This is what will make or break your business. Get this right and the world is your oyster. Get it wrong and you will never make your business a roaring success. I know from experience, as I will explain.

How newly acquired marketing skills turned me from failure into an overnight success.

In January 1995, I placed a small advert in a local free ad paper that cost me a few dollars. It brought in about $48 worth of business and I was charging $14 per hour - way too little. As a result of this small test, I concluded it was not worth pursuing, as there wasn’t enough money in it. How wrong I was.

At that stage, I didn’t know how to word my advert and I had no understanding of a very important concept: the lifetime value of a client.

Later that year, I wanted to get into the mail-order business and so I studied marketing. Then in January 1996, just to try and give me some immediate income, I tried advertising for computer training again. I reasoned that there are many people who need tuition after having bought a computer for Christmas.

You must remember that at this stage I was desperate for money and needed cash badly. I was in real danger of going under financially.

The difference in my approach to advertising this time around was like night and day. I knew far more about what makes an advert successful.

The result? A measly $3.58 this time around gave $128 worth of business in the first week. Then I increased my advertising spend and my income increased again. Within no time at all I was earning a very healthy wage doing what I enjoyed and with no boss to answer to. I had cracked it.

The top 4 choices for advertising your services

Let me share with you the secrets that made all the difference in the world.

Classifieds
Classified ads are what launched my career and they remain an excellent method of generating business. They are cheap and cost effective.

The key to generating business this way is to place enough adverts in different publications. This way you will get a large number of people reading your advert and hence a large number of enquiries.

So you can see, classified adverts are cheap, low-risk yet an extremely effective way of building your business. In very little time, I went from no business whatsoever to nearly 70 hours a week using classified ads!

Not everyone wants to work 70 hours a week and I certainly don’t. But it got me started and I was then able to restructure my business so that I could do less hour but still get paid handsomely.

Display
These types of adverts normally have a box around them. They tend to be larger and more expensive and generally I have avoided them because of cost. However, they may be effective so you may want to try them. Initially though, stick with the classifieds until you are snowed under with work. Then you can afford to test alternatives.

Yellow Pages
These adverts can be expensive so I do not recommend them when you first start. However, once established, Yellow Pages can give you a consistent source of business. When people go to the Yellow Pages they are normally hot buyers actively seeking your services.

This is different to classified and display advertising where someone may accidentally stumble across your ad and make a tentative enquiry.

If you have an advert in the Yellow Pages that works well, you can run it in editions in surrounding areas, chances are it will work just as well.

Website
This is one of the best value advertising opportunities around, but it takes a while before you get a steady flow of visitors to your website. The benefits of websites include:
• Low cost
• Low risk
• You can compete with much larger companies

You can get your website hosted for as little as $10 per month, regardless of the number of visitors. This low cost means you have little risk by spending money on something that may or may not work. Compare this with a mailshot that could run into hundreds of dollars yet may not produce any sales.

If created with professionalism, your website can make you look much larger than you actually are. My companies’ site is often mistaken for one of Microsoft’s and consequently we get all sorts of enquiries unrelated to what we actually do.

We had the following email sent once:

“I wish to thank Bill Gates and his staff for allowing a 71 year old lady to enjoy a super time on my new webtv, which my children got me for Xmas. I am still in the process of learning about it. I am on a fixed income but this has made my days shorter. Thanks again. xxxxx xxxxxx”

Very funny!

Your first choice for instant results and instant cashflow

Start with the classified ads. They are the cheapest and they pose the least risk when starting out. They can generate instant revenue because often you will be dealing with home users. They normally pay by cheque or cash, bringing you instant cashflow.

When you tackle the business market, you are mostly paid one month after your invoice falls on their desk. This could be crippling when first starting out. Get some cash in the bank and some experience under your collar.

With classified ads being so inexpensive, you can afford to take a small gamble. You only need one appointment to cover the cost of your advertising. If they become a regular client, your fees will more than cover your whole advertising budget for an entire year!
Your second choice for high profit returns and top credibility

Next, experiment with some display advertising. Always try to negotiate a discount if you can and start small. Don’t go mad and buy a whole page, or even a half page of advertising. Go for something small, just slightly larger than your classified ads. If that pulls well for a couple of weeks, bump up the size again. Do it in small stages unless your response is so good that it’s a sure-fire winner. This rarely happens though.

Display ads are more likely to attract business customers than a classified ad. A display ad makes you look more like a business than a classified ad, which can make you look like a part-time computer boffin. Don’t let this put you off using classified ads though. Judge by the type of clients that you are getting and whether they are bringing in revenue to help you get off the ground.

Yellow Page ads should be delayed until you are sure you can sustain your business with your existing clients and other advertising. The cost of a Yellow Page ad is high because its like having a display ad for 12 consecutive months. This obviously bumps the price up. I recommend steering clear of Yellow Page until you have 6 months experience.

