How To Achieve Profit Increase Despite The Off Season

Rachel: 00:00:11

Hey everyone, Regina here with Starter PPC.

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I'm going to talk today

about a success story.

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We have a client who's been with

us for almost 11 months now.

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and most recently we were able

to make some breakthroughs.

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We were able to increase

the business's profit.

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Okay.

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Not just revenue, but

like bottom line pocket.

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cash in pocket profit, by 13%.

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It was actually closer to 13 and a half

percent, on average over the past three

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months in the middle of the off season.

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I think this is a big deal because usually

in the off season profit goes down.

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I want to show you guys the numbers.

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So we're going to look at some

spreadsheets that I have, and I'm

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going to show you how we did it.

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But before I dive into that, I

want to talk through some of the

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history just to give you context.

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So this client has been with us

for about 10 and a half months.

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I believe she started in November

of last year, but I'm just showing

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January, we were spending only

about $500 in budget every month.

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Now normally we work with

clients who have budgets between

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1000 and to 5,000, dollars.

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but if a client comes in with $500

in budget, we will work with that.

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It's just that it's very difficult

to make a profit with $500 in

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budget I'm going to show you why.

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the return on ad spend was really high.

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This is a seasonal business that

does really well in the winter and

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the business dies off in the summer.

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she actually sells

felting supplies, right?

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crafting, making scarves, things

like that, which people do

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in the fall and in the winter.

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the blue line is ROAS and

it was really high 17, X.

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And this is just return

on ad spend, you guys.

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So as you can imagine, if the return

on ad spend was only 1, 700%, then

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the overall business's return on media

spend, right, media efficiency ratio,

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which is an even more accurate number

to look at is almost always higher.

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And sure enough, it was higher.

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For those of you who are lost,

the difference between ROAS, which

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is return on ad spend and media

efficiency ratio is just that ROAS

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relies on the Google tracking, which

is inaccurate to come up with a return

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on how much ad spend happened, right?

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So it only counts people

that can be tracked after

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they've interacted with an ad.

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Whereas media efficiency ratio is like

calculating ROAS, but on a business level.

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So you would basically take

your total revenue, and divide

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it by your total, media spend.

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it's always higher than ROAS.

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Almost always, unless

something is very wrong.

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Alright, so we were spending about 500.

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We were making super high returns.

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even in February when the blue

line starts to trend down, we are

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only, again, making a ROAS of 8.

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65.

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The MER was higher.

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and we're still spending about 500.

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Then it goes a little

bit back up in March.

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It goes, starts to go

down in April, right?

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The ROAS is taking a dive in May.

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People are not felting anymore.

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and then in June, which was the lowest

month, the return was only 300%.

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Now Throughout this entire time period,

every month we're going to the client.

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We're saying, Hey, let's add budget.

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Let's grow this business.

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It's making really high returns.

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Let's jump on this and get you more sales.

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And she's saying to us, I can

barely pay my overhead costs.

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I can't pay my bills.

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And we're saying, wow, on your business,

you're making like a 20 X return.

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So for every 1, she was making 20

and you still can't pay your bills.

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That's because you don't have enough

profit left over after paying your

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cost of goods and your shipping

costs, to cover the overhead and

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still have some leftover, right?

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So this is the problem with

being a small business.

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We'll get back to this graph in a minute.

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I want to show you guys the real

numbers in this spreadsheet.

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This is the problem with

being a small business.

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look at scenario one on the left side.

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Here, everything in gray,

these are real numbers because

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these have already happened.

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All right?

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So we were spending 500 in,

Google ads, but she was spending

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more money in like Etsy ads.

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she was hovering around 1, 000 spend

for the total business throughout

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those months that we looked at.

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And here is the media

efficiency ratio, right?

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So not just ROAS and Google, but

this is the total businesses return.

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So for every dollar.

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She spent she was making 28 and Her

sales were only 25, 000 in revenue.

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So when you take away the profit margin,

which is 25 percent right for cost of

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goods and fulfillment Then she only

has five thousand four hundred dollars

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with which to pay her overhead costs

And pocket some profit because she only

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has a few months where the Mer is high.

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It starts dropping in June, right?

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So in June, she only made 2, 300

in profit, which might not even

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be enough to cover her overhead.

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So in the winter, she might still be

paying the bills from last summer.

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problem.

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And we were going to her

saying, hey, let's grow.

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She finally agreed to start growing

her budget and growing her sales.

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And you can start seeing that in July.

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So July, August, and September are the

win months that I want to talk to you

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guys about because in these months we

began to grow the Google Ads spend.

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right here on the right.

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I added some notes and you

can see budget change percent.

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This is overall budget

for the business, right?

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So in July, there was only

a 13 percent increase.

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I don't think she was increasing

her budget other platforms.

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So it was just our increase in Google

ads, which I think was slightly

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less than 20 percent increase.

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so we added 13 percent budget and,

we, it wasn't a huge increase.

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Then you can see a 23 percent increase,

to the budget in August and a 10 percent

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increase to the budget in September.

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Now, what happened to the profit?

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It's going up.

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And this is in the dead of summer.

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This is when nobody is felting.

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It is hot.

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Everyone is at the beach.

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and I have tracked here the profit.

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So as you can see, profit was just

going down for no reason other

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than the fact that it was spring.

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Hi there.

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Quick interruption.

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Do you know the main thing that

prevents small business owners from

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getting their Google Ads account

into a position to grow and scale?

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Budget.

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A lot of businesses, especially

those that are just starting

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out, have limited budgets.

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And so because of this, they're turned

away by most ad agencies because most ad

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agencies have minimum budget thresholds

that they're willing to work with.

