Originally Posted by NRGCREATOR
Thanks for the reply. I'm not sure if the sustainable growth formula will work for us in that we don't have shares or stock holders or a payout ratio. the only type of payout would be the owners draw. Am i missing something?
Our market is not necessarily saturated, but we do have very fierce competition that has much more money for advertising and such than we do. We also have a very specific and small market, so the shares are limited. We are extremely competitive in our pricing. I feel we have used all creative and out side of the box thinking in the past 6 months, and have implemented those ideas, which have increased sales, I'm just not sure how much longer this sort of thinking can sustain any sort of growth rate without at least some funds to implement other ideas and tasks that demand some sort of funding, like marketing, SEO, updating website and so on. Any additional thoughts is again appreciated!
Some owners pay themselves in stock - as opposed to payroll for tax reasons. If not, the payout ratio is 0. It will still tell you your ability to grow without outside investment. This is important, as it sets a ceiling to what you can do without further investment - regardless of advertising success.
Likewise, your old advertising budget SHOULD have been bringing in a certain amount of business. If your advertising budget was working for you, dropping it should quickly reflect in your numbers. But very few companies have actually measured what advertising returns what - and therefore know what provides their biggest returns. Dropping it should give you an idea of how effective you have been- if you are still growing - maybe that money wasn't being well spent and you could acknowledge that to the boss - give him some options to do some limited testing of other approaches and see if their returns justify a bigger investment. You might find that free promotions/publications/lectures return more - revenue per dollar spent. But you have to measure results and use those results to justify spending more.
But I have been in many failing companies that had convinced themselves they had done all the creative thinking they could. When in fact, it is hard to scratch the surface of all the possibilities. Fresh eyes can usually walk in, and within hours, find 6-10% profit - and many ways to increase revenue.
If your SEO is that bad, does anyone internally know enough to add keywords to your site? May not be perfect, but paying for it doesn't ensure perfect either.
The budget being cut SHOULD tell you and your boss a great deal about what is happening and give you an OPPORTUNITY to demand a higher return from your efforts/money in the future. And if you have measured returns of advertising, it should be no problem to present a cost/benefit analysis that shows him what he is losing.
I suggest you take the opportunity to find the cost/benefit - and when you come up an unarguable one - present it to him and you'll be surprised at the mountains that will get moved when you suggest spending 1 dollar returns 10. I also suspect you'll be surprised at how effective some free promotions/publications and such are. Likewise, I suspect you'll also be surprised how inneffective some those ads are we paid the most for and are most proud of. Measuring results is very enlightening.
You can spend a great deal of time debating the "fairness" - but life isn't fair. Or, you can see it as THE REAL OPPORTUNITY it is to find the REAL revenue drivers - the real cost/benefit and take your company and your career to whole new levels!
Find this answer and I suspect your future comp plans will be much more rewarding.
McDonalds wouldn't have found the "value meal's" huge increase to their overall profit even though it reduced the profit on the individual fry/drink if they hadn't tried it - measured it - optimized it. So, I suggest you use this opportunity to - try it - measure it - optimize it. When you come up with a formula that works, the boss will listen! Good luck!