Websites are a special case in that you can start them at any time with minimal risk. Get your website up in the fastest possible time, but the results will start to filter through a little later once the search engines have indexed your pages.

My first winning advert that doubled, tripled, quadrupled my income

The first advert that kicked off this whole shebang was as follows:

COMPUTER TUITION available for home users. Learn Windows, Word, Excel and more. For details call 0181 666555.

I ran the same ad for ages, with small variations here and there as I updated my skills and could offer more to my clients. It cost next to nothing but I ended up getting up to 20 times the return on my money. In other words, for every $5 spent on advertising, I would get $100 back in revenue. This return would come back to me within a month.

I have clients who have been with me for over 4 years who keep on using me for computer consultancy – and these were from little classified ads like the one above.

For example, I have one client who has spent over $30,000 on my services over the last 4 years and I got them from a tiny $5 classified ad. I make that 3,800 times the cost of my ad. Not bad!

Even half that would more than cover all the money I have ever spent on my classified ads, display ads, Yellow Pages ads and website costs over the last 4 years!!! And how much longer will they be paying me my high fees for my services?

You only need one good client to more than cover all your advertising costs.

How to calculate which advertising source is best value for money

There are two approaches to this:

Approach #1: The cost of the advert relative to the circulation (or readership) figures.
This method is good when you haven’t advertised with a publication before or when you are first starting out and you want to estimate which publication is going to bring you the best return on your money.

Let’s say Publication A has a circulation of 100,000 and the cost of a 15 word advert is $6. This means that the advert cost is $6/100 = $0.06 for every 1,000 circulation.

Publication B has a circulation of 250,000 but the cost of a 15 word advert is $12. This means that the advert cost is $12/250 = $0.048 for every 1,000 circulation.

My conclusion from this would be that Publication B is the better value for money as the cost per 1,000 is lower. Therefore, when first starting out I would tend to choose Publication B over Publication A. Or when looking for addition areas to advertise, I would compare their cost per 1,000 circulation with my existing Publications cost and see if they are similar. If they are vastly more expensive per 1,000 I may be much more cautious over whether to advertise with them or not.

Approach #2: The results from each ad relative to their cost.
This method is the best once your ad is out there because it is based on real life and not guestimates based on circulation figures.

Here, you would advertise and then monitor the response from each enquiry. You would track which clients you got from which advert, how much you have spent on advertising in that publication and how much revenue these clients have produced.

Next, you would work out how much revenue each advert generated for every $1 spent on advertising in that publication.

For example, Publication A has brought in $1,000 in revenue from 5 clients and the advertising spend cost $90. Therefore, for every $1 you spend you have generated $11.11 in revenue.

Publication B has brought in $2,500 in revenue from 8 clients and the advertising spend cost $120. Therefore, for every $1 you spend on advertising you have generated $20.83 in revenue.

Clearly, Publication B appears – at least at the outset – to be better value for money.

Be careful that your figures are not being distorted by repeat business. In other words, you may have had one ad running much longer than the other and has therefore had time to have the inevitable repeat business building up the revenue figures. Perhaps you would want to just compare the first month’s results for each Publication to make the comparison fair.

How to identify your advertising winners

After placing your adverts and getting some business, it is wise to check how successful your advert has been. The key factor here is how much business you generate from every dollar spent on advertising. Let’s take the example of Publication B above. Your $120 of advertising brings in $2,500 worth of business. The calculation of the return on your money is easy.

Use the following formula:

Return on $1 advertising spend = Total advert revenue/Advert cost Therefore, our example indicates that for every pound spent on advertising in Publication B you receive $2,500/$120 = $20.83 in business.

As a rule of thumb, if you can bring in more than 2 – 3 times your initial outlay within 1 month of advertising, you have a winner. For example, if you spend $10 on an advert that brings in $20 in revenue within one month, this advert is worth running.

The reason it is a winner is that you will get repeat business long after when the advert was placed. This will then be all profit.

Rolling out big when you hit a winner – how to do it without risking your shirt

When you get a winning advert, role out big. Triple the number of magazines or papers where you advertise. Leave it a couple of weeks to check that the extra revenue generated is covering your extra advertising cost and that its not a freak result. If it remains successful, triple your advertising again. Keep doing this until you are fully booked.

If you start to run out of local areas to advertise, look at the surrounding areas if they are close enough. You don’t want to end up travelling miles if you can help it because you’ll eat up your time in a non-productive travelling. In other words, you can’t bill. Travelling some distance is not so much of a problem if you can charge extra high fees because it’s worth it. You may like to charge them for your travel and accommodation expenses too.

