Cutting marketing can make a company’s financials look better in the short term while quietly damaging the growth engine that gives the business its value. In this solo episode of Leaders & Legacies, Craig Andrews explains why marketing is not simply an expense to trim when conditions get tight.

Craig begins with Henry Ford’s reputation for frugality and the warning attributed to him: cutting advertising to save money is like stopping a watch to save time. He compares common marketing budgets with the heavier investment made by highly visible firms and explains why sustained spending creates familiarity and future demand.

A former client provides the sharper lesson. After marketing helped triple revenue by tens of millions of dollars, the company stopped the work while preparing to be acquired. Revenue then fell by half in one year and by half again the next. Craig connects that result to what M&A buyers notice when a seller suddenly cuts personnel or marketing: the asset’s future trajectory may be weaker than its current numbers suggest.

The answer is not indiscriminate spending. Craig distinguishes short-lived transactional campaigns from relational advertising that builds an emotional bond and activation advertising that moves that relationship into action. Leaders who protect the right marketing investment can preserve growth, differentiation, and business value instead of trading tomorrow’s momentum for today’s expense reduction.

Key Points with Timestamps

• 00:00 - Craig opens with the story of the team and freelancers who kept his business moving during his coma.
• 00:51 - Henry Ford’s frugality sets up his warning about cutting advertising to save money.
• 02:06 - Marketing is often the first expense cut when business gets tight, even though it supports future growth.
• 03:16 - Craig compares typical wealth-management marketing budgets with Ken Fisher’s much larger investment.
• 04:12 - A former client tripled revenue with sustained marketing before deciding the work should run by itself.
• 05:16 - The client’s attempt to improve acquisition numbers by cutting expenses damaged its revenue trajectory.
• 05:40 - M&A buyers scrutinize sudden cuts to personnel and marketing because they can weaken the asset they are buying.
• 07:14 - Short-term profit gains can come at the cost of the lifeblood that grows the business.
• 07:49 - Craig reviews marketing-spend benchmarks ranging from 2.5 percent to roughly 15 percent.
• 09:02 - Transactional marketing can burn out quickly, especially in a high-relationship business.
• 09:30 - Relational advertising builds an emotional bond, while activation advertising puts that bond into motion.
• 10:17 - Craig closes by urging leaders to think carefully about what they invest in marketing.

Links

Want to learn more about Craig Andrews’ work at allies4me? Check out his website at https://allies4me.com/.

Connect with Craig Andrews on LinkedIn at https://www.linkedin.com/in/craig-andrews/.

Think you’d be a great guest on the show? Apply at https://podcast.allies4me.com/podcast-guest/.

Transcript

00:00:05.20 - Craig Andrews
I was in a coma for six weeks while the doctors told my wife I was going to die. When I woke up, she told me the most fantastic story. My team kept running the business without me. Freelancers reached out to my team and said, we will do whatever it takes. As long as Craig's in the hospital. I consider that the greatest accomplishment in my career.

00:00:30.23 - Craig Andrews
My name is Craig Andrews and this is the Leaders and Legacies podcast where we talk to leaders creating an impact beyond themselves. At the end of today's interview, I'll tell you how you can be the next leader featured on this show.

00:00:51.10 - Craig Andrews
One share some of the wisdom of Henry Ford with you. He built, obviously, one of the largest car companies in the world and is still remembered today for his genius. And he was extremely frugal, but he also knew where to spend money. So you may have heard the term floorboards used to be very common. I don't know if it's used anymore, but when I was growing up, people talk about the floorboards in the car.

00:01:18.26 - Craig Andrews
And the weird thing is, when you looked at the bottom of the car, there was no floorboards. It was, you know, kind of a there was a rug and then there was steel and what have you. Well, the origin of that term goes all the way back to Henry Ford's day. And in cars, they actually had boards across the bomb that was the floor of a car was boards.

00:01:41.10 - Craig Andrews
And Henry Ford, when he had parts delivered to his factory to make cars, he would not only specify the parts, but he would specify the crates. He would have the crate sized to be at the length of the boards he needed for the floors in his cars, so he didn't have to pay anybody to cut the boards. And it saved him money, so he was frugal.

00:02:06.06 - Craig Andrews
But here's what he said about advertising. Henry Ford said those that would cut at ad spend in order to save money are like those who would stop their watch to save time. Now think about this. We have somebody who's incredibly frugal, but he sees the importance of advertising, the importance of marketing. And I you know, when the economy heads south or business gets tight, usually the first thing that people cut is marketing.

00:02:45.02 - Craig Andrews
And I of course, I feel that directly, but that's not the point of this video. The point is the health of your company, because Henry Ford was right. And as one of the privileges of podcasting is I get to talk to a diversity of people. And I was talking to someone yesterday who's a fractional CFO. He goes around and he helps businesses achieve 60% profit margins.

00:03:16.12 - Craig Andrews
He also tells them you need to spend 15% of your top line revenue on sales and marketing. Now that sounds wild. That sounds extreme because there are some industries that spend little to none. Wealth managers, for example, an average firm with more than a quarter billion dollars in assets under management, they spend about 2.5% of revenue on marketing.

00:03:43.05 - Craig Andrews
Now, most people know Ken Fisher, with Fisher Investments have a variety of feelings about my personally think, his whole line of we're different, we're fiduciary. I think that's weak marketing. But you know what? He consistently spends 6% of his top line revenue on marketing. And so the people the reason people remember them is right now, that's somewhere around $265 million a year that he spends on marketing.

