So how can being a skinflint on your marketing cost you money?

Because everything in business comes with an opportunity cost. In business, finance, and economics, "opportunity cost" is "the loss of potential gain from other alternatives when one alternative is chosen."

For example, going to college has an opportunity cost, which is the income you'd lose while attending school full-time for four or five years. Certainly, the increased earning potential and income after graduation would make up for it (if you chose the right major), but there's no denying that you'd be losing money while you attended school.

Likewise, skimping on your marketing comes with its own opportunity cost, but without the upside of increased profits later on down the road. Let me explain...

When I coach martial arts instructors and school owners, I often advise them to spend money hiring a professional web designer, graphic artist, videographer, etc. to create their marketing websites, ads, and videos. Often, the response I get is, "I can't afford to spend ______ dollars right now."

Now, I can definitely understand what it's like to start a business on a budget. Yet, what these school owners fail to understand is that it costs them more in lost business when they choose to DIY their marketing.

For example, as you probably know I build marketing websites* for martial art schools. Ironically, I started learning SEO, web design, and graphic design so I could update my own websites, without having to wait on my web designer to do it for me.

And after oh, 14 years or so, I've become fairly skilled at it. So, the average cost for me to design and build a website for a school owner, including writing their sales copy and doing the SEO on the site, runs around $1500 to $2000 (that's a one-time cost).

As you can imagine, I routinely hear school owners tell me, "I can't afford that." 

When I hear that response, every single time I'm thinking, "Seriously? I used to pay $1500 for a single direct mailing, and $1000 bucks for one display ad. One! How can you possibly tell me that you can't afford a one-time cost on a website that will bring you leads and students every single week for years to come?"

Of course, that logic makes sense to me, but it doesn't make much sense to a potential client who has been spoiled by the internet into thinking all marketing should be free. So, I'll explain to them why they should spend that money.

"Okay," I'll say. "Tell me how many leads you're getting from your current website."

They'll typically say "none" or "two to three a month." So, I'll point out that a decent marketing website should generate 15-20 leads a month. And, even at a measly 25% conversion rate, that represents four or five new students a month that they're not getting.

Then, I'll ask them how much each new student is worth. Usually the response is "oh, a few hundred dollars." 

"Really?" I'll say. "You mean your average student only sticks around for a month or two?"

"Oh, no," they'll respond. "Usually they stick around for six months or more."

"Okay, so that means your average lifetime value of a single student is six months times your monthly tuition. So, if you charge $150 bucks a month for tuition, then the LTV for each student is $900." Of course, that doesn't include equipment sales, testing fees, and other income, but I want to keep it simple so they get my point.

"So, four new students a month at a lifetime value of $900 a month equals $3,600 in lost revenue. Multiply that times 36 months (about the average interval that a business will request a site redesign) and it comes out to $129,600 in lost revenue for your dojo. Now tell me, how can you NOT afford to spend a measly two grand on your website?"

Usually, at this point they start asking about payment plans.

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Of course, I'm not trying to bust on anyone for wanting to save money. But, I do want you to realize what it costs you when you don't get a professional to design your marketing.

But beyond lost income, there's another cost associated with doing your own marketing that I'm going to talk about tomorrow. Keep an eye out for it, because you're going to want to read that email.