MBA2607 Why Most Entrepreneurs Waste Money on Ads (And What to Do Instead)

Summary

The $100 MBA Show: MBA2607 Why Most Entrepreneurs Waste Money on Ads (And What to Do Instead)

Host: Omar Zenhom
Release Date: April 4, 2025
Podcast Information:
Title: The $100 MBA Show
Description: Awarded Best of Apple Podcasts, The $100 MBA Show delivers practical business lessons for the real world. Host Omar Zenhom shares lessons, strategies, and insights from over 20 years of entrepreneurship, offering actionable advice on everything from validating ideas to audience-building and marketing, all tailored for entrepreneurs with minimal resources.

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Introduction

In episode MBA2607, Omar Zenhom tackles a pervasive issue among entrepreneurs: the ineffective use of paid advertising. Drawing from his extensive experience in entrepreneurship and his journey of building multi-million dollar businesses, Omar dissects why most entrepreneurs fail with their ad strategies and provides a blueprint for leveraging ads effectively to scale their businesses.

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Common Mistakes Entrepreneurs Make with Ads

Omar begins by highlighting a startling statistic: "80% of businesses that run paid ads lose money on them" (00:57). This figure, sourced from Wordstream, underscores the high failure rate associated with paid advertising endeavors. He identifies several core reasons why entrepreneurs squander their advertising budgets:

1. Lack of Clear Strategy: Entrepreneurs often dive into advertising without a well-defined plan, leading to scattered and ineffective campaigns.

2. Random Post Boosting: Boosting arbitrary posts in the hope of generating sales without targeting the right audience or message.

3. Directing Traffic to Sales Pages: Sending cold traffic directly to sales pages without prior engagement, which fails to build trust or relationships.

4. Inadequate Conversion Tracking: Failing to monitor and analyze ad performance, leaving entrepreneurs in the dark about what works and what doesn't.

Omar shares his personal journey, admitting, "When I first started running ads over 15 years ago, I made all these mistakes. I was spending thousands on ads only to realize I was sending cold traffic directly to a thousand-dollar offer. No trust, no relationship built. No sales." (00:57) This candid admission sets the stage for his solution-oriented approach.

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Effective Strategy for Using Ads

To rectify these common pitfalls, Omar outlines a three-step strategy for utilizing ads effectively:

1. Capture Leads

Objective: Lower the cost per acquisition by focusing on lead generation rather than immediate sales.

• Action: Run ads that offer a free, high-value resource (lead magnet) instead of directing traffic straight to a sales page.

• Examples of Lead Magnets: PDF guides, video training sessions, tools, or templates.

• Rationale: As Omar explains, "People are more likely to give their email than to buy right away. They're going to get instant gratification by giving their name and email address to get your lead magnet." (02:30)

• Outcome: Capturing names and email addresses allows entrepreneurs to nurture leads over time, building trust and educating potential customers.

2. Nurture Leads

Objective: Build a relationship with leads by providing consistent value, paving the way for future sales.

• Action: Avoid pitching immediately after capturing leads. Instead, focus on delivering valuable content through newsletters or other forms of communication.

• Strategy: Share useful content weekly to establish trust and authority within your niche.

• Case Study: Omar recounts his experience with Webinar Ninja, where instead of selling software upfront, they offered a free masterclass on running webinars as a lead magnet. This approach resulted in an engaged email list more likely to convert into paying customers later on.

3. Retarget and Close the Sale

Objective: Convert nurtured leads into paying customers through targeted advertising.

• Action: Once leads are captured and nurtured, run conversion ads aimed at retargeting these warm leads.

• Techniques: Utilize retargeting campaigns to direct leads to webinars or special offers, and provide limited-time incentives such as bonuses or discounts to encourage purchases.

• Results: For Webinar Ninja, retargeting campaigns led to converting 10 to 15% of those leads into paying customers profitably.

Omar emphasizes that "Ads don't work in isolation. They need to be a part of a bigger strategy." (03:45) Integrating ads into a comprehensive system ensures that advertising efforts contribute to long-term business growth rather than short-lived spikes.

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Alternatives to Paid Ads

Recognizing that not all entrepreneurs have the budget for paid advertising, Omar offers alternative strategies to generate leads and build an audience organically:

1. Organic Content Marketing

• Platforms: Utilize YouTube, podcasts, blogs, LinkedIn, or other preferred content channels.

