Any business has the potential to face a financial emergency. You might be dealing with a cash shortfall after struggling with a few months of declining sales. You might be in a tight spot after dealing with a major expense, like the breakdown of a key piece of equipment. Or you might face a disruption in your business that prevents you from operating as efficiently as you normally do.
Obviously, the best approach is to instill good financial habits so this doesn’t happen in the future, but when you’re up against the wall, you may need to start making cuts; otherwise, you’ll burn through your cash reserves and end up on a long list of failed businesses. Ordinarily, many entrepreneurs look to marketing and advertising as the first areas to cut—but is this a wise decision?
Why Marketing Is on the Chopping Block
It’s easy to see why marketing is the first department on the chopping block. Marketing and advertising exist above and beyond your “core” business—it’s not involved with creating or producing goods, nor is it involved with active customer management or internal logistics. Therefore, it’s often seen as superfluous, or the icing on your business’s cake. CEOs don’t see a problem with cutting back the budget temporarily, because they can always ramp the budget back up when things return to normal.
The Downsides
However, this interpretation overlooks some of the most important elements of marketing and advertising. Namely:
- Marketing gets you more business. Marketing and advertising are designed to win you more customers. If you shut down this wing of your business, you’ll be turning off a stream of new customer acquisitions, and therefore a stream of revenue that could help you turn your business around. It’s like shutting off the water to your house to save money.
- Consistency is vital for success. Successful marketing campaigns are built on consistency. Customers need time to become familiar with your brand, and they need to see it consistently represented on a semi-frequent basis before they’ll buy from you. When you disrupt that consistency, you compromise the effectiveness of your overall campaign.
- (Good) marketing has a positive ROI. If your marketing campaigns are underperforming, that’s one thing, but well-executed marketing campaigns have a positive return on investment (ROI), meaning they bring in more money than they cost to manage. Forfeiting that opportunity is akin to sacrificing extra income.
What to Do Instead
So if you shouldn’t cut your marketing budget, what should you be doing instead?
- Get an emergency, business Depending on the nature of your cash emergency, consider getting a business loan. There are many types of loans to consider, and as long as you’re prepared with a plan to pay the loan back, it’s an easy way to get a cash injection without committing to a long-term crutch.
- Seek extra funding, or tap your lines of credit. That said, if your problem is likely to last more than a few months, or if you don’t have a good plan to pay a short-term loan back, you may need a more permanent, long-term solution. For example, you might need to reach out to your investors for some extra funding, or you might need to open a new line of credit you can tap into in the future.
- Trim and concentrate your marketing budget. You can also make some cuts to your marketing budget, as long as you do it with the right intentions. For example, Procter and Gamble once cut $200 million in digital ad spending, but it wasn’t to simply pare down costs—it was to improve the quality and focus of their advertising, and they ended up seeing ten times the ROI. Trim only the strategies that aren’t working, and pump the strategies that are.
- Work your accounts receivable. If you’re like most businesses, you have at least a few standing invoices waiting to get paid. Going after those invoices and getting more serious about your collections may be able to give you enough cash to keep going.
- Outsource some of your work. If you value your employees, you may not like the idea of taking some of them down to part-time temporarily, or outsourcing some of their work, but it’s a way to cut overall costs without sacrificing an entire department.
- Hold a sale or special promotion. You could also incentivize more customer purchases by hosting a special sale or promotion. It may seem counter intuitive to lower your prices temporarily if your end goal is getting more money, but it will encourage more spending—and keep that revenue flowing.
It’s not unreasonable to trim down your marketing budget, but you shouldn’t eliminate your spending in this category entirely. If played correctly, you can use peripheral strategies to get through your cash shortage, then rely on your marketing and advertising strategies to reinvigorate your income—so you don’t have to go through this a second time.