Another way to roll out big is to increase the size of your display or classified ad. The larger the ad, the larger the response (on average). However, doubling the ad size will not necessarily double your response. You have to test, test, test to see what happens. Commonly, if you have a display ad taking up half a page, the response from a full-page ad may be just an extra 50% and not an extra 100%.

Also, consider placing more ads in the same publications. Let’s say you had the following ad in the computer section of your local paper:

COMPUTER TUITION available for home users. Learn Windows, Word, Excel and more. For details call 0181 666555.

You could also create the following ads for the same section in the same paper:

COMPUTER HELP for local businesses. Get staff trained onsite at competitive rates. Learn MS Office, Internet and more. Call 0181 666555.

TECHNICAL SUPPORT available on your computer related problems. Fast response guaranteed. Call 0181 666555.

WEBSITES CREATED at rock bottom prices. Check out www.yoursite.com for sample of our work. Call 0181 666555.

NETWORK SPECIALISTS ready to sort out your network problems or get you up and running. Fast response. Call 0181 666555.

When readers are scanning though the classified (or display) ads, they will often just glance at the headlines (CAPITALS) to see if the advert is relevant to them. By covering many topics, you improve your chances of your ad being read and replied to. Also, each ad makes you look as if you are a specialist in that area. Don’t worry if they read your other ads as well. They may think you have different departments within your company that deals with each different area.

Warning: Do not advertise everywhere immediately after getting a good advert reponse because sometimes it is a freak result. Your ad then may not pull for the next 12 times you run that ad. The ad cost then swamps all your profits. It could have been a dog after all but you were misled by the freak response when you first placed that ad.

Always look at the averages over time and ignore major aberrations that will occur from time to time.

Your 5 step action plan for when you first start out

Your suggested action plan:
1. Go to your newsagent and buy all the local papers in your area
2. Get the circulation figures and advert cost for each paper
3. Calculate the cost per 1,000 circulation for each paper
4. Place adverts in the cheapest cost per 1,000 circulation initially
5. Go from one advert to 3 to 9 and so on. ie. Triple your advertising spend each week to get you started. Only triple your advertising spend each week if your advert is generating enough replies. Don’t blindly throw money down the drain but do give it a fair enough shot to pay for itself. You only need one client who spends 10 hours training with you and this would generate enough revenue to pay for 30 or more classified ads.

Slashing advertising costs using these 3 simple words

At all times try to get a discount on your advertising. If you get these costs down you can advertise more for the same money, get more clients and grow faster. Paying full rate makes this more difficult.

When you phone enquiring about advertising in their publication, make out that you know what you are doing. They will sense your lack of experience if you give them the first opportunity. Then you are unlikely to get a discount.

Say something like this:

You: “Good morning, I’m making an initial enquiry about advertising in The Local Rag. Tell me, what discounts can you offer for distress space ads?”

Them: “Uh? What do you mean by distress space.”

You: “Distress space is where you have unfilled advertising space which goes to waste. Many publications offer these at a discount just before the advert placement deadline. We only normally buy distress space “

Them: “Er, OK. Let me see what I can do… <long pause> … we don’t offer that but we could give you a 20% discount if you place the advert for 4 weeks.”

You: “Can I get back to you on that one? We normally only ever deal with a company on a distress space basis.”

Them: “Let me have a word with my boss and see if we can do something on that basis.”

Let’s analyse our conversation for a minute.

You: “Good morning, I’m making an initial enquiry about advertising in The Local Rag. Tell me, what discounts can you offer for distress space ads?”

You state your enquiry is only “initial” and therefore tentative. They want to make a sale but you are not sounding exactly desperate to advertise with them.

You are obviously looking for (and expecting) a discounted rate so their expectation that you will pay their full rate has been changed.

You mention “distress space” which half the advertising sales staff have never heard of. This makes them feel less like an expert and gives them the impression that you know more than they do.

Them: “Uh? What do you mean by distress space.”

They’re feeling less certain of themselves at the moment.

You: “Distress space is where you have unfilled advertising space which goes to waste. Many publications offer these at a discount just before the advert placement deadline. We only normally buy distress space“

There you go – you know what you are talking about. And you are making it clear that you want distress space at distress space rates.

Them: “Er, OK. Let me see what I can do… <long pause> … we don’t offer that but we could give you a 20% discount if you place the advert for 4 weeks.”

They are trying to improve the deal for themselves by getting you to commit to a larger order. Even so, you’re starting to get a discount anyway so it’s a good fallback position.

You: “Can I get back to you on that one? We normally only ever deal with a company on a distress space basis.”

You are threatening to end the call and a potential sale unless you get a discount.

Them: “Let me have a word with my boss and see if we can do something on that basis.”

