Cut Expenses or Build Revenue?

There is a classic dilemma in business; Do I focus on managing expenses or building revenue?

At the root of this is the single factor that is responsible for your success in business: CASHFLOW.

Cashflow has little to do with profitability. All it takes is to look at Amazon to see an classic example of a company that went years without profit, but because it had cashflow it was able to continue on.

In Amazon's case, it raised funds through investment and debt to allow it to lose money but still survive. That's one way to grow a business, but frequently not an option for many smaller businesses.

False Dichotomy?

Some may think that the question of managing expenses or building revenue is a logical fallacy where a false decision is being presented. But the reality is that even Amazon has a limited amount of time, money and effort at it's disposal. And while you may have less resources than Amazon, there is a finite amount of resources available to Amazon. So if that's true for a company with very deep coffers, then it is even more true for you.

Think about your day and how much time you invest in pushing various ideas forward. Maybe a majority of your time is occupied with just fulfilling the promises you made to customers.

As cashflow gets thin in a business, the natural reaction is to turn away from building revenue and to focus on managing expenses.

This is a NATURAL psychological reaction when your business' survival is threatened.

But this is NOT the reaction that will preserve the business.

What Should You Do When Cashflow is Threatened?

The fact may be that your expenses are out of control. Poor money management can certainly be the cause of poor cashflow. But the reality is that you can only temporarily increase cashflow with managing expenses, and usually cashflow will decrease even further after managing expenses, IF you don't take this one concept into consideration.

How to Properly Manage Expenses

The fact of the matter is that not all expenses are created equal. Before you bother cutting an expense, throw them into one of two categories.

Directly Connected to Revenue Production and Fulfillment: this category is made up of expenses that if you stopped spending money in this area would inhibit your ability to get more business or to deliver on the promises you've made to customers.

Everything Else: this category is everything that is not critical to getting new business and delivering on promises made to customers. If you have a nice office that isn't critical to getting new business, then it would be in this category. If you have a dynamic image service for customized images and that's not a critical part of your lead generation and conversion, that would be optional as well.

Maybe you have filtered water delivered to you office for staff enjoyment. Cashflow crunch on you? Drop the filtered water.

I know that can sound harsh, but cashflow is what keeps you in business.

Maybe you have an assistant, but they just make your life easier and don't produce revenue or fulfill on promises. Cashflow is low, they got to go.

What You Can't Touch

Revenue Producing Expenses! Unfortunately, I read the same tale too many times. Each time someone cancels service with FixYourFunnel, we do ask why and what their plans are. Some might do this to stop the cancelation. We do it so that we can know how to help them out as they leave. But sadly, a common story is the "cutting back expenses" one. I don't say it that way to be harsh, but rather because it's the first act in a three act play.

The 3 Act Tragedy

Act one, the pinch of shrinking cashflow prompts a panic.

Act two, the search for expenses to cut.

Act three, the business closes.

Now, I didn't write this article to tell folks in the middle of the 3 Act Tragedy to not cut expenses, but to hopefully help them know HOW TO CUT EXPENSES.

But there is more...

The Cause of Shrinking Cashflow

Some folks close their FixYourFunnel account during act 2, others after act 3, but the truth is if they knew what I'm about to share with you, they would have never seen the opening of act 1.

For many cashflow rises and falls like a wave on the ocean. You may have heard of this phenomenon as Feast or Famine.

This rise and fall is caused by human nature. Don't believe me? Go look at the price chart of a large company on the stock exchange. As you review the chart you'll see shapes that slightly resemble a head and shoulders, with one shoulder being higher than another.

This is one of several known formations of stock prices. These known formations are used by some stock traders to identify the best time to buy or sell a stock.

The reason that these formations are known and show up with such predictability is they are based on human emotion or human nature and how it translates through the process of deciding to buy or sell a stock.

Mitigating Human Nature

Left unchecked, human nature will create a rise and fall in cashflow in your business. This is true for large and small businesses, but is much more noticeable in smaller businesses because there are fewer humans on which the tide of cashflow can rise and fall. Larger businesses can sometimes mask the rise and fall of human nature's impact, not because they mitigate the impact the way I will recommend, but because of the sheer number of people, their varying timing of impact and the way they can offset each other.