• Content Strategy: Post valuable and engaging content that ends with a call to action inviting viewers to download a lead magnet and join the email list.

• Benefit: Establishes credibility and attracts a curious audience without financial investment.

2. Leverage Other People's Audiences

• Methods: Form partnerships, guest blog, appear as a guest on podcasts, and engage in collaborations.

• Objective: Tap into established audiences to expand reach and attract potential leads.

3. Utilize Word of Mouth

• Technique: Encourage early customers to refer friends and family by sharing their positive experiences.

• Strategy: Foster a loyal customer base that organically promotes your business through personal networks.

Omar shares his own experience: "Before I spent a single dollar on ads, I grew my podcast audience first. And through this podcast, I was able to build my email list. And through my email list, I'm able to sell my products and services." (05:00) This approach allowed him to accumulate his first thousand customers without initial ad expenditure.

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Personal Insights and Experience

Omar's narrative is enriched with lessons from his entrepreneurial journey. He underscores the importance of building a strong foundational system before integrating paid advertising. His success with Webinar Ninja serves as a testament to the efficacy of his three-step strategy, demonstrating tangible results from meticulously nurturing leads before attempting conversion.

Moreover, Omar highlights the critical mindset shift required: "More money won't fix a broken system. Your goal isn't just to get more traffic. It's to create a system that turns that traffic into loyal customers." (07:00) This philosophy emphasizes sustainable business growth over quick fixes.

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Conclusion and Final Takeaways

Omar concludes the episode by reiterating the core message: entrepreneurs must build a robust lead generation and nurturing system before leveraging paid ads to scale their businesses. Key takeaways include:

• System Over Instant Gratification: Prioritize creating systems that convert traffic into loyal customers rather than seeking immediate sales through ads.

• Strategic Ad Integration: Use ads as a tool to amplify existing successful strategies, not as a standalone solution.

• Patience and Consistency: Avoid the temptation to "burn cash on ads" due to impatience; instead, focus on long-term strategies that yield sustainable growth.

• Continuous Learning and Adaptation: Engage with Omar's resources, such as the Three Things newsletter, to receive ongoing coaching and actionable business insights.

Final Quote:
Omar Zenhom: "If you take this system in place, ads will scale your business instead of draining your bank account." (07:50)

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Actionable Steps for Entrepreneurs

1. Implement a Lead Generation Strategy: Focus on capturing leads through valuable lead magnets rather than pushing for immediate sales.

2. Nurture Your Leads: Provide consistent value and build relationships with your email list to establish trust.

3. Retarget Effectively: Use retargeting campaigns to convert warm leads into paying customers.

4. Explore Organic Marketing: Leverage content marketing, collaborations, and word-of-mouth to grow your audience without significant financial investment.

5. Evaluate and Optimize: Continuously track your advertising efforts to understand what works and refine your strategies accordingly.

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Additional Resources

• Subscribe to Omar's Three Things Newsletter: Receive weekly insights, actionable steps, and valuable resources to stay ahead in your entrepreneurial journey. Visit 100mba.net to sign up.

• Learn More About The $100 MBA Show: Explore past episodes, guides, and resources designed to help you start, grow, and scale your business with minimal resources.

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By following Omar Zenhom's strategic approach to advertising and lead nurturing, entrepreneurs can transform their advertising dollars from potential losses into powerful tools for scalable and sustainable business growth.

Transcript

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[Omar Zenholm]

