I Spent More Than $50,000 Buying Leads. Here's What It Taught a Former Business Banker About Risk.

Series 1: Article #1 of 8 by: Daphne Balcazar

To continue Series 1: Articles 2-8 I Spent 15+ Years Banking Business Owners. Then I Became One.

The first $1,000 I risked on my own business felt like I was putting my life on the line. Not just mine. My kids' too. Logically, I knew that wasn't entirely true. I had spent years in banking. I understood credit, cash flow, profitability, risk and return on investment. I knew how to analyze whether putting money into something made financial sense. But this time, there was one significant difference: It was my money.

And, relative to what I had available at the time, the amount I was investing felt enormous. I remember thinking: What if nobody buys? That's when I began learning something that would change the way I thought about business risk. There is a difference between analyzing someone else's risk and feeling the weight of your own.

So, I did what my banking and sales background taught me to do. I learned my numbers. When I first started purchasing leads, they cost me a little over $1 each. I knew that, conservatively, out of every 10 leads, I might make meaningful contact with three or four. Two might move forward. One might close. As I grew, I tracked everything. A typical $1,000 investment might generate approximately 100 leads. Perhaps I'd connect with 25 that month. Around 12 might move forward in the sales process. Conservatively, six might close. My packages ranged from approximately $300 to $1,000, with my average sale around $750. Six new clients at $750: $4,500 in new revenue from a $1,000 lead investment.

That represented only one source of business. It didn't include repeat clients. Referrals. Other lead sources. Speaking. Consulting. Or additional revenue opportunities. Once I understood the economics, I wasn't simply spending money anymore. I was allocating capital.

Daphne Balcazar

Eventually, there were months when I invested approximately $5,000 in leads. Some of those investments generated more than $30,000 in revenue. Over time, I spent more than $50,000 acquiring customers. One of the lessons I learned was almost funny: If the economics work, sometimes your biggest problem is wishing you had even more money to invest. Then, something happened that every entrepreneur eventually experiences. What worked stopped working.

The same types of leads that once cost me a little over $1 can cost $10 today. Some can reach $50. And they may still be cold leads. At one point, a company I relied on began charging considerably more while the quality of its leads deteriorated. Eventually, there were times when I spent money with that company and generated virtually no return.

Fortunately, I knew quickly. I had started with spreadsheets and eventually progressed to a CRM with reports and tracking tools. The numbers were telling me: Something has changed. And I knew I needed to change with it. But knowing and executing are two very different things. That's a lesson I already knew as a banker and still had to learn as an entrepreneur.

Daphne Balcazar

I was running two businesses. Raising two boys. Volunteering. Managing clients. Generating leads. Selling. Providing services. Learning marketing. Managing technology. Working on branding. Experimenting with Meta ads, funnels and newsletters. Learning AI. At times, between business and personal responsibilities, I was working close to 20 hours a day. I knew what I needed. More people. I had a couple of part-time 1099 employees, but it wasn't enough. I should have built more infrastructure and delegated more. I knew that.

I'd seen business clients encounter the same problem during my banking career. Businesses can actually grow themselves into trouble. I hesitated. Why? Because I had become accustomed to investments producing relatively quick returns. Hiring people was different. I would have to invest today knowing the return might take considerably longer. So instead, I tried to do too much myself. That was a mistake and perhaps one of the most important things entrepreneurship taught me was this: Knowing the right business decision doesn't guarantee you'll make it.

Business owners are human. We become comfortable. We get tired. We become attached to what worked before. Sometimes we know what needs to change and postpone changing it anyway. That's why a great business banker can be far more valuable than someone who simply knows how to structure a loan. Sometimes, the business owner needs someone willing to ask the question their client is avoiding.

Business owners who know their numbers have an enormous advantage. I've always believed that. Today, I believe it even more strongly. A business owner who understands their numbers knows where they are, what's working, what's changing and what decisions need to be made. A business owner who doesn't know their numbers? It's like throwing darts without a target. Maybe you'll hit something, but you're not building a strategy. Eventually, that catches up with you.

There's another distinction I think gets lost frequently: Revenue isn't profit. Someone can say: “I have a million-dollar business.” My next question is: What did it cost you to generate the million? Payroll. Marketing. Rent. Software. Inventory. Contractors. Debt service. Insurance. Taxes. Customer acquisition. Equipment. Those numbers matter. What's left? Because annual sales tell me the size of the top line. Profit tells me something much more interesting about the business. And numbers always tell a story but you still have to ask why.

Suppose a banker looks at a business and says: “Revenue is down. I don't think we should lend to them.” My response would be: Why is revenue down? What exactly are you looking at? It's August. Are you evaluating last year's tax return, or have you reviewed the current P&L? Is the business seasonal? Was there an unusual expense? A lawsuit? A distribution? Did the owner intentionally discontinue an unprofitable product? Did the market change? Did customer behavior change? Did the company make an investment that temporarily affected earnings? The number is the beginning of the conversation not the end of it. That's why questions matter.

In fact, I almost never believe the first problem someone gives me is the entire problem. I've seen this in banking. I've seen it in business consulting. I've seen it in coaching. A business owner comes to you and says: “Here's my problem.” Maybe. But I still want to ask questions. I sometimes compare it to going to a physician. Imagine walking into the office and saying: “Here's my diagnosis. Here's what's causing it. And here's what you should prescribe.” Then why did you need the doctor? Yes, today we all have Google. We have AI. We have access to more information than at any point in history. But information doesn't eliminate the need for expertise.

