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As corporations increasingly eliminate the Chief Marketing Officer (CMO) role from the C-suite, entrepreneurs should consider switching to prioritize sales over marketing.
Maximizing Early-Stage Growth: Less Is More
To build and retain more wealth, focus on growth strategies that achieve more with fewer resources. Prioritize sales, where the return on investment is measurable, rather than marketing, which often leaves you questioning where your budget went. As John Wanamaker famously noted, “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.”
Here are four essential reasons to emphasize sales over marketing for sustainable growth:
1. Cost: Venture capital (VC) is one of the most expensive funding options available. Early-stage VCs typically expect annual returns between 80% and 100%. An analysis of 22 billion-dollar entrepreneurs revealed that those who received early-stage VC retained just 7% of the wealth created, compared to 16% for those who secured late-stage VC and 52% for those who avoided VC altogether. Moreover, most VC-backed ventures fail to achieve billion-dollar status, leaving entrepreneurs with diminished returns.
2. Control: Venture capitalists often replace up to 85% of entrepreneurs, especially those seeking additional rounds of early-stage VC. These fired entrepreneurs are frequently replaced by CEOs who further dilute the founders’ ownership.
3. Chances: Only 6% of billion-dollar entrepreneurs built unicorns by accepting early-stage VC and losing control of their ventures. In contrast, 94% improved their chances of success by delaying or avoiding VC funding altogether.
4. Income vs. Outgo: Sales generate income, while marketing typically incurs expenses.
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What Successful Entrepreneurs Do
Billion-dollar entrepreneurs focus on sales because it allows them to measure their return on investment accurately. Here are some examples:
- Dick Schulze (Best Buy): Utilized weekly flyers in local markets, with costs subsidized by product manufacturers.
- Bill Gates (Microsoft): Focused on selling to PC manufacturers.
- Michael Dell (Dell): Targeted PC buyers through direct mail campaigns.
These entrepreneurs adopted capital-efficient, measurable sales strategies to optimize early-stage growth while maintaining control of their ventures.
How Billion-Dollar Entrepreneurs Prioritize Sales Before Marketing
Successful entrepreneurs prioritize sales over marketing by:
- Identifying the Right Customer Segment: Instead of spending heavily on broad marketing campaigns, they focus on finding the right customer segment. For example, Sam Walton targeted rural America, while Brian Chesky focused on New York landlords to help them find guests.
- Discovering the Most Effective Sales Driver: New ventures often struggle to identify the sales driver that attracts the most sales at the least cost. Joe Martin, for instance, leveraged his expertise in online sales to build Boxycharm.com into a unicorn with just a $375 investment.
- Developing Sales Skills: While many entrepreneurs hope that marketing investments will translate into sales, the most common skill among 35 unicorn entrepreneurs interviewed or financed was sales. For example, Dick Schulze (Best Buy) began his career as a sales rep for Sony, selling consumer electronics to store owners before becoming a store owner himself.
By experimenting with different combinations of strategic groups, market segments, and sales drivers, entrepreneurs can discover the most effective strategies for growth. Among 85 billion-dollar entrepreneurs, 99% focused on the right strategic group and segment, identified the most effective sales driver to enhance capital efficiency, and honed their sales skills to achieve growth.
Conclusion: Why You Should Prioritize Sales Over Marketing for Sustainable Growth
Many entrepreneurs hope to secure expensive VC funding and spend it on marketing in the hope of gaining traction. However, focusing on sales is more beneficial, as it provides a more accurate measurement of return on investment and fosters sustainable growth. By prioritizing sales, you can gain traction before investing heavily in marketing. Additionally, by avoiding or delaying VC funding, you maintain control over your venture and the wealth it creates.