They don’t want to lose a sale if they can help it. It depends on how motivated the staff member is. If they are on commission then expect them to keep you on the phone. If not, then they probably don’t give a damn and you won’t get a discount from them. Whatever happens, always be business like and courteous. Make enemies here and you will never get a discount.

Just in case you are wondering, distress space does exist but not every paper or magazine offers it. Also, it is used for display advertising and not classified ads.

What I’m trying to emphasis is you must do your best to get discounted advertising.

How much should I spend on advertising each month?

I used to budget around $400 per month, which covers my classified and Yellow Pages adverts. Yellow Pages charged me about $80 per month for my ad.

Your situation will be different to mine as you may have more or less competition than me. But the above figures will give you an idea of what I’ve been spending. Although it may seem a lot, just consider the business that you are bringing in. A typical month may earn you $4,000 most of which will be profit.

Over time I started to cut back on my advertising because I was getting more and more repeat business from existing clients. I ended up with more in my pocket and less expenses but it took me a little time to get there.

Here’s what you can earn and how long it takes to get it

Everyone’s results will differ but I’ll show you how I did. This will show you what might be possible for you too.

Turning every $1 into $20

As I have said earlier, every dollar I spent on advertising brought in about $20 in business. However, as time went on and my prices increased this figure fell. Don’t be over concerned about this as it is to be expected.

While you get fewer customers from each advert, you will receive a higher hourly rate, which helps compensate. To still give yourself a full diary you just place more adverts. The advert cost is so cheap that you can place them everywhere and still make a decent profit.

If you are getting more than $2 to $3 for each dollar you spend on ads then you’re doing fine. Keep ploughing your money into ads and you will get more business than you can handle.

My advertising results when I first started

First month
In January 1996, I earn’t close on $800. Remember that I had one advert out that didn’t appear until 10 days or so into the month.

Second month
In February 1996, my monthly take was approaching $4,000 -not bad from a standing start!

12 months later
After 12 months, I had some weeks where I was earning over $1,600 pw. I worked for approximately 42 hours averaging $40 per hour. What a contrast to the pittance I was earning the previous year as a mortgage broker, where in 1995 my income was less than $6,500.

4 years later
Well, what can I say. My pricing is totally different nowadays. I charge by the project and I charge by the day whenever possible.

Typically, my software development work is at $720 per day + expenses. My training is $640 per day for the first delegate and $80 per additional delegate per day. Web marketing consultancy is $128 per hour.

When you “come of age” and get some maturity in your skills and knowledge, you realise you can pretty much charge what you like. I am forever revising my pricing upwards and changing my attitude towards what I can charge. No doubt soon I will reach a ceiling on what the market can bear but believe me when I say the main mistake people make is not charging enough.

A lot of the time people perceive your skill level by what you charge. The higher the charge the higher the perceived skill. Also, the more you charge the more respect your client gives you as a consultant. You are no longer the office lackey but a skilled consultant who’s time is highly valued.

The mindset of someone who has been running a computer consultancy for some 5 months goes like this:

“I’ll slowly increase my charge but not too fast otherwise I will lose a lot of business and I need that business for immediate cash flow and revenue.”

Rubbish. Just charge a rate just below your market average if you have 5 months experience. After 5 months I was charging a pitiful $32 per hour, sometimes $40. With hindsight, it was way too low. Had I known then what I know now, I would have charged $48 to $65 per hour for my area of expertise. This ignorance and poorly conceived mindset cost me dearly. I ended up working longer hours for less pay. What an idiot I was!
What I intend to do in the future (and you can too!)
The future is looking good. My rates will go up again soon and I will try to be much more selective in the work I take on. Then I’ll have time to devote more attention to my best high fee-producing clients. The 80/20 rule often works here with 20% of your clients giving 80% of the business.

Additionally, I aim to include more “packaged” deals for clients where I offer add-ons for an additional fee. For example, if I offer to create a database system for a company costing $8,000, I will also offer them the following:

System written documentation: 5% of project cost = $320
One year support contract: 15% of project cost = $1,200
Video tutorials of system: 5% of project cost = $320 (using something like Hypercam (www.hypercam.com)

As you can see, add-ons can seriously bump up the amount of business from one client. And for those who want rock-bottom price you can exclude the add-ons.

The direction in which I can steer my business is practically endless. I can aim for the most lucrative course of action or stay with a market I feel comfortable with. When you own your own business, It is YOU who controls the rudder and not some boss who’s been telling you what to do.

There is obviously a lot of money to be made on the Internet and this is where I am now devoting a lot of my attention. My consultancy is still continuing but I’m seeking opportunities on the net that may give me a freer or more lucrative lifestyle.

Ideally, I’d like to generate passive incomes by creating products to sell on the net. That way I don’t have to turn up for work each day to earn a living!