Morgan, Chase bank and a member FDIC subject to credit approval Most rookie entrepreneurs think they could just throw money at ads and suddenly customers will show up. The reality is is that that's the fastest way to burn through cash and get nothing in return. In fact, 80% of businesses that run paid ads lose money on them. That's according to Wordstream. So if you're running ads or thinking about running ads, you need to gobble up today's episode. I'm going to show you why most entrepreneurs waste money on ads and more importantly, what to do instead to actually make your let's get it. Welcome Back to the $100 MBA Show. I'm your host Omar Zenholm, where I deliver practical business lessons three times a week, Monday, Wednesday and Friday to help you start, grow and scale your business. Most people lose money on ads because they don't understand how ads actually work. Here's what most struggling entrepreneurs do. They run ads with no clear strategy. They boost random posts hoping a sale. They send people straight to the sales page. Most people don't buy the first time they see something. They don't track conversions properly. They have no idea what's working and what's not. The result? Wasted money, no roi, and a truckload of frustration. When I first started running ads over 15 years ago, I made all these mistakes. I was spending thousands on ads only to realize I was sending cold traffic directly to a thousand dollar offer. No trust, no relationship built. No sales. So here's what I did instead. Ads don't work in isolation. They need to be a part of a bigger strategy. Instead of spending money blindly. Here's what actually works. Step one Capture leads. First, run ads to a free high value resource, not a sales page. Okay? You want to get your cost per acquisition as low as possible. So getting somebody's name and email address is a lot cheaper than trying to get them to buy. And by having a lead, you can then nurture them, educate them and then convert them into a customer. Think of the long term goal here. Don't try to get a sale immediately. So how to get the lead? Well, you use a lead magnet like I talked about. Like a PDF guide, like a video training, like some sort of tool or template. Why? Again, because people are more likely to give their email than to buy right away. They're going to get instant gratification by giving their name and email address to get your lead lead magnet. And they're going to get satisfaction. They're going to get value immediately from you. Step two, Once you have their email, don't pitch right away. Don't make this mistake. Provide value. Build that relationship. Share useful content week after week on your newsletter. Build trust over time. When I started Webinar Ninja, a software company selling software, not content, right? We ran email capture ads first. Instead of selling the software upfront, we actually gave away content as our lead magnet. We gave away a free masterclass on running webinars. The results? We built an email list of engaged leads who were far more likely to buy later. Step three is to retarget and close the sale. Now that people know you and trust you, this is where you run the conversion part of this equation. You start running conversion ads. This is where you retarget people who have downloaded your lead magnet. This is where you send them to a webinar where you can educate them further and then make an offer. This is when you can send them a limited time incentive to get started and buy. So maybe this is a bonus or some sort of discount or deal. For example, with our software webinar Ninja, we ran retargeting campaigns only to those who were on our webinars who watched our demo webinar. The result? We converted 10 to 15% of those leads into paying customers profitably. Now I get it. You might be asking Omar, what if I don't have the budget for ads? Don't worry, I got your back. If you're not ready to run ads yet, here's what you can do instead. Organic content marketing. Post valuable content on YouTube. Start a podcast, writes a blog post. Write some posts on LinkedIn x whatever you prefer. This is going to get people curious about what you do. Just remember that when you post this content to end on a call to action, asking them to download your lead magnet so they can get on your email list and start this cycle. Leverage other people's audience Use partnerships, guest blogs Be a guest on a podcast. Use collaborations as much as possible so you can leverage other people's audiences. Lastly, leverage word of mouth. It still works. Ask your early customers for some referrals. Ask them to share their experience with their friends and family Before I spent a single dollar on ads, I grew my podcast audience first. And through this podcast I was able to build my email list. And through my email list I'm able to sell my products and services. And by the time I got that point and I have some profit now, I can afford some ads. That first original organic traffic became my first thousand customers without spending a dime. But once you start making some serious profit, you can speed up your growth by leveraging ads.

[US Cellular Representative]

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[LinkedIn Ads Representative]

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 Zenholm]

So I hope I've shown you that most entrepreneurs waste money on ads because they're using them the wrong way. They're blindly running ads hoping for sales. Build a system first. Capture leads, nurture them, then sell right. Retarget those warm leads. Sell to people who already trust you. Focus on organic marketing first. Add ads should amplify what's already working. If you're not selling your products and services without ads your product, your offer is probably not strong enough yet. So you should be able to sell it without ads. If you can and you want to amplify it, that's where you go the ads route. If you get this right, ads will scale your business instead of draining your bank account. If you take one thing away from today's episode, then let it be this. And I want to leave you with this. More money won't fix a broken system. Your goal isn't just to get more traffic. It's to create a system that turns that traffic into loyal customers. The right customers, the right way. Don't rush to burn cash on ads because you're impatient or that's what everybody else is doing. Focus on what actually moves the needle and when you get that system in place, ads will become the fuel to scale, not a money pit. You got this if you're serious about building your business, then join my Three Things newsletter every week I send you three things 1. Something to think about. Something to shift your mindset 2. Something to do an actionable step to grow your business. 3. Something to learn. A valuable resource to keep you ahead. It's completely free and it's my way of coaching you from afar. Just go to 100 MBA net and sign up for any of our free guides and you'll automatically be added to the newsletter. If this episode helped you in any way, subscribe and share it with somebody you know needs to hear this. I'm Omar Zenholm and I'll see you in the next episode.

[US Cellular Representative]

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