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Entrepreneurship Mini Course: Building Audiences, Part #1
An introduction to one of the most important customer acquisition strategies in modern entrepreneurship
Welcome to the first Entrepreneurship Mini Course from Entrepreneur Office Hours. In addition to this week’s regular issue of Entrepreneur Office Hours that’ll publish at its usual time on Friday, you’ll be receiving three emails teaching a fundamental lesson about entrepreneurship. This is Part #1.
In the past few issues of Entrepreneur Office Hours, I’ve been arguing that audience building (particularly on social media) is the single most important thing entrepreneurs can do to improve their chances of startup success. But I haven’t done a great job of explaining why. As a result, I’ve gotten some feedback that makes it seem a bit like I’m trying to convince everyone they need to become “TikTok famous” in order to be successful entrepreneurs. I promise, that’s not the case.
Encouraging people to build audiences on social media isn’t about becoming “famous.” It’s about explaining a strategy to help entrepreneurs like all of you overcome the biggest challenge you’re going to face in your startup careers: how to predictably find new customers.
Simply put, businesses require customers. If you don’t have customers, your business is going to fail… guaranteed! Since customer acquisition requires having a consistent flow of prospective customers, every successful entrepreneur has to figure out how to scale the number of leads they’re getting.
The problem with paid advertising
If you’re like most entrepreneurs, in the earliest stages of building a business customers come from limited channels and random places like referrals, conferences, a friend of a friend, and maybe your aunt’s second-cousin’s roommate’s dog.
That’s a perfectly fine way to start generating customers (and cash!), but it’s not repeatable, predictable, or scalable. Instead, revenues are going to bounce around like my daughter after eating a bag of Skittles. This is a very stressful way to run a business, which is why every business ultimately has to find something more reliable.
The first strategy most people turn to when they want a more reliable source of sales leads is paid advertising. Heck, that’s why companies like Google and Meta are worth gagillions of dollars. They make paid advertising easy.
Unfortunately, they don’t make paid advertising effective. To understand why, think about this scenario…
Imagine you’re driving down the street, and you pass a billboard that says: “Ralph’s Pizza: Best Pizza in the City.” When you see that ad, do you say to yourself, “Ralph’s Pizza is definitely the best pizza in the city”?
Of course not! You understand you’re looking at an advertisement purchased by a company, and the company is obviously going to claim its product is great.
This is the fundamental problem of paid advertising. When consumers take action after encountering a paid advertisement, they enter the sales pipeline as skeptics. As a result, the company running the ads has to do tons more work convincing those skeptical potential buyers to become customers. That’s a difficult, expensive, and exhausting process.
The entrepreneur who got burned by paid advertising
The scenario I’ve described above is almost identical to the position one of my clients, Sam [not his real name] found himself in. The biggest difference is that Sam wasn’t selling pizza. He was an entrepreneur who’d just bought the local operating rights to a popular cycling studio franchise.
To get more members, Sam began purchasing ads on Google and Facebook/Instagram. Over the next four months he spent nearly $20,000 on ads, but, by the end, his franchise was still one of the bottom 25% in the country.
Clearly, the paid ads hadn’t worked.
He began looking for another solution and eventually found one that took his franchise from one of the bottom 25% in the country to one of the top 10%.
In tomorrow’s lesson, I’m going to share what he did and what you can learn and apply directly to your business (regardless of your industry).
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