Behind the Scenes - 9/13/24

 

Dear Friends,

For those who are new to our emails, I try to do an email once a week where I go into the details of what is happening behind the scenes of our small business. If you want to catch up on prior messages, check out the blog here or just jump right into the story below.

In the famous Peanuts cartoon, Lucy, a devilish woman, continues to trick our hero Charlie Brown into trying to kick the football she is holding, merely to pull it away at the last second, causing him to fall on his rear. I'm fairly confident our bankers took that cartoon and decided they were going to use it as a blueprint, deciding that casting themselves as Lucy in this skit would be more advantageous. I can't precisely fault them for that. Being Charlie Brown, in my experience, is pretty terrible.

As some of you may have already deciphered by my opening paragraph, the bank has denied the extension on our Line of Credit. The reason they gave:

"Future Cash Flows are Unpredictable"

I should have that tattooed on my arm.

Of course future cash flows are unpredictable. That is true of every business. Any business that tells you otherwise is either delusional, or lying. At its peak, Kodak controlled 80 percent of the market share of the camera film market in the US and 50 percent of the market globally. One might have said that their future cash flows would be rather predictable. Now it exists in name only as a shadow brand.

Now this should have been a predictable end to my quest for the LOC extension even from the start, but the business banker I had been working with had made it clear that all their internal models and formulas would say that we qualified for double or triple our current line. So I guess my real failure was to properly temper my trust in that banker's understanding of their internal policies.

So, what does this mean for us?

Good question. First, Despair is not only a sin, it's bad strategy. Second, my hope is built on nothing less than Jesus' blood and righteousness, and my home is the kingdom of Heaven. So with that noted, I can confidently say I am not worried about things in the long run. However, from a more corporeal perspective, we need to change some of our plans for the short term.

As the Good Lord would have it, I happen to have always dreamed of being a business consultant (as does every business graduate), and what better time to apply my talents of consultancy than to my own business. Stepping out, as it were, and pretending to be merely a dispassionate advisor.

To start, we have left our marketing woefully unattended to. This is mainly because I am the one who does all our marketing (emails, social media, paid ads, etc.) and I have been focused on getting my new product idea made and launched before Christmas. Most of my days have been spent in front of the mill working on just that.

Because of this, we have fallen down on the job of getting more sales and new customers. Our current marketing strategy is old, dusty, and frankly not working well enough anymore.

We can get away with losing money so long as we have the borrowing capacity to withstand that, and are using the time to build something that will make for a better company in the long run. Unfortunately, with the bank not willing to lend more, that runway is gone.

So my first recommendation to the Murdy Creative Co. would be to put your pet project on hold until after Christmas, and focus in on the marketing exclusively. From now until things get better, Colin Murdy wears the hat of a social media manager and content creator almost exclusively. Every day must be devoted to the hungry content machines called social media.

The larger macro-economic situation that surrounds us is certainly a factor at play. People are functionally more financially strained now than ever, and you can see the hallmarks of that all around. When you see small businesses running big sales of 20%-30%, just realize that they are likely doing that because they are hurting financially and need the cash boost. I've been getting a lot of those emails from the small businesses I follow. It is ominous. I do not dare ask for whom the bells toll.

With that in mind we need to be creative. People still buy things even when times are tough, and despite what some might think, they do buy luxury items. The usual change is what type of luxury items they buy. Rather than getting an expensive new pair of jeans they might buy a Starbucks coffee. Rather than getting a jet they buy a Rolls Royce. I think we fall somewhere in between those two examples.

With that in mind we need to realize that the consistent and unrelenting decline in our advertising success on Facebook and Instagram over the last 12 months may be related to the macro conditions, rather than our unique creatives. Those platforms may be slowly losing their steam.

However, good creative may be able to overcome that issue in the short-term. It has to be a killer ad though.

I am hoping to be testing a bunch of new ads with different slogans in the future here, and I would love your help. Please send me all your ideas for slogans that you think my work for our products. I don't care if they aren't perfect, your suggestions will be the fertile soil from which the refined slogans may come. It also helps me get a sense of what you as the customer think the best selling points are for our items.

Another issue that we find is a paradox in our ad spend. Spending very small budgets usually fails to get our ads out of the learning phase and optimized, but spending a lot on our ads usually causes an asymmetric decline in performance. So the ideal thing would be to find the sweet spot small budget that maximizes our return on ad spend (ROAS).

We need to hit a basic floor for sales each day to break even so if that ideal ROAS is too small of an ad spend to get the sales we need, then we need to solve the shortfall. The best idea I have so far is multiple smaller optimized budgets across different ad platforms. So rather than all our ad spend in Meta (Facebook and Instagram) where we used to get our best return, we diversify.

Now to all you armchair quarterbacks out there, I know that sounds obvious, but up until about 6 months ago our Meta ads were so significantly outperforming our Google Ads that it didn't make sense to spend any money on Google. I think that time has come to an end. So instead we will be trying many small budgets across multiple platforms to create an aggregate ROAS collectively that meets our sales target at the right ad spend.

That helps in the short run, but we need to come up with a broader strategy that allows us to have less than 30% of our total ad budget spent on social media advertising in the future. So we are broadening our efforts to dive into print/mailing advertisements in the form of high quality catalogs, working on bringing on influencers and collaborators, and hopefully adding to our retailer network across the country.

I think all of this is possible, and will allow us to reverse the trends we are seeing in our marketing performance. There are other cool things we are working on in house that are tangentially related to marketing in the form of value proposition improvement for our current product line. I don't want to say too much about that until we get a little farther down that rabbit hole.

All this to say, my special project has been delayed until early next year so that I can get our organic social media in top shape, clean up and organize our paid advertising, and nail down some new marketing avenues.

We will come through this better than ever. This isn't even close to the worst its been. We just need to play a good game right now.

I am so grateful to all of you who have helped bring this project to life with your purchases and your feedback. Thank you!

Stay tuned for more letters on Friday in the coming weeks and be sure to go subscribe to our YouTube channel. If you like and watch the videos it helps us get promoted more by the algorithm to people who may never have heard of us.

Ever your servant,

Colin Murdy

CEO/Owner

Murdy Creative Co.

Cell: 414-434-9001

MurdyCreative.Co 

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