In a small business it is CRITICAL to mitigate the impact of human nature by utilizing a combination of systems and automation.

Systems are developed by documenting the general way in which things are done.

Automation may have a place in making sure key systems are consistently executed.


Of all the human nature traits that impact cashflow, the most common is procrastination.

Given the choice of doing a critical task to revenue production or delaying it, most humans will delay. I'm sure we could never explore all the causes, but one of the top reasons humans procrastinate is they are afraid of confirming the negative dialog that goes on in the head.

You may be tempted to try and control the thought processes of yourself and those who work with you.

I think it's a great idea to encourage healthy thinking and positive action, but the reality is that billions of dollars have been spent on trying to change human nature, and while I believe in the capacity of humans to improve and perform better, it's not a business strategy that I would build on.

The reality is that systems tied to automation is a better bet than the bet that Joe is going to radically change the fact that he forgets or procrastinates communicating with every lead on a regular basis.

Simple Mechanisms Combined to Create Sophisticated Processes

The real secret to creating consistently expanding cashflow is to automate processes that attract new prospects and then engage them in conversation that can lead to sales.

When first getting started building these processes I recommend using simple mechanisms that will achieve the goal.

Since all sales occur in conversation, we want to make sure that our mechanism will lead to and facilitate communication.

A common error I see folks make when they attempt to create these sales producing processes is they rely on cheap mediums of communication, like email. There is nothing inherently wrong with email. I use email quite a bit in my sales processes. But the mistake is relying on it as the primary medium of communication.

For many reading this, when I said simple mechanism, they may have thought of a webform asking for an email address, or perhaps, if they were feeling bold, a name too.

The hope being that they could then engage in communication or conversation via email and as a result convert that prospect into a customer and help bolster rising cashflow!

Email is NOT the Solution

This mechanism of collecting an email address and communicating with a prospect used to be a very good solution to mitigating human nature in an effort to build cashflow. And today there are many companies that are making a profit with it. But they have no idea how far the odds are stacked against them.

When you send out an email with a marketing automation platform, like Infusionsoft, you have lost more than you have won. The first email you send has the best chance of being seen and consumed, but that's not the critical communication attempt.

Think about the last time you entered your email into some webform in order to receive something you wanted. How many emails were you hoping to receive? One?

You hit the submit button and then rushed to your email inbox. The second you arrived in your email inbox, you probably regretted it. It was a reminder of all the emails you haven't evaluated and acted on. But that's fine. You'll just wait for the email you WANT NOW to arrive. How many minutes will you sit there refreshing before you say, "I guess I'll get it later..."

And did you ever? Did you ever get back to that email? Or did it get pushed down the never ending stream of emails that constantly bombard you?

See, email is great for what it is, but there are too many things that make it the least valuable and least desirable medium for a simple mechanism that will convert prospects to customers that increase cashflow.

Let's suppose that the email did arrive when you expected and you did click through to the thing you really wanted (because you didn't want the email, you wanted what you hoped it would bring), but as you review that thing you realize you are not ready to buy. You have questions. Will you email the company back and ask? Not if your like most prospects.

Instead, they will carry on with their life, wondering about that question that stopped them from buying until life interrupts and they forget entirely about your company.

But wait! You've added them to an automated campaign and you'll send another email, right?

What are the chances they will even see the subject line of that second, third or fourth email?

Current "email open" rates are in the 5-25% range. But email opens are a lie. They are a vanity metric built on a foundation of sand...

The Lie of Open Rates

An email open is determined by placing an image into an email body. This by definition only applies to html emails. If you send a text only email, you can't find out if the email was opened. So the theory of email opens is that if the recipient opens the email, the tracking image, which is unique to the recipient and that email body, will be requested and the marketing automation platform can report that Fred saw email 2 in the email campaign.

Here's the rub...

