Even if money did grow on trees, we would still be faced with decisions in business (and life) that cost us revenue or income, all the time. Really, the only question is to what degree or how much.
In economics this is referred to as ”opportunity costs.” It is the ”loss of potential gain from other alternatives when one alternative is chosen.” In other words, when we make a choice, we lose the value (however defined) of having made other choices.
Business owners and managers are faced with opportunity costs nearly every day. This is perhaps most acute in terms of hiring new employees – especially salespeople. The churn rate in sales averages about 28% a year, meaning if you hire four salespeople this year you are nearly certain to end the year with only three. As we all know, the time and costs associated with hiring salespeople are high. A quick Google search turns up a range of $120k to over $1 million per year, depending on the industry. These costs include salary, benefits, training and lost productivity (meaning new sales!) What seems to go unnoticed or under-appreciated, is the fact that the costs of generating sales -in the short-term- is likely to exceed the revenue from new sales, meaning your short-term ROI is negative or neutral at best. It’s a major challenge.
Media properties and publications face these same costs and challenges. Increasingly, print publications have turned to ”off the page” or alternative revenue sources; these include events, sponsorships, buying clubs, in-house marketing businesses, etc. Nevertheless, there is one alternative source that doesn’t require an upfront investment of time and resources, the opportunity costs are low and the short-run ROI may well compete with the hiring of a new sales rep.
At Mediabids, our alternative revenue, print advertising service has an upside potential (like other alternatives) but without the high opportunity and hard costs of other options. You simply select the ads and tell us the size/specs. You run the ads in your pages. We then pay you for the response. It’s that simple!
We have several publications (particularly the ones that view our service as a true alternative revenue source) that generate over $100k a year. Keep in mind, this revenue is virtually cost free and relative to the costs of other alt revenue options (or the option of hiring a new salesperson), the short-run ROI is tough to beat.
Even if money is growing on trees, at your organization, the opportunity costs of alternatives to Mediabids’ alternative revenue, print advertising, are likely to be unnecessarily high. If you’re considering the pros and cons of your options in the alt revenue space, be sure to include short-run ROI among the variables to be evaluated.
Post by Jim Jinks.