MBA2381 Q&A Wednesday: Should I give my team a raise or invest in marketing?

0:09Heyo! Welcome to the$100 MBA show, business truths delivered on a silver platter with our practical business lessons. I'm your host, your coach, your teacher, Omar Zinhome. I'm also the co-founder of Webinar Ninja, an independent software company I started back in 2014. And in today's episode, we have Q &A Wednesday. On Q &A Wednesdays, we answer a question from one of you, one of our listeners. If you've got a question you want to ask, go ahead and email me over at omar at 100mba.net. Today's question is from Emery, and Emery asks, I made a bit of profit in my business, and I'm looking to reinvest.

0:41Should I give a raise to my team members or should I spend the money on marketing? It's a bit of a tough one because marketing will help grow my business, but investing in my team and holding onto my great players will allow me to create a better experience for my customers. Would love your advice, Emery. First of all, Emery, congrats on making some profit and being in the position where you have a good problem to solve, where you have some money, where you want to reinvest in your business. Should you spend it on marketing? you should have spent on raising your salaries for your team members.

1:12We're going to get into it. And every business owner is going to go through this at some point. They have some profits and they need to reinvest so the business continues to grow. Where do you put that money towards? People that are in a growth mindset that are like more sales, more customers, they're going to think, of course, spend it on marketing, make more money, and then you can spend more on your team. People that are in a product first mindset will think, no, a better product will sell more. So create an environment where your team members are feeling rewarded so they can work better so that you produce a better product for your customers.

1:42So we're going to get into this sort of seemingly opposing arguments and give my advice to Emery on how to spend that profit. So let's get into it. Let's get down to business. First of all, Emery, this is your business's money. So you get to decide. My job here is to give my input, consider it in your decision, but the decision is yours. And I'm here to tell you that it doesn't have to be either or. And I can understand that, hey, you might have a certain amount of money. It's not a lot of money to go around. You can probably only do one effectively. I get those circumstances. But let me explain.

2:16I'm a big believer in both of these ideas, in investing in marketing and investing in your team and rewarding team members for good work. But we have to understand that these two ideas don't actually function in the real world the same. What do I mean by this? Once you give your team members a raise, you're going to have to pay that money for the rest of their employment. So every month. So say, for example, you increase their salaries by$100 per month. This is just an example. Then you're going to have to pay$100 extra every single month. Marketing, on the other hand, you might run a campaign.

2:50It'll get you some customers. But once the campaign is over, you're not spending over and over. Maybe if you do a new campaign to get other customers, you're going to spend again. But the point here is that marketing can be on and off or it could be variable. You could spend$1 ,000 on marketing this month and$2 ,000 the next and then$1 ,000 again the month after and then$1 ,500. But with a raise, with an increase of salary, it's set. You've already promised them this much money, so you have to give that money every single month. So just keep this in mind. It's a little bit more of a commitment to where you're putting your profits.

3:25Next, I want to address this idea of like, hey, just spend money on marketing. make more money for your business than you can spend on your team. Well, that's not really how marketing works. Marketing is one of those things that when you spend, you make, but when you don't spend, you don't make. Meaning if I run Facebook ads to an offer, some of those ads will convert and I will make sales. But once I stop running those ads, I will not have the ability to make that offer through that audience. So I can make money. And then once I have it, if I don't continue to spend money on marketing, I won't continue to make that money every single month or every single interval, whatever it is.

3:58So I can't rely on that money coming in all the time to pay my team. Now, obviously there's a lot of different kinds of marketing. There's ways to grow your email list so that you can be able to nurture that list and sell to people later on. And that's a good ROI. There's paid ads, there's sponsorships. There's a lot of different ways you can market and spend your money. But generally speaking, when you stop spending money on marketing, you stop getting the sales from marketing. Now, if you do marketing for long enough, I'm talking about years, then you build a brand and people start understanding who you are.

4:27People know who you are. You are a name in the industry and that long-term investment pays off and people will just buy because they know who you are. That brand affinity becomes a by-product of all that marketing for years. But this is not applicable in the case of, hey, I'm going to spend the next year in marketing versus the next year on salaries or raises in this case. So let's make sure that's clear. Let's talk about the salaries part and the raises. I'm a big believer that you should always reinforce good behavior. Positive reinforcement is very, very strong. And one of the best ways and the most important ways team members, employees feel recognized is with time and money, meaning time off and their salary.

