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Don't know how to invest money in business to make more money


#1

Andrey made a comment on the ‘Take them to Hooters’ episode about how he doesn’t know how to put money into his business and get more out (I don’t remember the quote exactly). I am the same way. I broke the $1000 a month revenue level in the Autumn and should soon pass the $1500 level. I have no clue how to spend money on the business and get more out.

Do others have this problem? I guess the high cost of Adwords is a contributor to this. But I suppose, if it was just as simple as ‘put more money in and you get more out’… then the bigger companies with deep pockets would dominate even more.


#2

Create some experiments. Make sure you can track results and see what works.

Adwords is one thing, you can also advertise on specific websites (via BuySellAds etc.), offer some sort of incentive based scheme to customers for recommending you, try Twitter, Facebook or Linked In ads.

The key is to do each experiment for long enough that you see conversions and that you have a way to track conversions and compare which source of traffic works out best for you.


#3

I agree with @rachelandrew here. What provides a positive return on investment (e.g. “Prints Money”) for one company/product may not do well at all for the next. With varying unique value propositions, target audiences, competitive landscapes, etc. there is a lot that goes into why something might work out well for one company but not another. The only way to truly know what will be the magic system for your company is to try a variety, with an emphasis on measuring results.

Another key trap to avoid is measuring the wrong results. For example, some people might measure signups as their metric for what works, but perhaps instead they should focus on signups that last more than 2 months. For example, which campaign sounds better:

Campaign A: Spent $1,000. Got 100 signups. Had 15 people still signed up after second month.
Campaign B: Spent $1,000. Got 50 signups. Had 40 people still signed up after second month.

Depending on what you were really tracking, the results take a different spin.


#4

Spending money to make money doesn’t have to mean advertising. You could choose to buy or subscribe to tools that will give you data about your visitors, your users, your sales funnel, etc. If there is enough data to work with you can use it to craft experiments aimed at increasing conversions or reducing churn or whatever else the data reveals.


#5

If your revenue is already on a good upwards trajectory, maybe you don’t need to invest money at all? Whatever you are doing, just keep doing it, but always improve…

I suspect that for young products, the best possible return comes not from advertising or other forms of marketing, but simply by relentlessly improving your product. Add that key feature, improve the first-time experience, fix that bug causing sporadic crashes.


#6

Lots of great comments here already :smiley:

It’s just a process:

  1. Plan an experiment (ad campaign, product improvement, tool purchases, whatever), calculate the ROI you’d get if it succeeds. Start with small experiments, and continue with bigger ones when you find out what works.

  2. If there’s a lot of money involved, make a small sensitivity analysis - just recalculate your scenario with slightly different figures to see which factors can break your plans. This way you’ll also find out the threshold for success, e.g. need to get at least 25 signups or you’ll lose money.

  3. Measure the results. Like @ryanbattles said, try to measure what matters.

  4. Repeat

Also keep your eyes open, like @SteveMcLeod said. Sometimes there are better investment instruments available that have lower risk and you may want to put at least part of your money there.

What you don’t want to do is to keep spending without a plan, especially if you are offering annual plans and have float in your P/L sheets.