00:04:12.17 - Craig Andrews
He spends a quarter billion dollars a year or marketing. And, and obviously it works. Everybody knows him, knows the name. And that's the thing is, when you cut that, you're cutting into your future growth. Now, we had a client years ago that we took on, and we worked with them at a year and a half, and we tripled their revenue by tens of millions of dollars in that year and a half, tripled the revenue by tens of millions of dollars.

00:04:52.09 - Craig Andrews
And the the client came to me once and said, well, Craig, you have all the marketing set up. Shouldn't just run from here. I'm like, no, that's not how marketing works. Yeah, marketing, the job of marketing is never done. Well, he disagreed and he, he cut us loose the next year. His revenue cut in half. The year after that, his revenue cut in half again.

00:05:16.00 - Craig Andrews
Now it turns out one of the things that they were doing was they were trying to get ready to be bought. And so they were just cutting all sorts of expenses because they thought that would help the numbers. Well guess what? As I said a few minutes ago, I talked to a broad range of people on. I have two podcasts, Leaders and Legacies and Fiduciary Alchemy, and I talked to a lot of people through those podcasts.

00:05:40.03 - Craig Andrews
And some of the people I talked to are M&A brokers. And I have one in particular who's pretty significant M&A broker, who told me, he said one of the things that they look at when they're valuing a company is sudden changes in expenses, especially in personnel and in marketing. Well, the reasons really basic, the reason that they're worried about that is they're buying an asset and they're wanting to make sure that that asset grows in value.

00:06:20.14 - Craig Andrews
Well, if you go in and you cut personnel, the people who help build it are no longer there to continue to help build it. If you cut marketing part of the growth engine that was giving it, it's trajectory that's just been cut off. If you think back to the example, my, you know, former client, they the year that they cut a sluice or the year after their revenue cut in half the year after that, the revenue cut in half again.

00:06:45.25 - Craig Andrews
And so that's what happens when you cut out marketing. And the M&A folks know this. They're like, wait a minute. If you're going to cut that, we're going to devalue what we're going to spend for your company because we want to buy an asset that's growing in value. And so it really comes back to Henry Ford's statement. Those who would cut advertising to save money, or like those who would stop their watch to save time.

00:07:14.13 - Craig Andrews
It doesn't have that effect. And yes, you may see a short term cut, you know, a short term boost in profits, but you're cutting off the lifeblood that's ultimately going to grow your business. And so those are just a few thoughts. Now let me wrap up by talking budgeting what people spend on marketing. Wealth managers. According to Schwab's annual RIAA survey, firms with a quarter billion in assets under management or more, they spend about 2.5%.

00:07:49.28 - Craig Andrews
I'm just going to say that's that's not enough. That's too low. Ken Fisher spends 6%. He's come out and said that multiple times. The, Small Business Associates Association said your average small to midsize business in the services spends between 6 and 8%. There was a study by KPMG that shows that now there are obviously serving larger companies, but they're spending about 15% between 13 and 15%.

00:08:30.20 - Craig Andrews
Well, that lines up with a fractional CFO that had on my show. And, that episode will be coming out shortly. He tells his clients to spend 15%. That's where they need to target spending on both sales and marketing. And by the way, he told me about one of his clients that he took from 300 K in revenue, up to 40 million in revenue in four years, in four years.

00:09:02.05 - Craig Andrews
And that's how it works. So anyway, I'll leave you with that. As you're looking at the plans now, one caveat and I'll address this in another episode and other video is when you're buying marketing, a lot of people buy marketing and it doesn't work out as well as they had hoped. Probably you're buying transactional marketing or some type of direct response.

00:09:30.05 - Craig Andrews
You run an ad, you want response, and those work for short period of time, and then they burn out or they don't work at all if you're in a high relationship business. And so what you really want to run are relational ads in conjunction with activation ads. The relational ads create an emotional bond between you and your prospect, and then the activation ad puts that into motion.

00:10:05.18 - Craig Andrews
And those work a lot longer. They last a lot longer. But again, that what will go into that in another video. But think about what you're spending on marketing.

00:10:17.20 - Craig Andrews
Ken Fisher, who's seen as wildly successful, spend 6%, according to Small Business Association. Your average small to mid-sized business spends between 6 and 8% in the services business, and this fractional CFO, it lines up with KPMG 13 to 15% on sales and marketing. All right. Well good luck to you.

00:10:51.15 - Craig Andrews
This is Craig Andrews. I want to thank you for listening to the Leaders and Legacies podcast. We're looking for leaders to share how they're making the impact beyond themselves. If that's you, please go to Ally's for me.com/guest and sign up there. If you got something out of this interview, we would love you to share this episode on social media.

00:11:15.11 - Craig Andrews
Just do a quick screenshot with your phone and text it to a friend, or posted on the socials. If you know someone who would be a great guest. Tag them on social media and let them know about the show, including the hashtag leaders and legacies. I love seeing your posts and suggestions. We are regularly putting out new episodes and content to make sure you don't miss anything.

00:11:38.23 - Craig Andrews
Please go ahead and subscribe. Your thumbs up. Ratings and reviews go a long way to help promote the show. It means a lot to me. It means a lot to my team. If you want to know more, please go to Ally's for me.com. Or follow me on LinkedIn. Thanks for listening. We'll see you next time.