One of the CFO Services available to my clients is an expense review. During this analysis I look for alternative vendors with more value or negotiate with existing vendors for lower pricing. No matter how good the CFO is at cutting expenses, I have never seen a P&L with zero expenses. Eventually, you are going to need sales growth.

A troubling trend that I am seeing is that business owners are starting to cut more effective advertising and putting off new promotions that they believe will be effective.  Cut elsewhere but not advertising and marketing unless it is determined to be totally ineffective. As a CFO, I am well aware of the risks involved in advertising and marketing.  However, I am also aware that businesses owners cannot retreat forever or they will retreat right into bankruptcy court.

When someone either cuts more effective advertising and marketing or passes on a new advertising and marketing idea that they really like, I am reminded about the story of the Hot Dog Vendor:

A Man lived by the side of the road...and sold hot dogs.



He was hard of hearing, so he had no radio.  He had trouble with his eyes, so he had no newspaper. But he sold good hot dogs.

He put up a sign on the highway, telling how good they were.  He stood by the side of the road and cried, "Buy a hot dog, mister!"  And People bought.

He increased his meat and bun order, and he bought a bigger stove to take care of his trade. He got his son home from college to help him. But then something happened. His son said, "Father, haven't you been listening to the radio? There's a big Depression on. The international situation is terrible, and the domestic situation is even worse."

Whereupon the father thought, "Well, my son has gone to college. He listens to the radio and reads the newspaper, so he ought to know." So, the father cut down on the bun order, took down his advertising sign, and no longer bothered to stand on the highway to sell hot dogs.

His hot dog sales fell almost overnight. "You were right, son,” the father said to the boy. "We are certainly in the middle of a Great Depression."

If the business is cutting into advertising and marketing because it is ineffective, that is one thing.  However, if the business is cutting more effective advertising and taking a pass on new advertising opportunities that they believe will be effective, they need to re-think that!