The common element shared by highly successful single-truck owners is that they use little, if any, advertising.
Their work comes from repeat customers and referrals.
The owners of these companies net more than $100,000 per year, while less successful owners tend to top out around $50,000.
Many owners don't recognize the way advertising limits their income.
Advertising includes everything from Google searches to Yellow Page ads, from Valpak coupons to pay-per-clicks.
When you look at your annual expenses, advertising costs may seem to be limited to $20,000. But this does not explain why the more successful owners make $50,000 more.
There are hidden costs in using advertising. These other expenses don't show up as a line item on your annual profit and loss statement, but they have a major effect on your income.
It is important to know if the money you spend on advertising is a good investment.
Buying customers
Advertising is essentially "buying customers". Is the money you spend helping you, or are you just throwing it away? Many owners can't answer this question because they don't carefully track their advertising results.
Some advertising makes you money, some doesn't.
If, for example, it costs $20 to get a customer who spends $250 for your services every year for the next 15 years, you got a great deal. On the other hand, if you pay $150 to get a one-time $100 job, you've lost money.
Companies often have a false sense of accomplishment because advertising keeps them busy cleaning.
They see a lot of money pass through their hands but they don't evaluate whether the work is profitable. At the end of the month, they wonder why they are still struggling to pay the bills.
Many owners justify what they are doing by convincing themselves that they are building a clientele when, in fact, there is little to support the idea that those customers will ever use their company again.
The hidden expense of discounts
It is common to offer discounts in ads.
The amount of income being given away in discounts is rarely included when calculating the true costs of advertising.
In many cases, these discounts can increase the cost of your advertising by 50-100 percent. How much have you given away in discounts to get new customers in the last year?
Unfortunately, these discounts also fall into the hands of past customers.
Customers who could have paid full retail for your service now pay a discounted rate. Use of these discounts by existing customers provide little benefit to you, and eat up your profit.
Forced pricing
Advertising also forces you to keep your prices low. Consumers that use advertising have many companies from which to choose. Price is often the determining factor when they choose which company to use.
If you raise your prices, the effectiveness of your advertising will drop. Your prices will be severely lowered when you are focused on getting the most for your advertising dollar.
Your existing customers probably would not have a problem accepting a 10 percent price increase, but you cannot make that the change if it means you will lose your competitive pricing needed for advertising.
Now you've locked yourself into charging lower prices and sacrificed thousands of dollars your existing customers would have paid.
The cost for those 'who got away'
You will not close the sale on every consumer that calls from an ad; yet, you use time and resources to field the calls and give quotes on this work you don't get.
There are still expenses related to dealing with these consumers.
The close ratio for customers you get from repeats, referrals and networking is generally near 100 percent.
The close ratio for customers obtained from advertising is dramatically less.
These costs should also be included when calculating the total cost of advertising.
The total expenses add up
When all of these costs are taken into account, advertising is far more expensive than it first seems.
When you add up the cost of running the ad, discounts given to new customers, lost profits from discounts used by existing clients, charging lower prices for all customers and the expense for dealing with consumers you never closed, you realize advertising steals a major portion of your profits.
Are the customers you get from advertising worth this price?
As an owner/operator, you only have so much time. Therefore, you need to make as much as you can per hour.
Dependence on advertising reduces what you earn.
Many owners fail to see that if they eliminated the costs of advertising, their business would be significantly more profitable.
There are four ways to get work:
1. Networking
2. Referrals
3. Repeat customers
4. Advertising.
Advertising is usually everyone's fallback plan because it looks like the easiest way to get work.
Realizing the true costs associated with advertising should make you reconsider if this "easy" option is really worth the price.
You can reach higher levels of success as a single-truck business. You can keep more of the money you earn. To do this, you need to reduce your dependence on advertising.
Shift your focus from advertising and spend more of your time and energy networking and getting repeat and referral customers. These are more profitable ways to get work. This is how highly successful companies have done it.
Steve Marsh is the creator of the Be Competition Free Marketing Program. He is a 30-year veteran of the carpet cleaning industry, an
IICRC-approved instructor and a Senior Carpet Inspector. Marsh is a marketing and business consultant who provides a turn-key program for attracting better customers. For more information, log on to w