Some email service providers (ESPs), like yahoo, google, etc, have settings that you to indicate that you don't want to load images in emails. That means that some people will actually open your email, but because the ESP blocked the image load, the marketing automation platform won't ever get that signal and will report to you that the email was not opened.

That's a bummer, right? But it can make you feel better, because even though your email had an open rate of 5%, there might have been more folks who really saw it!

If false negatives was all there was messing with open rates, it might be OK, but it gets worse!

Some ESPs, in order to provide a faster user experience, open images in the background so they can cache them either on their servers or on the user's device! This means that the 5% you are seeing as your open rate on that fantastic email you wrote, might in reality by 0.5% or even 3. No, not 3 percent, but 3 people.

If you really want to know how well your email campaigns are doing, then you have to use clicks.

Your email click thru rate is the only reliable metric. So let's say you are in the 2-20% range of click thru rate. What does that mean?

80% Failure to Communicate Rate

It means that you are not connecting sufficiently with 80-97% of those leads you spent money, time and effort to generate.

Leads that consumed MONEY that lowers your cashflow.

See, your cashflow level is directly connected to how well you are able to communicate with prospects what it is you can do to address their needs and wants.

When you rely on email alone, you're fighting a VERY difficult battle. This reality begs the question: What can you do about it?

Marketing Rule #19

After working with thousands of small business owners and teaching tens of thousands more, we discovered Marketing Rule #19, which states: You must know how you will sell before you decide how you will lead capture.

This rule is critical to your success and must be considered as you are deciding on the simple mechanisms you will use to increase sales.

If you use the classic, and less effective, webform to get an email address, what are your options when it's time to sell? You can email them.

We've explored why that's such a weak position to be in if we want to build sales to be reliable enough that it builds cashflow.

A Strong Simple Mechanism for Growing Sales

When given the choice between a webform and something else I'll always consider something else, because I understand how weak a position the email only collection puts me in.

How do I WANT to sell? Well, understanding that selling happens in conversation, I want to have the option to engage in conversation in the most reliable way possible.

I know that most humans above age 12 have a device with in 3 feet of them that will support multiple methods of communciation.

I also know that email is highly competitive and difficult to gain immediate attention with.

I know that everyone who has a mobile phone for sure has a phone number.

I know that a phone number may receive phone calls and text messages.

A Mobile Phone Number is the Single Most Important Contact Point

Therefore, the most important piece of contact information any business can collect in their lead generation activities is the mobile phone number. Hands down.

Because some folks don't yet know how to get a prospect to give them their cell phone, they will revert to what they know. But this leaves them subject to rises and falls in cashflow and the threat of going out of business.

So, if you want to build immunity to cashflow crunches, you must learn how to acquire the mobile phone number AND, more importantly, permission to communicate with the prospect by text message and phone call.

All of this sets the stage for you to comprehend the power of the strongest simple mechanism for growing sales and building cashflow...

Keyword and Phone Number

By creating an automated conversation that acts as a webform in text message format, and assigning that a simple, easy to spell keyword with a FixYourFunnel phone number you have created a simple and powerful mechanism that will accomplish the following:

  • Collect a mobile phone number
  • Establish a conversation with the prospect
  • Open the door to communicate respectfully by text message
  • Identify the reason the prospect initiated contact
  • Start an automation to communicate by email, text message or voicemail drop

There are some that will take exception with this method of lead generation. They would rather buy a list of phone numbers and start broadcasting to those numbers in order to take advantage of the power of the mobile phone without earning it.

One thing I have learned in life is that there are no real short cuts. There are straight and narrow paths that lead to success and there are deceptive short cuts that are paths to destruction. Destruction of relationship. Destruction of wealth. Destruction of health.

The power of the keyword and phone number mechanism is that it allows you to connect with another individual.

Your cashflow health will be directly proportional to the number of people your business is able to connect with.

The Next Powerful Simple Mechanism

When you have opened the door to communicate through the mobile phone, recognize that it is the most intimate form of communication and should be respected.

Make it a way for the prospect to get to what they want FASTER and EASIER.

