Saturday, March 1, 2014

3 Reasons Why Growth Hacking Won’t Help You – Part 2

3 Reasons Why Growth Hacking Won't Help You – Part 2 image nightmare

This is continuation from 3 Reasons Why Growth Hacking Won’t Help You – Part 1

2) You don’t have a (readily) scalable business

When I was generating solar leads for solar installers, I noticed a pattern.

That 60-80% of solar sales would come between June to Oct, when it was super hot and so of course, people cranking up A/C’s would yield high electric bill.

High electric bill = high pain = people immediately seeking solution to relieve that pain.

Solar installers would have no trouble closing my leads (some great sales guys were closing 20-35% , which meant they were spend couple hundreds bucks to make $30-50k in sales) during these months.

When a job is sold (i.e. the customer signs on the dotted line and either pays in cash or signs up for some loan), the installer guys would get on the roof and put the panels on the house.

Success Often Leads to Failure

Here’s where the operational nightmare begins.

You can’t just hire (when the orders pick up) and fire (when the peak season passed) these installers because

  1. If you’ve ever dealt with these home improvement/construction guys, they are… well.. let’s just say that they’re not the most reliable so if you find the reliable ones, you want to keep them

  2. They’re highly skilled workers in a very niche industry that requires all kinds of training & certifications (i.e. hard to find)

  3. They require all kinds of insurance and bonding and stuff like that because their jobs are by nature very dangerous (imagine carrying 20-40 panels that weigh 50 lbs each, onto a roof, 30-50 ft high).

  4. They are often unionized, and unions people don’t listen to logic. It’s like give-and-take with them: you give, they take.

So if the summer months have been bad for that year, often times, these solar companies would actually incur loss on slow months just to keep them on the payroll.

In the winter, these guys are twiddling their thumbs waiting for business to happen. My business phone rank off the hook during the winter and I had to stop taking calls because I couldn’t fill everyone’s demand.

I even had some solar companies asking me if I could do lead generation for gutter cleaning, painting, HVAC, and roof repair/maintenance business that would keep them afloat during these months

In another words, their operation was just not scalable.

Miscalculated move.

The more you make in sales, the more you have to increase in salary.

The more you increase your payroll, the more you have to sell.

The more you have to sell, the more you have to advertise.

The more leads you get, the more salesmen you need.

The more salesmen you need, the more ad budget you need to get more leads.

The more leads you get (and hopefully), more sales you get.

3 Reasons Why Growth Hacking Won't Help You – Part 2 image hamster wheel

A TRUE hamster’s wheel.

What’s sad about this is that this one particular solar installer was grossing $15 million in revenue, yet their net was less than $500k.

Yes… net profit of $500,000 from earning of $15,000,000.

I’ve seen solar companies that scale up really fast, i.e. “growth hacking” with paid media for lead generation, only to find themselves in a financial nightmare, and end up selling to their competitor for pennies on the dollar. (On the flip side, this is where I learned that bidding on your own name is VERY profitable.)

This is why, as with any labor or capital intensive business, you see lots and lots of consolidation going on because of this cashflow crunch.

The bug guys swoop in and snatch your business for nothing.

So is it impossible? Of course not.

Solar companies like SolarCity, Verengo, Sungevity have figured it out.

But they also have huge financial backings. Hard to scale does not mean impossible to scale.

Virtual = Scalable

The word growth hacking is often applied to internet and software companies, where the cost of distribution is fairly low and the ratio of consumer to provider is often.

Remember WhatsApp, the chat app company that got acquired by Facebook for $19 billion dollar?

They supported 14 MILLION active users with only 32 engineers.

That’s 437,500 users PER person. Now that’s scale.

But fret not, the physical world CAN be scaled. If you think about it, even people like Adolf HItler managed to growth hack himself to power & influence.

Take a look at all the large franchises & chains like McDonalds, Starbucks, Apple stores.

If the people that work in your system is highly replaceable and easily trainable, you can produce a massive scalable business.

If someone asked me what they would recommend if they were to start a solar installation business is DON’T.

Get into solar SELLING business, and outsource the installing to someone else. Let someone else take care of the seasonality so that you can stay lean & focus on what you’re good at – selling.

3) Confusing Growth Hacking with Spamming

People often think growth hacking is spamming or some sort of blackhat marketing.

Well, ok, there is a fine line between letting your people do the word of mouth marketing FOR you vs. straight up spamming, like not complying with people’s wishes or worse… violating CAN-SPAM laws.

Facebook is probably the greatest example of growth hacking, but if they were truly indeed spammers, I doubt they would’ve gotten that big without running into trouble with the law.

RapGenius, a site for rap lyrics, probably has gotten the most recent notoriety for SEO spamming, disguised as affiliate marketing:

3 Reasons Why Growth Hacking Won't Help You – Part 2 image rapgenius affiliate facebook post

When you email them, what do you get?

Blackhat linkbuilding:

3 Reasons Why Growth Hacking Won't Help You – Part 2 image Screen Shot 2013 12 23 at 3.29.13 PM

Of course, they were de-indexed from Google… only for short amount of time.

Why? They know people in high places. (i.e. a large VC firm in silicon valley)

This is NOT growth hacking.

Growth hacking is essence, marketing PLUS engineering. Spamming is neither.

If you confuse the two, you surely will make more enemies and kill your business in the long run.

Growth hackers often say.. make a good product as highest priority, then build the viral distributions channel in.

Good product is the key… shitty plane with strong engine is still just a shitty plane that will break apart in mid air.

Takeaway for Growth Hacking

  1. Find product market first

  2. Make your business scalable

  3. Focus on product AND marketing, not spamming

Source: B2C_Business

3 Reasons Why Growth Hacking Won’t Help You – Part 2

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