Sometimes, it makes the right questions even more important. The business owner's responsibility is to provide information. Our responsibility as advisors is to know what to ask. COVID showed me how dramatically the story behind the numbers can change.

Before COVID, I traveled considerably more and met clients face-to-face. That required travel expenses and, perhaps more importantly, time. Then, the world changed. Phone and virtual meetings became normal. Suddenly, I could serve clients without losing hours traveling between appointments. My costs changed. My capacity changed. My profitability changed. The COVID years became some of my strongest financially. Then, the environment changed again. Prices increased. Consumer spending behavior changed. The cost and quality of leads changed. But I saw another opportunity.

Companies were spending. So, I expanded further into speaking, facilitation and workshops. A speaking lead might cost $50 or $60. Much more expensive than the leads I had historically purchased. But a speaking engagement could generate anywhere from approximately $1,000 to $10,000. Again: Price means very little without understanding value and return.

The same thinking led me into another business. My sister and I once decided to take our children on an RV trip. We rented one. It cost us close to $2,000 for roughly five days. Later, my boys and I took another RV trip. Same thought: This is expensive. Then, the entrepreneur in me started asking questions. What if I bought one? We could use it ourselves. I could rent it occasionally. It could provide another source of income during slower periods in my primary business. I researched the market. Ran the numbers. And financed my first RV.

I thought I'd created a little passive income. Instead, it was booked almost the entire year. Eventually, I bought another and grew again. What started as diversification became another business. And when another revenue stream later slowed, that business helped balance me out. That's one reason I believe strongly in understanding the whole business. Markets have seasons. Industries have seasons. Customers change. Economic conditions change. A good strategy isn't one that never changes. A good strategy recognizes when it needs to. But diversification doesn't eliminate risk. My RV business eventually taught me that too.

The business was doing well. I didn't want to sell it. In fact, I realized I had an advantage over many competitors because I understood business, not just RVs. I understood pricing. Marketing. Sales. Customer acquisition. Financial management. Operations. Then came the event I hadn't planned for. My RVs came back totaled. Not needing minor repairs. Totaled. Because of the circumstances, insurance did not cover the losses the way I had expected. The economics changed almost overnight. I ultimately sold the business. I was still profitable overall.

I didn't sell because the underlying business model had stopped working. I sold because the risk profile changed. There's an important distinction there. Selling, downsizing, eliminating a product, or closing a business isn't automatically failure. Sometimes, the smartest business decision is recognizing when the equation has changed.

Today, if a business owner came to me and said, “I need $100,000 to grow, ” I wouldn't begin with the $100,000. I'd begin with: “Why do you want to grow?” The obvious answer might be: “To make more money.” Okay. Why? What's the vision? What's the mission? What are you trying to build? What have you done so far? What's working? What's not? Do you have a plan? Do you have the people and infrastructure to support the growth? What happens if you grow faster than expected? What happens if it takes twice as long? What happens to your life if you accomplish exactly what you're asking me to help finance?

Years ago at Wells Fargo, we called this “peeling the onion.” Keep asking. One layer reveals another. Because the first answer is rarely the whole answer. This is where I believe banks and credit unions have an enormous opportunity.

Financial institutions already know relationships matter. Most have relationship strategies. Sales processes. CRM systems. Client-experience initiatives. Training. Scripts. Goals. Dashboards. The challenge isn't always knowing. It's executing. You cannot script genuine curiosity. You cannot KPI someone into caring. You cannot create deep relationships simply by telling employees to “deepen relationships.” You have to hire the right people. Develop them. Know them. Understand what motivates them. Care about their success. Then teach them to extend that same curiosity to the people they serve. Because everyone matters. The employee matters. The business owner matters. The member matters. The community matters. Deep client relationships are often the downstream result of deep employee relationships.

People who feel seen are much better equipped to see others. And that's why I believe business owners need bankers who ask questions. Not simply bankers who have answers. A business owner may not know what financial solution they need. They may not even understand the real problem yet. They know their business. They know what they're experiencing. They can give us the information. But our responsibility is to ask enough of the right questions to uncover what that information means. Then we can offer a solution. That's the partnership.

After spending more than $50,000+ acquiring customers, building multiple revenue streams, adapting through changing markets, growing businesses, making mistakes, experiencing losses and making decisions with my own capital at risk, I understand that partnership differently than I did earlier in my banking career. The banker needs the numbers. The business owner needs to know the numbers. But both need to understand the story behind them.

The first $1,000 I invested in my business felt like I was putting my family's future on the line. Years later, I understand why that feeling mattered. It taught me something no spreadsheet ever could: Capital isn't just money to the entrepreneur sitting across from you. It can represent their children's security. Their employees' paychecks. Their dream. Their independence. Their second chance. Their future. And sometimes their entire life's work.

That's why I believe the responsibility of a business banker goes far beyond knowing products. Entrepreneurs need us to ask the questions they may not know to ask themselves. Because when we ask the right questions, they can give us the information. And when we truly understand the information, we have an opportunity to do something much more valuable than sell them a product. We can help them find the right solution.

By Daphne Balcazar

To continue Series 1: Articles 2-8 I Spent 15+ Years Banking Business Owners. Then I Became One.