5:10Yes, there's other ways you can reward them, recognition, titles, rewards, and all that stuff is great. But the strongest one of them is how much money they take home and how much time they have off. And that's why they always say, don't mess around with those two things with team members, right? Don't mess around with their time off. Don't mess around with their salary. Make sure that they get paid on time. Make sure that they have their time off as allocated. And I'm a believer of this, but I'm also a believer that raises really don't have value and they don't actually serve you if everybody gets the same raise.

5:41In my opinion, raises increments should be based on performance. The better they do, the better they hit their KPIs or key performance indicators, the better they deliver on their promise as an employee, the more they should be compensated. It's simple as that. And if they don't do their job properly or they don't do it at a high level, they shouldn't be compensated. They shouldn't be given raises until they earn it. You have to earn your keep. Otherwise, it has no value. Now, this is outside of inflation raises. A lot of companies, they will give an increment because there's inflation that happens in the economy.

6:13We do this, and that's why our increments are a range of percentage, starting with some percent of raise. So if they're not doing so well, then they'll get the lowest percent raise just to cover inflation. But if they do great, they get the higher end of the range. Having said this, you don't have to give raises or the same amount of raises to everybody on your team. Do the maths and see how much would you give actually if you did it based on performance. and you'll find you might be able to afford to give the right people the raises, have some money left over to spend on marketing as well. Now, here is my just straight up advice.

6:47If you're not spending any money on marketing right now, I'm talking about$0, you need to be spending money on marketing. Marketing should be a line item in your business all times, whether you're using organic ways, SEO, email marketing. I'm not saying you have to spend money on paid ads, but you have to spend money, you have to invest in some form of marketing, whether it's hiring an expert to help you with SEO or with your email growth or with sponsorships or whatever it might be. The point here is that if you're not spending on growth or marketing, then you're asking for trouble. You just can't continue to survive without bringing in a steady stream of new customers.

7:24And you gotta start building on that brand affinity we talked about. So you should budget some of that profit to marketing if you're not spending any money on marketing right now. And then if you have some money left over, let's say 30 % of that budget, look to reward, even with one-off bonuses to people that are doing well in your team. They don't have to have a raise. You can give them a little bonus until you can give them a raise. Once you start growing your business to start making more sales and more profit from the marketing efforts you're making. This is what I would do if I'm starting out and I am not spending any money on marketing right now.

7:57It's important to reinvest in your team and to reward people for those who actually need rewarding, that actually are doing a great job, that are A players on your team. You want to keep them. You want to nurture them. You want to make sure that they are happy, that they stay with you, and you can continue to reinvest with them. That's why if you make any kind of effort with a bonus, again, even just one off, that's better than nothing. Or if you could budget for the rest of the year, a raise for a certain number of people, that's great as well. The point here is that maybe you don't have to choose.

8:25And I say this because a lot of people don't do the math, sit down, do the math, see how much it's going to cost you, see how you can break it down, how you can distribute this funds, how much can you spend on marketing versus, you know, these types of rewards for your team, financial rewards, so that you know where you stand financially. Now, if you are spending on marketing and just trying to put more fuel to the fire, that's great, but maybe you don't have to put so much of the profit into marketing since you're already spending on marketing. So maybe you want to go 50-50 split or 30-70 split, 70 being the team members.

8:55Now it's time for you to start rewarding all their hard work. One of the things I would advise is to actually talk to your team members and say, hey, we made a bit of profit. I'd like to reward those who are doing well. Talk to those people who are doing well. Tell them what you want to give them. Just communicating it to them makes a big difference. Letting them know that you're making a conscious decision to reward these people and tell them, hey, you deserve something because of your hard work, because of your results, because of what you've accomplished, because of your review was excellent.

9:23You went above and beyond what you're supposed to do. Even if that reward doesn't kick in into next month or a few months down the line, communicating your intention will allow you to garnish some good credibility and get them motivated. This is good news. You should share that with your team and capitalize on that. Emery, I hope that helps. I hope that answers your question. Hey, if you're listening right now and you've got a question you want to ask, go ahead and email me at omar at 100mba.net. I'll make sure to answer it right here on Q &A Wednesday. If you haven't already, leave us a rating and review.

9:56Whether you're on Spotify or Apple Podcasts, go ahead and let us know what you think of the show. I rate every single review, so it means the world to me to hear from you and know what you love about the show the most. Mention your favorite takeaway, your favorite episode. I'd love to hear about it. Before I go, I want to leave you with this. Reinvesting in your business is essential if you want to continue to grow or even just stay competitive and stay alive. pocketing all the profits might seem like a good option, you know, at the start, but you got to feed the goose that lays the golden eggs so it can continue to feed you and your family.

10:29Thanks so much for listening and I'll check you in Friday's episode. I'll see you then. Take care.

10:49Thank you.