Marketing Automation - SharpSpring

In this newsletter to my fellow paying members, I will discuss:

  • Marketing Automation and what I have learned so far covering SharpSpring

  • Why this theme is something I think will pick up in the next three years

  • What are digital ad agencies

  • What are some risk factors with the business


What is Marketing Automation?

Let us use a real life example. You own a small wood shop, you have been around for a three to five years and you notice sales are becoming stagnant. Where did the top line growth go? How can we get the sales men and women to start generating leads and convert those leads into sales? In comes SharpSpring. Now, the goal is not to replace the sales workers, but instead smooth the process out and generate leads through:

  1. Email marketing

  2. Social Media

  3. Digital Advertising

  4. Nurturing

While we generate the leads, the hope is that those leads then turn into revenue for the wood shop. The SharpSpring platform connects to a CRM (Customer Relationship Management), which is why Salesforce owns competitor Pardot, and this helps track customer data to drive automated engagements. The goal is to close more deals, and accurately measure the marketing Return on Investment. We always want to have a solid ROI, right?! What is the value in investing if we see no ROI.

As with any software, SharpSpring is a tool for sales and businesses to use to become more efficient, key word here. I have read through Salesforce website on Marketing Automation, and I read through SharpSpring on Marketing Automation. Gathering my thoughts is sometimes difficult. There are numerous benefits of Marketing Automation for businesses and here are a few..

The M.A. can help generate more leads, and potentially move the leads more quickly through the pipeline to close the deal. (Who needs a cold call?!). The software also engages the buyers, utilizing personalized campaign emails and marketing. Now for the important part, to fully understand if the software is working we have to have a Return on Investment, so we can monitor one step at a time to fully grasp the ROI.

What I have learned so far covering SharpSpring, not only the volatility of the price of the stock, but I have learned a whole new corner of the market. I never really knew or heard of Marketing Automation, and if I had to guess I would have guessed it was here to REPLACE sales people.. exactly the opposite! SharpSpring believes themselves to be a "revenue generator" for a business, helping sales people from start to finish! Coming out of COVID I can see how this could be a huge secular tailwind and hopefully SharpSpring capitalizes on gaining market share given they are going back to 2019 levels of Sales and Marketing spend.

Out of all Themes in the Global Marketplace, Why This One?

This is a great question, and my paid members get the answer. Look, people think I am rude when I tell them I cannot answer that, paid members only. I am defending you all that read this and pay for my research, time, and thought process. I appreciate all of you.

We are coming out of an economic pullback, small businesses really got hurt during the government induced shut down. Coming out of COVID-19, businesses are going to need to generate revenue.. not just any business, small business! This is a play on small business re-opening, spending, and generating revenue! Not only current businesses, but new businesses that have been created during the economic downturn. If you read my previous posts, you would know that SharpSpring targets really small businesses. I will talk more about this under the "Why SharpSpring" section. Yes, my answer to "why this theme" is really THAT simple. Take a read of this article, and you will see where I am coming from!

What are Digital Ad Agencies?

Ok, you have to bring in sales right? There are numerous kinds of Digital Ad Agencies if you decide to look into it more, but basically what they do is provide a service for online marketing. They know where the trends are, how to go about those trends, and the tools you need to succeed. So it absolutely makes sense that SharpSpring partners with the Digital Ad Agencies to then sell to customers, they have BOTH Direct Customers and Digital Ad Agencies. That was easy.

Risk Factors?

As with any business to study or invest in, there are risk factors. Nothing is perfect. With a micro cap ($200m market cap) company like SharpSpring, I actually think the risks are much greater allocating capital towards them. There is much less news flow, not much analyst coverage, and you have to really think outside the box to invest in the business. Look where others are NOT!

Example, you may see 10 articles and write ups on Apple per day, where SharpSpring the news flow lacks, it is less liquid, and moves up and down each direction in irrational ways, and maybe 1 article every 3 months, IF that. I feel like I am the only coverage on it.

A few risks I noticed in the most recent 10-k revolved around the auditor of the business, Cherry Bekeart LLP, I have not heard of them nor are they the big four. A brief look at their website, they seem the second largest certified public accounting firm, HQ'd in the Southeast. As I study small caps more, I feel this may be a recurring theme with lesser known accounting firms and not the big four, I am going to have to ask around and dig deeper.

What I found interesting is that even during COVID-19, SharpSpring was able to put up 29% growth on their top-line. Applying for the SBA loan as a public company is "meh" in my eyes, but it is another source of cash for them to burn, of which they have $29m they are set given they burned ($2.85m) in 2020. I think they can put up 25% top line growth, if not more if they can capture the tailwinds of new businesses.

This investment is not for the people who stare at their screen everyday and think stocks only go up, this one may take time as we evaluate execution. They have strong 2021 tailwinds, if execution feels weak to me we will have to make a decision.

I hope everyone is enjoying the write ups, I feel the posts have become way better and quicker to the point.

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