When you create an automated conversation, you want that conversation to be two or three steps that that a conversation flow is started. The most common conversation flow is:

  1. Prospect texts in the keyword
  2. Ask the prospect for their name
  3. Ask the prospect for their email address
  4. Confirm delivery of promised resource
  5. Ask a conversation starting, open ended question

When the prospect texts the keyword to your FixYourFunnel phone number it is because you called them to action and promised them that if they did they would get something that they want. This anticipation of getting what they want should be accompanied by the expectation of how the promise will be fulfilled. For example, "Text REPORT to (760) 621-8199 and I'll email you a powerful report showing how to solve your biggest problem."

You have set the expectation that the report will be sent by email. It stands to reason that you will need to get their email address to fulfill your promise.

So ask for the first name in the first step. The desire to get the thing you promised will motivate them to provide their name as requested. Next, ask for their email address. They will be expecting this and provide it.

After they provide you with their email, the response should thank them for requesting the promised thing. That's just good manners and good manners helps build relationship!

I like to provide a link to the promised resource (video, pdf, etc) in this final automated response to the prospect. I do this because I don't really care much if they gave me a real email address or not. Why? Because of the power of the mobile number, which I already have. Also, it builds relationship to deliver on promises promptly.

Relationship is built on trust. When I make a promise and I immediately keep that promise, I've earned a little trust. That trust will help them to feel comfortable communicating with me in the future.

Also, they didn't know I was going to provide the promised resource when I asked for their email address. So they probably gave me a real email address. That's great. I'll email them the thing as well because it might be easier for them to consume it on their computer later.

The Critical Question

Now all that has occurred in this automated conversation is very powerful, but this next step is the most important of all.

After you thank them and deliver the goods, ask them an open ended question related to the context of why they texted you in the first place.

You might ask, "How do you plan to use our product?"

By the way, an open ended question is one that can't be answered with a single word answer.

Why do you think that asking an open ended question at the initial moment of engagement would be so powerful to our cause of increasing the regularity and amount of cashflow in your business?

Facebook Messenger

Don't let this injection of Facebook Messenger throw you off. I want to mention Facebook Messenger here because it illustrates a very important principal. Folks who have a LOT of experience with facebook messenger have discovered that it can be good for initial interaction, but beyond the initial interaction it's even worse than email.

That means if you use Facebook Messenger and figure out how to get folks to start conversations with you on it (which is much more difficult than texting for some reason), you've only got one shot, so you've got to use this technique because you've only got one shot.

With text messaging you have more than one shot, but while folks are in the moment of initial interest there is a special window of opportunity open for fast action takers.

If your question is good, you can engage many of your fresh prospects in conversation. And remember, conversation happens in sales.

You might work on this question for 30 minutes. You might iterate on it over time. And the reason you'll put in that kind of effort is that this question could double your revenue. It could elicit from new prospects that conversation that leads to a lifetime customer relationship.

The Most Important Work

Designing a keyword automated conversation can be the most important work you'll do in your business.

I understand how bold of a statement that is, but I know it's true. I've seen it hundreds of times.

Know that the short time invested in crafting this powerful yet simple mechanism will pay off for years.

An Invitation to Action

I'd like to invite you to experience a keyword driven automated conversation. Text DEMO to (760) 621-8199

When you do, you'll see an example of an automated conversation. In this case I'm not promising to send you an email, but I'll ask for your email address anyway. Know that we don't email or text too much either. We communicate with you in the way that you want. We open the door and invite you to ask questions and get answers so you can make the best decisions for your business.

The Big Take Away

The biggest indicator of your success in business is how well you can manage cashflow. It takes minutes to put the simple, yet powerful mechanisms in place that I've described here. Use your healthy thinking and positive action to put this mechanism in place and use it.

Place your keyword and phone number in social media posts. Place it in blog posts, like I did here. Place it in videos. Place it in direct mail. Place it in books.

As you do, you'll discover that you CAN manage cashflow. You can grow it. And you can avoid the 3 act tragedy that destroys so many small businesses.

If you need any help getting your cashflow under control, text or call us at (760) 621-8199 and allow us to help you succeed!

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