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So what happens is the business owners

end up learning Google ads themselves.

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And the problem with that is

that most of the advice online is

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geared towards larger accounts.

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And the advice doesn't have any of those

strategies or tricks that can kickstart

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the algorithm into giving a small

account a leg up over larger competitors.

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So it often just doesn't work.

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And the business just ends up

losing money month over month.

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If this sounds familiar

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Because all of our clients are just

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Because we know that every dollar saved

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the ad budget, which is going to help

the algorithm gather speed and power.

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So if you're serious about growing your

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the bank, check us out at starterpbc.

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com.

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Okay.

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Back to the video.

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and then when we started adding

budget profit goes up, right?

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13 percent increase.

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In July from June, 20 percent

increase in August compared

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with July, 7 percent increase in

September compared with August.

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I think this is huge.

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This averages out to a 13.

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4 percent increase over the

last three months in profit.

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and all we did was add budget.

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I'm telling you, if you find

that you're not making enough

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profit to pay your bills.

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But your Mer is really high or

your row eyes is really high.

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Just add a little bit of profit.

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Don't add a ton all at once, right?

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don't double your budget overnight.

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Don't do more than 20 percent at a time.

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if you're feeling very budget

strapped and you can't come up

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with the 10, 20%, come up with 10%.

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But try to come up with that budget

that you can add when the Mer is high.

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Because It's the only way to crawl

out of that pit of, Oh, I don't

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have enough profit to pay my bills.

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I only have 2, 000.

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To pay my overhead costs, So

now we're crawling out of it.

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And this is in the off season.

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So the reason why I have this spreadsheet

is because I'm trying to run some

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scenarios, to try to figure out what's

going to happen as she sticks with us.

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And we continue to do these

20 percent budget bumps here.

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I'm adding a full 20 percent to

the business's budget overall.

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month over month.

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Now, I don't have any control over

the budget on the other platforms.

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We only manage her Google ads account.

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So I don't know if she'll actually do

20%, but this is my pie in the sky.

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I want her to do 20%.

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So on this scenario too, you

see the budget increasing by 20

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percent and the scenario one,

it's staying the same, right?

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We stopped doing increases

and we keep it at: 1400

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And over here, I'm using

some sort of average Mer.

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I can't remember how I came up with this.

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you don't really know what

the MER is going to be.

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but you do know that if you don't increase

your budget, the MER will be higher

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than if you do increase your budget.

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Why?

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Because every time you give the algorithm

more money to work with, It has to go out.

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It has to find new people, new placements,

new combinations of ad copy, new images,

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to use, new products to show, whatever

it is, and it has to try things, and

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it has to figure out what's working.

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You're also competing with

bigger competition, As you grow.

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So your bigger competitors who are

able to bid more aggressively, you are

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now playing in that pool with them.

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So that's why the MER tends to

shrink as you grow your budget.

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until it levels out at

an industry average MER.

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The thing is a lower MER is

not necessarily a bad thing.

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Why?

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Because bottom line is profit, right?

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So here, we were growing.

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The budget, the mirror was shrinking

: 1374

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in August compared with July again,

for: 1347

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yet profit was higher in September.

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So don't be afraid of a shrinking mirror.

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Be afraid of a shrinking mirror

that shrinks really fast,

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profit is the bottom line.

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if you're not making more profit,

then you're growing too quickly.

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and since this is seasonal, we have

to look at every month individually,

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what I would like to start doing

is comparing year over year, how is

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July this year compared to last, but

I don't have that data right now.

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so anyways, I'm running some

scenarios into the future.

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I have no idea what the Mer

is actually going to be.

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I suspect it's going to continue

shrinking as we grow because I don't

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believe that her competitors are.

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Able to make this high of a mer, right?

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And whatever your competitors

are making is what your mer is

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going to level out at as you grow.

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So I'm going to assume it keeps shrinking.

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I put some in January is

,: 1800

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And this is a full whopping 1000

percent less than last January.

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And yet sales revenue is 54, 000 compared

with last January, which is 25, 000.

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Why?

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Just because we have more budget.

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We're spending three times as much.

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even though the Mur is a thousand

percent less, revenue is super high and.

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She has double the profit now, right?

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10, 000 instead of 5, 000, so don't

be afraid of growth, you guys.

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sometimes is the way out of your

financial woes, is to add budget.

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yeah.

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And this is just the total,

comparing two scenarios here.

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71, 000 compared to 89, 000.

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I have no idea how accurate this is.

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I feel like this is a

really high MRSA, actually.

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This should be probably lower.

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Who knows if it's going to go back up

to: 2000

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Definitely not in October.

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I should probably set

this to 16, who knows?

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yeah, let me go back to the graph and we

can just look at how things are panning

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out, from inside the Google dashboard.

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the red line, which is cost begins

to grow, in July, $600 spent.

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the blue line is still low because

it's the middle of the summer.

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$723 spent.

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Blue line is still low 'cause it's the

middle of the summer, . And again, 864%

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Blue line is still even lower because

it's still the middle of the summer.

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September is the beginning of fall,

so hopefully it starts to grow.

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The return starts to grow soon, but.

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In September, return did not

grow and yet we still made more

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profit than we did in August.

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I can't stress this enough, you guys.

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Don't be afraid of a shrinking MER.

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Be afraid of a shrinking profit.

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Okay, thanks for watching.

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This is a success story.

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If you are interested in growing your

account with Google Ads, check us out.

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We are Starter PPC.

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We manage budgets between

1, 000 and 5, 000.

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500 and 5, 000.

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and we would love to work with you.

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Thanks for watching.