This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in October 2011 and is posted here by their kind permission.
The answer to insufficient sales may be more money invested, but there are other opportunities
By Ed Hatton
I have just started a college with a unique range of course offerings. Enrolment numbers are poor due to a low advertising budget. How do we get investors involved without having surety?
Existing entrepreneurs reading this will probably be smiling wryly. Cynics say the first two laws of start-ups are:
In this case the entrepreneur has assumed that the only way to increase enrolment is to put a lot of somebody else’s money into advertising. There are a couple of issues with this proposed solution.
Firstly investors put funds into businesses because they believe they will make a good return. So this entrepreneur will have to demonstrate that the project will make money, despite the fact that early enrolments are poor. Facts, figures and hard information are needed, not just self belief and enthusiasm.
The entrepreneur has also assumed that throwing money at advertising will solve the enrolment problem. This is a very dangerous assumption, as many entrepreneurs who have spent large amounts on advertising for little return will testify. It may work, but unless there are compelling indications that advertising will bring enrolments it is not a good place to start.
Start by going back to basics. Are the courses wanted and needed by his target market, or are they those he thinks students should want? We often get blinded by our own beliefs and enthusiasm. Unless the market thinks the same way there is a long painful and expensive path to first convince the market that the courses are desirable and only then to begin to sell to them.
Assuming the courses are needed and attractive, potential students must be told about them. Advertising to the broad community is inefficient and very expensive. The entrepreneur should rather identify the target market and then understand a great deal about them. What are their needs? What are their behaviours? They would presumably be young people; are they internet users? Do they attend school or gather at community centres? What do they read? Would SMS or e-mail marketing reach them? Do they play sport or have interests that the entrepreneur could leverage to get attention?
Then the entrepreneur can develop the method of getting information to his target market. He must be prepared to learn new things very quickly. For instance marketing via social media is often very effective and free, but needs know-how, and without funds the entrepreneur needs to learn how. Fortunately there is a lot of free information about.
Promotions could be by way of posters or flyers at places the target audience gather, by e-mail or bulk SMS to those who agree to receive them, by displays at events or by commission earning sales agents. For an internet active potential market pay-per-click advertising like Google Adwords can be effective and carry a low fixed cost limit. The most effective promotion is by talking directly to potential students. This can be in person to groups, by means of a blog, through chats on internet forums or other free and simple methods.
Word of mouth is by far the most powerful advertising, and it is free. Recommendations by satisfied students or people who have been impressed by your message will bring potential students to the entrepreneur. This does mean that the courses and their delivery must be special to attract comment.
There is a belief that start up businesses must have investors or loan finance to enable them to succeed. Frequently this is simply not true. Very substantial businesses have been created with minimal start up capital, with entrepreneurs working both hard and smart to drive their businesses to success without the high cost of loans or sacrifice of part ownership.
Start up finance is expensive, hard to access and sureties are often required. Wise entrepreneurs will always think about how their businesses can develop without external finance.
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