You have undoubtedly heard the expression that cash flow is the lifeblood of any business. For small businesses, it is often the line between keeping the “doors open or closed”—survival or shutting down. When money becomes tight, small business owners and managers must decide which expenses to cut and which to keep.
One of the first areas often considered for cuts is marketing. Unlike payroll or rent, marketing is often considered discretionary, meaning it’s nice to have but not really a necessity. But one must ask, “Is slashing marketing the smartest move when a business faces a financial crunch?” Another question might be, “Should marketing be the last expense on the chopping block?”
Cash Flow Pressures
Cash flow problems happen when a business doesn’t have enough incoming money to cover its outgoing expenses. This can be due to a variety of reasons… declining sales, unexpected costs, delayed receivables, or seasonal slumps. When this occurs, the pressure to cut costs is immediate and intense. Rent, payroll, utilities, debt payments, etc., are typically fixed or non-negotiable. Marketing, on the other hand, is often variable and linked to both immediate and longer-term operations. While some might think it is reasonable to reduce or pause marketing efforts to free up cash, the reality is more complex.
The Case for Cutting Marketing First
- Immediate Cost Reduction: Marketing budgets can often be cut quickly without contractual obligations or penalties. Reducing ad spend, postponing campaigns, or pausing outsourced marketing contracts can offer immediate relief.
- Uncertain ROI: Marketing ROI can be vague, especially in small businesses without strong analytics. If it’s unclear how much return the business gets from marketing efforts, it becomes an easy target for cuts.
- Focus on Core Operations: In a crisis, businesses may prioritize core functions such as customer service, delivery, production, etc., rather than prospecting for new customers. Marketing is a long-game strategy and less urgent than meeting current obligations.
The case for Keeping Marketing Until the End
- Marketing Drives Revenue: The most fundamental argument against cutting marketing is that it fuels the sales pipeline. Revenue cannot rebound or increase if customers don’t know about a business, its products, or what it offers. Reducing marketing expenses may provide short-term relief but can worsen long-term financial problems by shrinking a business’s customer base and reducing visibility to prospective customers.
- Increased Opportunities: If a general economic downturn contributes to cash flow problems, competitors are probably in the same dilemma. If a business continues marketing while others go silent, it has a greater chance of capturing more market share.
- Rebuilding Momentum: Marketing is not just about immediate sales. It is also about building brand recognition, customer trust, and momentum. Once that momentum is lost, rebuilding can take significant time and resources. A marketing “blackout” could mean customers forget that the business exists.
- Retention Over Acquisition: Even if new customer acquisition is not financially feasible, marketing is still vital for customer retention. Marketing keeps existing customers engaged and coming back, which is more cost-effective than acquiring new ones.
Optimize and Refocus Marketing
- Shift to Low-Cost, High-Impact Channels: Not all marketing requires big budgets. Social media, email blasts, referral programs, blog posts, videos, etc., can build long-term value.
- Double Down on Customer Retention: Focus marketing efforts on strengthening relationships with current customers. Loyalty programs, thank-you emails, feedback surveys, and exclusive offers can boost repeat business and word-of-mouth.
- Continuous Measurement: Every dollar matters during a cash flow crunch. Tracking the return (as much as possible) on every marketing activity is crucial. Then, the results can be used to eliminate or scale back efforts that don’t yield measurable returns and increase reliance on those that do.
Marketing as an Investment
Always remember that marketing should be an investment and not an expense. If marketing does not yield an ROI (return on investment), then it becomes an expense, and during a cash flow period, problems should be eliminated or changed. In times of financial strain, it is easy to view all outgoing money as expenses, but not all expenses are created equal. Some expenses, like marketing, are essential for generating a business’s cash flow to survive. Rather than asking, “Can we afford to keep marketing?” a better question might be, “Can we afford not to have marketing?”
Conclusion
When small businesses face cash flow problems, cutting costs is inevitable. The key is to be strategic. Don’t spend unthinkingly, trim expenses that are not essential, and continue to maintain visibility with the target audience. While marketing may seem easy to reduce, doing so can have long-term consequences (positive or negative). Marketing is an engine for growth, visibility, and customer retention. In business, out of sight truly can mean out of mind.