MBA2381 Q&A Wednesday: Should I give my team a raise or invest in marketing?

Summary

The $100 MBA Show: MBA2381 Q&A Wednesday - Should I Give My Team a Raise or Invest in Marketing?

Release Date: October 25, 2023
Host: Omar Zenhom

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Introduction

In Episode MBA2381 of "The $100 MBA Show," host Omar Zenhom addresses a pressing dilemma faced by many business owners: Should I give my team a raise or invest in marketing? Drawing from over two decades of entrepreneurial experience, Omar provides actionable insights to help entrepreneurs navigate this critical decision.

Listener Question

Timestamp [01:41]:
Emery, a listener, reaches out with the following question:

"I made a bit of profit in my business and I'm looking to reinvest. Should I give a raise to my team members or should I spend the money on marketing? It's a bit of a tough one because marketing will help grow my business, but investing in my team and holding onto my great players will allow me to create a better experience for my customers. Would love your advice."

Analyzing the Dilemma

Omar begins by congratulating Emery on achieving profitability and being in a position to reinvest in the business. He acknowledges the common crossroads entrepreneurs face when deciding how to allocate limited funds for growth.

Timestamp [02:20]:
"First of all, Emery, congrats on making some profit and being in the position where you have a good problem to solve, where you have some money, where you want to reinvest in your business."

Marketing vs. Team Investment: Understanding the Differences

Omar delves into the fundamental differences between investing in marketing versus investing in the team:

1. Financial Commitment:

   • Marketing: Often variable and can be scaled up or down based on current needs. For example, running a $1,000 Facebook ad campaign today doesn't obligate you to continue spending the same amount indefinitely.
   • Team Raises: Constitutes a recurring financial commitment. A $100 raise per month per employee means a consistent financial obligation that persists as long as the raise is in effect.

   Timestamp [03:15]:
   "Once you give your team members a raise, you're going to have to pay that money for the rest of their employment... Marketing, on the other hand, you might run a campaign. It'll get you some customers, but once the campaign is over, you're not spending over and over."

2. Impact on Business Operations:

   • Marketing: Directly influences customer acquisition and revenue growth. However, its effectiveness can wane if investments cease.
   • Team Investment: Enhances employee satisfaction, retention, and productivity, indirectly benefiting customer experience and long-term business sustainability.

   Timestamp [04:00]:
   "Marketing is one of those things that when you spend, you make, but when you don't spend, you don't make... You can make money, and then once you have it, if you don't continue to spend money on marketing, you won't continue to make that money every single month."

Striking a Balance: Combining Both Investments

Omar emphasizes that the decision doesn't have to be strictly binary. Entrepreneurs can allocate funds in a manner that supports both growth and team welfare.

Timestamp [05:30]:
"You have to do the math and see how much it's going to cost you. See how you can break it down, how you can distribute these funds. How much can you spend on marketing versus these types of rewards for your team, financial rewards so that you know where you stand financially."

He suggests creating a budget that allows for both marketing initiatives and rewarding high-performing team members, ensuring that the business can grow while maintaining a motivated and committed workforce.

Performance-Based Raises: Maximizing Value

Omar advocates for performance-based raises rather than uniform increments for all team members. This approach ensures that raises are meaningful and tied to individual contributions.

Timestamp [06:45]:
"Raises really don't have value and they don't actually serve you if everybody gets the same raise. In my opinion, raises increments should be based on performance. The better they do, the more they hit their KPIs... The better they deliver on their promise as an employee, the more they should be compensated."

By linking compensation to performance, businesses can reward top performers, fostering a culture of excellence and accountability.

Practical Budgeting Strategies

Omar offers practical advice on how to allocate profits effectively:

1. Allocate a Portion to Marketing:

   • Ensure that marketing remains a consistent line item in the budget to sustain growth efforts.
   • Consider both paid and organic marketing strategies, such as SEO and email marketing.

   Timestamp [09:50]:
   "If you're not spending any money on marketing right now, you're asking for trouble... You have to invest in some form of marketing, whether it's hiring an expert to help you with SEO or with your email growth or with sponsorships or whatever it might be."

2. Rewarding the Team:

   • Allocate around 30% of the budget to reward high-performing team members through bonuses or raises.
   • Even if full raises aren't feasible, one-off bonuses can effectively recognize and motivate employees.

   Timestamp [07:50]:
   "If you have some money left over, let's say 30% of that budget look to reward even with one-off bonuses to people that are doing well in your team."

3. Communication is Key:

   • Engage with team members to express appreciation and communicate intentions behind financial rewards.
   • Transparent communication can enhance team morale and loyalty.

