When I speak about marketing I have a pretty simple definition. Marketing is anything that a company does, intentionally, to create leads to give to the sales department, whose job is to convert those leads into work for the company.

Included in marketing are both free public relations and paid advertising.

There are many things a company can do to get exposure outside of paid advertisements. These things include supporting events, sports teams, bands, or charitable causes. In fact, any public relation focus will work. Causing print, radio or television to focus on the company as part of a human interest story or an announcement concerning a newsworthy event regarding the company will work.

Paid advertising not only includes commercials on television and radio or paid print advertisements but also signage on trucks, uniforms, letterhead and information on hold.

The assets any company directs toward marketing are, of necessity, limited. While it is normal for a retail focused company to spend 8% or more of their gross revenue on marketing efforts, the service industry traditionally spends much less than half of that amount or, less that 4% of gross revenue.

In many service companies with whom I have worked it is not unusual to see 2% or even 1.5% as a marketing budget.

To make certain your marketing efforts are a good use of your money you need to track your current budget (to be sure you don’t overspend) and analyze the effectiveness of each marketing strategy.

A good way to track marketing effectiveness is to create a system which counts the number of:

1. Leads – This should include any and all types of quality from –hot to not.
2. Prospects – Includes where there is a presentation and a decision to buy is offered.
3. Sold prospects – Work is performed and the company has been paid.
4. Unsold leads –
   1. Those who purchased elsewhere and why.
   2. Those who have not yet purchased and why.
   3. Unsold prospects.

Those categories of leads should have the lead source or sources also listed.

You may find that a particular marketing effort may create a large number of leads but very few prospects and almost no sold prospects. Some believe that big display ads in the yellow pages are in the front of this category.

The final element that is needed to make measuring marketing effective is a consistent program of analysis.

At a minimum, quarterly marketing review meetings should be held where members of the team can confirm the wise decision of budged allocation or the need to change the way the company goes to market.

Next – Tracking sales

We started this series with a general introduction regarding the importance of counting in your business and focused on the first area… office support

This time let’s focus on the Counting of Money.

A most valuable tool is the Profit and Loss statement. Based on a useful myth the P & L pretends that two things are true.

1. All money owed to the company has been collected.
2. All money owed by the company has been paid.

In that regard, P & L’s are never completely correct. However, they are very useful tools because they can determine.

1. Revenue status, often, divided by profit centers.
2. Cost of sales expense, often, divided by profit centers.
3. General overhead, costs that cannot be allocated to specific jobs or sales activities.

Revenue minus Cost Of Sale equals the Gross Margin and tells us if the fee we charge for the work we do is enough. It is also a strong indicator of company productivity and when accompanied by percentage indicators (all off of total revenue) can quickly tell us the areas to focus on for positive change.

Gross Margin minus General Overhead costs indicates Net Profit and Net Profit is the money we use to pay expenses on the Balance Sheet.

A word about attitudes toward profit: It used to be that owners viewed profit as “the money the government taxed”. It was the advice of many accountants to manipulate the figures to show a loss and therefore avoid taxes. The problem with that old view and practice is that those who do so find it difficult to get lines of credit from banks or suppliers. Perhaps most importantly there is no clear focus on the real measure of the company’s success or failure to perform.

I am constantly amazed how many small to medium businesses do not have timely monthly P & L’s. To a lesser degree, how many companies with monthly P & L’s do not review them with the management team on a consistent basis.

How can you see where the rocks or open seas are if you don’t check your position?

Other financial measurement tools of important value are:

• Accounts Receivable Ageing Report – Who owes you money and for the longest time.
• Accounts Payable Ageing Report – Who do you owe and for how long?
• Cash flow projections– When is money coming in and when will it be going out?
• Balance sheet – What is the Changing Status of long-term debt, receivables, payables and inventory?
• Job Costing – What is the gross margin dollar and percentage amount of the most recent work we have done?

Timeliness, Accuracy and Active Review of the financial status of your company are among the most important counting you can do.

Next – Measuring Marketing