We all know many start-ups fail – but there may be a state even worse than death. It’s a prolonged and agonising condition brought about when a business can’t achieve meaningful growth or profitability, but has found some kind of meagre financial sustenance that keeps it shuffling on in an embarrassing fashion. This is the start-up zombie.
As research from CB Insights shows, start-ups usually die 20 months after raising financing of about $1.3 million. There are many and complex reasons for start-up failure or falling into a zombie state. Their analysis reveals poor marketing amongst the top ten reasons for their demise. Other factors like not leveraging support networks, disharmony among the team and investors are also cited as common reasons for the failure of start-ups.
Here are a few tips for how marketing can address some of those key issues and help your start-up avoid a fate worse than death.
1 Set realistic marketing objectives
The passion and energy of a start-up can cloud objective business thinking. This is especially true in the fintech space where executives and investors tend to dream of unicorns rather than zombies. The Marketing team can often come under pressure to deliver on unrealistic expectations.
Nobody likes a negative marketing people so deal with this carefully. Get your facts together and use external sources to keep your views and recommendations grounded in reality. It will avoid setting unrealistic expectations that create friction and disappointment further down the line.
Gather all relevant data from your business case and any subsequent executive planning work to ensure you have the most current view of the high-level strategy and objectives.
Supplement this with industry benchmark data where possible, expert advice or even anecdotal input that may be accessible from your teams, investors or advisors.
When you write up your marketing objectives, always have a clear line of sight from every marketing activity up to a top-level business goal.
2 Set your budget
Setting a budget provides parameters for your marketing plan. The marketing budget must be a direct reflection of the profile, revenue and growth expectations of the business.
The general guide for your marketing budget is traditionally that five percent of the overall business revenue should be earmarked for marketing. It’s likely to be a different story if you happen to have a loss-leading, venture capital-fuelled growth strategy.
There are no hard rules so the best approach is to look for context in the current world of fintech. The marketing spend details of TransferWise, the international online money transfer business, were reported by Business Insider in September. If you are hoping to stick around that 5% figure, you might want to skip the next paragraph…
In 2015, TransferWise spent £9.3 million on marketing to help deliver £9.7 million in revenue. Last year, with a modest increase in the marketing budget to £12.3 million, TransferWise achieved a sharp jump in revenue to £27.8 million. We don’t know the initial revenue targets, so we can’t calculate the percentage of marketing budget against planned revenue, but it provides some context.
In simple terms, achieving big, fat, hairy audacious goals costs money. Just ask President elect Trump who spent $247.5 million dollars on his campaign last year.
3 Define your marketing plan
Once you have your business objectives and marketing goals aligned, you need to get tactical.
Don’t go into every detail at this point. Simply illustrate your recommendations for how to realise your business strategy through the marketing mix.
If you are a start-up, one of the biggest problems is going to be lack of specific data regarding what has worked or not previously. Think about the type of channels or tactics you want to use and look for research or case studies where they are tried and tested.
Don’t overlook your network of investors or advisors as a channel for your marketing. They have external influence and are predisposed to help you achieve success. Build regular communication with stakeholders into your plan such as e-newsletters, social media or webinars to share your successes, marketing messages and ask for help.
4 Gain stakeholder buy-in for your marketing plan
Without the support of key internal and external stakeholders, your marketing plan is likely to be the first thing that goes zombie. Socialise and adapt your plans to gain consensus and create a shared sense of purpose. It may be a painful process but it will mitigate friction and finger pointing later in the boardroom. This iterative process will build stronger stakeholder relationships, resulting in a firm plan that you can finalise with extra detail.
5 Execute your marketing plan
Get ready for emails from enthusiastic colleagues pointing out exciting ways to spend your marketing budget that aren’t on your plan. Discounted last minute advertising rates, event participation or other opportunities may seem too good to miss, but they divert your time and budget. Stick to your plan.
There is a big difference between allowing yourself to drift off course and adapting your plan. As soon as you begin execution, you need to test, learn and refine your activities to achieve maximum marketing ROI.
Put in the time and effort to do things right, especially in a start-up where enthusiastic stakeholders and an influx of investment can result in loss of financial and strategic control.
Many of these activities from planning to execution are broken down and assigned to internal or external resources. Hiring some marketing talent to help you establish your marketing messages or creative campaign ideas that differentiate your business. Create an impactful first impression. It’s much easier than putting lipstick on a zombie.