   Timestamp [08:30]:
   "One of the things I would advise is to actually talk to your team members and say, hey, we made a bit of profit. I'd like to reward those who are doing well."

Final Recommendations

Omar concludes by reiterating the importance of reinvesting profits to sustain and grow the business. He advises entrepreneurs to:

• Prioritize Marketing: Ensure consistent investment to maintain and grow customer acquisition.
• Invest in the Team: Reward and retain top performers to enhance overall business performance.
• Balance Allocations: Use strategic budgeting to support both marketing efforts and team investments without sacrificing either.

Timestamp [07:00]:
"Reinvesting in your business is essential if you want to continue to grow or even just stay competitive and stay alive. Pocketing all the profits might seem like a good option, you know at the start, but you got to feed the goose that lays the golden eggs so it can continue to to feed you and your family."

Conclusion

Episode MBA2381 offers valuable guidance for entrepreneurs grappling with the decision to invest in marketing or their team. Omar Zenhom underscores that both investments are crucial for sustained business success and provides a roadmap for balancing these priorities through thoughtful budgeting and strategic planning.

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For more insights and practical business lessons, visit The $100 MBA Show. If you have a question you'd like addressed in future episodes, email Omar at [e-mail].

Transcript

[Omar Zenhom]

I won't let my moderate to severe plaque psoriasis symptoms define me emerge as.

[Medical Narrator]

You in two clinical studies, Trimfaia gusoquumab taken by injection provided 90% clear skin at 16 weeks in 7 out of 10 adults with moderate to severe plaque psoriasis. In a study, nearly 7 out of 10 patients with 90% clearer skin at 16 weeks were still clearer at 5 years. At 1 year and thereafter, patients and healthcare providers knew that Tremphya was being used. This may have increased results. Results may vary.

[Safety Announcer]

Serious allergic reactions may occur. Tremphye may increase your risk of infections and lower your ability to fight fight them. Before treatment, your doctor should check you for infections and tuberculosis. Tell your doctor if you have an infection or symptoms of infection, including fever, sweats, chills, muscle aches or cough. Tell your doctor if you had a vaccine or plan to emerge.

[Medical Narrator]

As you learn more about Tremphya, including important safety [e-mail] or call 1-877-578-3527. See our ad in Food and Wine magazine. For patients prescribed Tremphaya, cost support may be available.

[LinkedIn Advertiser]

Does it ever feel like you're a marketing professional just speaking into the void? Well, with LinkedIn ads, you can know you're reaching the right decision makers. You can even target buyers by job title, industry company seniority skills. Wait, did I say job title yet? Get started today and see how you can avoid the void and reach the right buyers with LinkedIn ads. We'll even give you a $100 credit on your next campaign. Get started at LinkedIn.com results. Terms and conditions apply.

[Omar Zenhom]

