Have a read on how one small business owner took the reigns and reexamined his results, fine tuned his companys performance and made substantial sales gains.
Over the last few years, I have made a conscious effort to find ways to get advice from other business owners. Writing this blog was the first thing I did, and I have found the feedback from commenters to be valuable. This year, in an effort to find a more focused set of advisers, I joined a Vistage business group. We meet once a month, and a portion of each meeting is devoted to analysis of business issues that each member presents. When a member of the group presents a problem, the other owners listen, ask questions and then suggest solutions.
Through the spring, I kept the group updated as my sales collapsed, and in May (as I explained in Thursday’s post), I told everyone that I felt like a victim of a bad economy. The thing was, nobody else in the business group was having such a hard time. Many of them felt the economy could be better but that conditions were still favorable. I seemed to be the only one who was suffering and the only one who thought that the problem was out of my control. One of the members told me bluntly: “I don’t want to hear any more about the Euro or health care or whatever excuses you come up with. This is YOUR problem, and YOU have to solve it.”
Excellent advice. Complaining hadn’t helped, upping my ad budget hadn’t worked, so I had to keep trying things until we either recovered or went under. But if it wasn’t an outside problem, then what could it be? It had to be something about my marketing, and that meant the problem was in AdWords. Once I decided the problem had to be there, I started looking at the data again to try to find a solution. But this time I approached my analysis with the conviction that the problem was something I had done — not something that was beyond my control.
I went back to the basic problem: no more calls from bosses looking to spend their own money. Where had they gone? Looking at the data again, I spotted a pattern that I had overlooked. After I had introduced those modular tables, we started getting more calls for them from schools and non-profits, most likely driven by our Modular Table ad group. These calls tended to come in the morning or middle of the day. Unfortunately, neither schools nor non-profits have much money, so these inquiries weren’t generating much revenue.
Bosses, who actually have decent budgets, tend to call late in the day, after completing all of their pressing tasks. Although I didn’t have a way to prove this, I believed that our calls from bosses were driven by our Boardroom Table and Custom Conference Table ad groups. These two groups have relatively low traffic, but they get high click-through rates and generate a high proportion of e-mail submissions. I started tracking to see whether the ads in these groups were appearing throughout the day, and sure enough, by about 2 p.m., they had stopped running.
The daily budget hadn’t been exhausted, but Google was only showing the ads that got the most impressions and the most clicks — even though their click-through rate was much lower than some of my other ad groups. All other ads were being shut off, so that more money could be devoted to the ads with the most traffic. This approach maximizes Google’s revenue. If the impressions are huge, it doesn’t matter to Google if the click-through rate is low — even though the minuscule rate is an indication that there is little real interest in the product.
In other words, my budget was being wasted. It was putting ads in front of people who weren’t as interested in our products and couldn’t really afford them. But because the number of people searching was so high, the total number of clicks generated far outstripped the traffic from my more focused ad groups. Google’s algorithm saw the total number of clicks generated as evidence of success, regardless of whether we closed any business. By all of its own metrics, the AdWords campaign was a home run. I had received lots of impressions and bought lots of clicks. The only problem was that these apparently were the wrong clicks.
So now I revised my theory about why my sales had tanked. I started telling myself a new story — not that the economy was collapsing but that my AdWords spending was going to the wrong people. And I put in place a revised campaign with a very different structure. In order to keep running the ads that I most wanted running, I had to stop the other ads from draining their budget.
Fortunately, there’s a simple fix for this. You can fragment the big campaign into several smaller campaigns, and you can give each campaign its own budget. I separated the Modular Table group and a couple of other high-impression, high-click, low-click-rate ad groups into a campaign I called the “Vacuum Group” — because it had sucked the life out of the other groups — and I limited its budget. I also broke out Boardroom Tables into its own campaign and increased its budget. And the rest stayed in the Long Tail group with a third budget. The total of all of the budgets was still $600, but they could no longer affect each other.
Wouldn’t it be lovely if, after you make a strategic adjustment in your business, you could find out immediately whether it had a positive effect? Unfortunately, things don’t work that way. After I restructured my campaigns in late June, a period of weeks followed during which I had to force myself to leave my AdWords campaigns alone to see what would happen. The first week after the changes included the Fourth of July, and we got very few calls. But the following week saw a significant jump in the number of incoming calls, and for the first time in a month, there was a nice sprinkling of boss calls.
Through the years, there has been a pattern to our sales in the months when we have met our sales target. About a third of our customers place an order relatively quickly after calling, within a month. Another third take longer, from one to three months. And another third can take anywhere from three months to a year. So when our pipeline quality deteriorated, the jobs that disappeared were from the first two groups. But then, when my new campaign started driving better leads to us, it still took a while for us to catch up with that slower moving third group and get our total sales back where they needed to be.
In July, our sales were $144,893 — not awful but not where I wanted them to be. At last, in August, we got back to our target, closing $200,607 in new orders. September was also strong: $220,361. And in October, we hit our target in the first three days of the month. Those jobs included a number of orders from large corporations that had delayed their spending until the end of their fiscal year.
So now I have some breathing room. My cash is still way behind where it was at the beginning of the year, but if sales stay strong I should recover before the year ends. I think my problem is fixed. That’s the story I’m telling myself, anyway.
Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside Philadelphia.