it to go to press.
All of this, still while the President is out of the office.
When Mr. President came back Monday, I was in trouble!
One of his big roles — and an important one at that — was helping to manage the company Owner’s impulsiveness.
You see, the same “starter” attitude that gets a company off the ground from zero can cause real problems when you have a much more complex, running operation.
It takes a delicate balance to maintain your innovative, experimental, and “try it” nature while still making sure you’re not sending the company in a million different directions and ending up going nowhere.
This was one of those opportunities Mr. President would have told me to pass on, if he’d been there.
He was really frustrated.
And, I felt bad — because I liked him, and felt like I’d let him down!
We were already past the point of no return…
The ad had gone to press. We were on the hook for the $1,200.
It ran. And…
It made exactly one sale. $1,200 in revenue. For a $1,200 ad spend.
Break-even. And that was before the cost of fulfillment. Before the fixed costs of running the business. Before any expenses above and beyond running the ad.
By most standards, it was a failure.
It was a fun risk to take. But we didn’t come out ahead.
Or… Did we?
I didn’t have context at the time, but that should have been the beginning of a string of big wins…
At that time, I was under the common assumption that you need to make money on your first sale.
And when a business is just getting started, maybe you do — making a little bit of profit on each sale will keep you afloat.
But once a business is up and going — as ours was — you can actually create an advantage for yourself by being willing to acquire customers at break even, or even a little loss.
Let’s look at the math on that sale again.
Yes, we got $1,200 in revenue. On a $1,200 ad expense.
But that was a subscription product. With an approximately 85% renewal rate. So if we sold 20 of those, we’d likely sell 17 renewals the next year.
On average, every $1,200 sale would turn into another $1,020 revenue the next year. (And $816 the next, and $652.80 the next, and so on…)
This particular situation was unique. The magazine was folding. We would never get that same rate on that ad again.
But that magazine was folding because its circulation was too low to sustain it. And we still broke even on it. With the potential for significant profits in the coming years.
That test was actually a big success — even though we didn’t recognize it at the time…
At this point, that ad is simply a big “what if.” But let’s play that game.
What if we went to the various regional IT magazines, and ran a version of that ad in every one.
Some would probably perform similarly. We would get a bunch of new customers at break even. And increase our subscription and renewal base, to multiply our future profits.
Some would do better. We’d actually make a profit on customer acquisition. Plus even more profits when 85% renewed every year.
Others may not work. We could cut losses after the first couple tests, and focus on other media that performed.
We could also start testing the ad. We could try different variations, and maybe find one that performed twice as well. Or better.
We could try other IT publications. National magazines. Anything else our target market might read.
And then we could have re-purposed the ad for direct mail. Or maybe it would have worked online.
Even if each one performed at break even, we’d be building that subscriber base. And we’d be significantly increasing profits as soon as those renewals hit.
If we’d made a point of it, we could have put that ad in the hands of just about every IT professional in our market.
And by simply being willing to acquire new customers for this subscription product at break even, we could have rapidly expanded our subscriber base.
Unfortunately, we didn’t…
At that time, I didn’t understand this math. Nor its implications.
I didn’t understand that if you can acquire a customer at break even, you’re doing good — because you can make a ton of profit on the next sale, and the next sale.
I didn’t understand that the purpose of the first sale is to acquire a customer, NOT to make a profit.
And so I accepted the flawed belief that my “mistake” was actually a failure.
I might have been in the wrong by going over my boss, the President’s, head.
But the outcome — if I’d known then what I know now — was a breakthrough we never really realized.
These mistakes are remarkably common in businesses…
And in fact, one of my secret super powers (now!) is in helping uncover these breakthroughs and the hidden profit opportunities they represent. Then, leveraging them to create rapid, exponential growth.
If your business is currently doing at least $500,000 and you’d like me to help identify the opportunities you’re missing out on, shoot me an email at [email protected].
I’m looking for Beta Testers for a new program, where I help you identify and leverage these opportunities.
I’ll link you to an online application. You fill it out and submit it. If I think you’re a fit, we’ll schedule a quick, no-obligation call to discuss the program and how it might work for you.
It has the potential to be totally transformative. That client did end up going on to grow from $3MM to about $30MM, based on other things we got right in developing that subscription program. Other clients have seen $500,000 annual profit increases as a result from even just a 5-minute conversation.
Breakthroughs abound — if you know where to find them. I’ll show you where they’re hidden in your business!
Yours for bigger breakthroughs,
Roy Furr