Hey oh. Welcome to the $100 MBA Show Business Truths delivered on a silver platter with our practical business lessons. I'm your host, your coach, your teacher, Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company I started back in 2014. And in today's episode we have Q and A Wednesday. On Q and A Wednesdays, we answer a question from one of you, one of our listeners. If you got a question you want to ask, go ahead and email me over@omarr mba.net Today's question is from Emery and Emery asks I made a bit of profit in my business and I'm looking to reinvest. Should I give a raise to my team members or should I spend the money on marketing? It's a bit of a tough one because marketing will help grow my business, but investing in my team and holding onto my great players will allow me to create a better experience for my customers would love your advice. First of all, Emery, congrats on making some profit and being in the position where you have a good problem to solve, where you have some money, where you want to reinvest in your business. Should you spend it on marketing? Should you spend it on raising your salaries for your team members? We're going to get into it, and every business owner is going to go through this at some point. They have some profits and they need to reinvest so the business continues to grow. Where do you put that money? Towards people that are in a growth mindset, that are like more sales, more customers. They're going to think, of course, spend it on marketing, make more money, and then you can spend more on your team. People that are in a product first mindset will think, no, a better product will sell more. So create an environment where your team members are feeling rewarded so they can work better so that you produce a better product for your customers. So we're going to get into this sort of seemingly opposing arguments and give my advice to Emory on how to spend that profit. So let's get into it. Let's get down to business. First of all, Emery, this is your business's money. So you get to decide who. My job here is to give my input. Consider it in your decision. But the decision is yours. And I'm here to tell you that it doesn't have to be either or. And I can understand that, hey, you might have a certain amount of money. It's not a lot of money to go around. You can probably only do one effectively. I get those circumstances, but let me explain. I'm a big believer in both of these ideas in investing in marketing and investing in your team and rewarding team members for good work. But we have to understand that these two ideas don't actually function in the real world the same. What do I mean by this? Once you give your team members a raise, you're going to have to pay that money for the rest of their employment. So every month. So say, for example, you increase their salaries by $100 per month. This is just an example. Then you're going to have to pay 100 extra dollars every single month. Marketing, on the other hand, you might run a campaign. It'll get you some customers, but once the campaign is over, you're not spending over and over. Maybe if you do a new campaign to get other customers, you're going to spend again. But the point here is that marketing can be on and off, or it could be variable. You could spend $1000 on marketing this month and 2000 the next and then 1000 again the month after and then 1500. But with a raise, with an increase of salary, it's set. You've already promised them this much money, so you have to give that money every single month. So, so just keep this in mind. It's a little bit more of a commitment to where you're putting your profits. Next, I want to address this idea of like, hey, just spend money on marketing. Make more money for your business than you can spend on your team. Well, that's not really how marketing works. Marketing is one of those things that when you spend, you make, but when you don't spend, you don't make. Meaning if I run Facebook ads to an offer, some of those ads will convert and I will make sales. But once I stop running those ads, I will not have the ability to make that offer through, through that audience. So I can make money. And then once I have it, if I don't continue to spend money on marketing, I won't continue to make that money every single month or every single interval, whatever it is. So I can't rely on that money coming in all the time to pay my team. Now obviously there's a lot of different kinds of marketing. There's ways to grow your email list so that you can be able to nurture that list and sell to people later on and that's a good roi. There's paid ads, there's sponsorships, There's a lot of different ways you can market and spend your money. But generally speaking, when you stop spending money on marketing, you stop getting the sales from market. Now if you do marketing for long enough, I'm talking about years, then you build a brand and people start understanding who you are. People know who you are, you are a name in the industry and that long term investment pays off and people will just buy because they know who you are. That brand affinity becomes a byproduct of all that marketing for years. But this is not applicable in the case of hey, I'm going to spend the next year in marketing versus the next year on salaries or raises in this case. So let's make sure that's clear. Let's talk about the salaries part and the raises. I'm a big believer that you should always reinforce good behavior. Positive reinforcement is very, very strong. And one of the best ways, and the most important ways team members, employees feel recognized is with time and money. Meaning time off and their salary. Yes. There's other ways you can reward them. Recognition Titles, rewards and all that stuff is great. But the strongest one of them is how much money they take home and how much time they have off. And that's why they always say don't mess around with those two things with team members, right? Don't mess around with their time off, don't mess around with their salary. Make sure that they get paid on time. Make sure that they have their time off as allocated. And I'm a believer of this, but I'm also a believer that raises really don't have value and they don't actually serve you if everybody gets the same raise. In my opinion, raises increments should be based on performance. The better they do, the better they hit their KPIs or key performance indicators. The better they deliver on their promise as an employee, the more they should be compensated. It's simple as that. And if they don't do their job properly or they don't do it at a high level, they shouldn't be compensated. They shouldn't be given raises until they earn it. You have to earn your keep, otherwise it has no value. Now, this is outside of inflation raises. You know, you know, a lot of companies, they will give an increment because you know, there's inflation. That happens in the economy. We do this. And that's why our increments are a range of percentage, starting with some percent of raise. So if they're not doing so well, then they'll get the lowest percent raise just to cover inflation. But if they do great, they get the higher end of the range. Having said this, you don't have to give raises or the same amount of raises to everybody on your team. Do the maths and see how much would you give actually if you did it based on performance. And you'll find you might be able to afford to give the right people the raises. Have some money left over to spend on marketing as well. I won't let my moderate to severe plaque psoriasis symptoms define me emerge as you.

[Medical Narrator]

In two clinical studies, Trimfaia guselcumab taken by injection provided 90% clearer skin at 16 weeks in 7 out of 10 adults with moderate to severe plaque psoriasis. In a study, nearly 7 out of 10 patients with 90% clearer skin at 16 weeks were still clearer at 5 years. At 1 year and thereafter, patients and healthcare providers knew that tremphya was being used. This may have increased results. Results may vary.

[Safety Announcer]

Serious allergic reactions may occur. Tremphya may increase your risk of infections and lower your ability to fight them before treatment. Your doctor should check you for infections and tuberculosis. Tell your doctor if you have an infection or symptoms of infection, including fever, sweats, chills, muscle aches or cough. Tell your doctor if you had a.

[Medical Narrator]

Vaccine or plan to emerge as you learn more about Tremphya, including important safety [e-mail] or call 1-877-578-3527. See our ad in Food and Wine magazine for patients prescribed Tremphia, cost support may be available.

[LinkedIn Advertiser]

Does it ever feel like you're a marketing professional just speaking into the void? Well, with LinkedIn ads you can know you're reaching the right decision makers. You can even target buyers by job title, industry, company seniority skills. Wait, did I say job title yet? Get started today and see how you can avoid the void and reach the right buyers with LinkedIn ads. We'll even give you a $100 credit on your next campaign. Get started at LinkedIn.com results terms and conditions apply.

[Omar Zenhom]

Now here is my just straight up advice. If you're not spending any money on marketing right now, I'm talking about $0. You need to be spending money on marketing. Marketing should be a line item in your business all times, whether you're using organic ways, SEO, email marketing. I'm not saying you have to spend money on paid ads, but you have to spend money. You have to invest in some form of marketing, whether it's hiring an expert to help you with SEO or with your email growth or with sponsorships or whatever it might be. The point here is that if you're not spending on growth or marketing, then you're asking for trouble. You just can't continue to survive without bringing in a steady stream of new customers. And you got to start building on that brand affinity we talked about. So you should budget some of that profit to marketing if you're not spending any money on marketing right now and then if you have some money left over, let's say 30% of that budget look to reward even with one off bonuses to people that are doing well in your team. They don't have to have a raise. You can give them a little bonus until you can give them a raise. Once you start growing your business to start making more sales and more profit from the marketing efforts you're making. This is what I would do if I'm starting out and I am not spending any money on marketing right now. It's important to reinvest in your team and to reward people for those who actually need rewarding that actually are doing a great job that are a players on your team. You want to keep them, you want to nurture them, you want to make sure that they are happy so they stay with you and you can continue to reinvest with them. That's why if you make any kind of effort with a bonus again, even just one off, that's better than nothing. Or if you could budget for the rest of the year a raise for a certain number of people, that's great as well. The point here is that maybe you don't have to choose. And I say this because a lot of people don't do the math. Sit down, do the math. See how much it's going to cost you. See how you can break it down, how you can distribute this funds. How much can you spend on marketing versus, you know, these types of rewards for your team, financial rewards so that you know where you stand financially. Now if you are spending on marketing and just trying to put more fuel to the fire, that's great. But maybe you don't have to put so much of the profit into marketing since you're already spending on marketing. So maybe you want to go 50, 50 split or 30, 70 split 70 being the team members, now it's time for you to start rewarding all the hard work. One of the things I would advise is to actually talk to your team members and say, hey, we made a bit of Prof. I'd like to reward those who are doing well. Talk to those people who are doing well. Tell them what you want to give them. Just communicating it to them makes a big difference. Letting them know that you're making a conscious decision to reward these people and tell them, hey, you deserve something because of your hard work, because of your results, because of what you've accomplished, because of your review was excellent and you went above and beyond what you're supposed to do. Even if that reward doesn't kick in into next month or a few months down the line, communicating your intention will allow you to garner some good credibility and get them motivated. This is good news. You should share that with your team and capitalize on that. Emory, I hope that helps. I hope this answers your question. Hey, if you're listening right now and you got a question you want to ask, go ahead and email me at omar100, MBA net I'll make sure to answer it right here on Q and A Wednesday. If you haven't already, leave us a rating and review. Whether you're on Spotify or Apple podcasts, go ahead and let us know what you think of the show. I read every single review, so it means the world to me to hear from you and know what you love about the show the most. Mention your favorite takeaway or favorite episode. I'd love to hear about it. Before I go, I want to leave you with this. Reinvesting in your business is essential if you want to continue to grow or even just stay competitive and stay alive. Pocketing all the profits might seem like a good option, you know at the start, but you got to feed the goose that lays the golden eggs so it can continue to to feed you and your family. Thanks so much for listening and I'll check you in Friday's episode. I'll see you then. Take care. I won't let my moderate to severe plaque psoriasis symptoms define me emerge as.

[Medical Narrator]

You in two clinical studies, Trimfaia guselcumab taken by injection, provided 90% clearer skin at 16 weeks in 7 out of 10 adults with moderate to severe plaque psoriasis. In a study, nearly 7 out of 10 patients with 90% clearer skin at 16 weeks were still clearer at 5 years. At 1 year and thereafter, patients and healthcare providers knew that Tremphya was being used. This may have increased results. Results may vary.

[Safety Announcer]

Serious allergic reactions may occur. Tremphya may increase your risk of infections and lower your ability to fight them. Before treatment, your doctor should check you for infections and tuberculosis. Tell your doctor if you have an infection or symptoms of infection, including fever, sweats, chills, muscle aches or cough. Tell your doctor if he had a vaccine or plan to emerge.

[Medical Narrator]

As you learn more about Tremphya, including important safety information, at tremphya.com or call 1-877-578-3527. See our ad in Food and Wine magazine. For patients prescribed Tremphaya, cost support may be available.