In this webinar Business Value Academy co-founders Jeff Meziere and Cory Miller walk through determining the value of digital marketing campaigns, including how to value a lead.
We help you calculate these values in the webinar:
- Lead value
- Target spend per lead
- Target customers needed
- Lead target
- Campaign budget cap (max spend)
Jeff Meziere is a CPA, as well as a Virtual CFO. Schedule a free 30-minute coaching call with Jeff to discuss your business.
Machine Transcript – Part 1
Cory Miller 00:01
Welcome to a BusinessValueAcademy.com webinar. Today I’m excited to be talking about the value of a lead exercise, Jeff and I, my name is Cory Miller, co-founder of business value Academy, my partner in crime over here, Jeff Meziere, will be talking through the value of a lead exercise and the worksheet now, I don’t know, Jeff, the start this conversation started like a month ago, probably when I came to you and I said, you know, put just background hyou know, he’s been a CPA, I trade in licensure. But he’s an amazing entrepreneur, but he has this analytical mind that I can pose these big questions and, and he can help me think these through and we’ve done some amazing, like work the last couple of weeks on this. So I’m pumped to share that with you today. One of the things was I said, I think I said to you, Jeff, I said, What is the value of a lead? And you’re like, Okay, I’ve got 15 questions for you. And let’s talk it through. So the value of this today is having a CFO for hire, tap, and I happen to have a partner that does this for a living, and being able to work through like, you know, the conversation about how to actually do this and get a spreadsheet, we’re going to be sharing that spreadsheet fairly soon with you. And so I love having what Jeff calls data decision making, instead of just relying on hunch and instinct, you know, through data, and how to pair that with your hunch, to make really good conversations. So Jeff, you want to share a little bit of what we’re doing? I know you’re going to be sharing this spreadsheet here in just a second for that.
Jeff Meziere 01:42
Yeah, absolutely. I think in, in my work that I’m doing right now, virtual CFO as a service offering. Everything always starts with a question, right? There’s one question and then we peel back the onion and uncover it and get down to where the value is for a client. And this question was a lot of fun actually, in in, in exploring this topic, we hear a lot of buzz out there about lead value. And so spending some time getting to this, it was eye opening, not only from a client perspective, but also from personal perspective, thinking through the business value Academy, ourselves and our service offering and price points. And what it takes to actually, you know, attract a lead, and what we’d be willing to spend for a lead. So for me, it’s all about best practices, and starting out with a plan. And today, this session is really all about doing exactly that. So no battle was ever won, according to plan, but nobody was ever won without ever having one. And I think that’s what today is all about is kind of starting out with a plan, seeing what it is that you would want to spend money where you would want to spend money, understand the value of the lead. And a good CFO can help you start to frame some of these questions and establish these baselines in not just marketing campaigns, but a lot of different things. So that you define your success up front so that you can actually track and monitor it. So why is this worth your time today? Well, if you’re still guessing about how much you should spend to get a lead, I think that we’ll be able to answer that question for you today. And if your marketing spend is more of like a guessing game, and not necessarily relied upon using facts and data to to drive those decisions. If it’s more of a gut decision and how you feel, I think you’ll get a better understanding of where a financial mind goes and helping you analyze to make some of those decisions. So I’m ready to share a screen and get in I know that I kind of geek out on spreadsheets every now and then. But I’m ready to to to share the document and move forward. Are you ready to do that now?
Cory Miller 03:49
Yep, go for it. Go for it.
Jeff Meziere 03:54
All right. So let’s get in here. Cory, do you have that link? Can you share that link with everyone so that they can actually pull it up on their own if they’d like?
Cory Miller 04:05
And yes, I’ll do that right now in the chat, everybody. And if you have questions, please use the q&a button at the bottom of the zoom app right here. Or the chat. We’re here for you today.
Jeff Meziere 04:16
We like to do that. So if we ever need to come back and be like, What did they say? Or we’re confused about something or campers.
Cory Miller 04:26
And then we Okay, Jeff. They’ve got the link to the script spreadsheet right now.
Jeff Meziere 04:31
All right, sounds good. Well, listen, let’s just jump in here real quick. I’ve shared my screen. We’re looking at pre campaign digital marketing planning, right. So really, this exercise is about establishing some baseline expectations. I think I’ve already said that. Out of this today. The only thing that we really need from you at this point in time is the data input for two things. And that one being what is the average sales per new customer. That’s that lifetime value. The amount of revenue that you would anticipate getting from a from a new lead from a new customer. And then what is your sales goals, we’re going to ask those two questions. And out of that, we’re going to talk about five different elements, and five different things and angles that we can actually begin to develop a plan for our for our campaign of marketing. So our outcomes, we’re going to calculate the lead value, we’re going to estimate how much you could or should spend to get a lead, we’re going to know how many customers that would actually take to hit your sales goals. If you haven’t thought through some of these things. This is a really good opportunity to do that in advance. Right? So this is that pre campaign pre event planning that we’re doing, recognize how many leads it would take. So not only how many customers it would take, but also how many leads it would take to generate that? And ultimately establish a marketing campaign budget, right? How much money would it actually take to attract the number of leads that are required in order to convert those into customers. So without further ado, we have thrown in here some numbers. And at any point in time, if somebody wants to be a guinea pig, we can definitely use some real live data and help answer some questions real time. But here’s where we’re at, we use $350 as an average sale for a new customer. So this assumes that a customer comes in and is a one time purchase and purchases something and in a product type industry or company has a one time sale of $350. And then we never see him again. Or this is a customer that is a $50 recurring customer that might have a lifespan of seven months, right? So $50 a month times seven months, on average. There’s my lifetime value of this customer 350. Right. I’ve also typed in the sales goal and just estimated that at 150,000, we have two assumptions that are extremely critical in this. One is what is the goal conversion rate. Right? So what do you anticipate or hope industry wide? I think that people when we define lead, we say that we can typically convert 1% of our actual good qualified leads into customers. So 1% of the number of people who you know, visit our site or download an ebook, hit us up on a contact form, pick up the phone and call us. They’re making inquiry into our business. And that conversion rate, we’re going to assume right now, conservatively speaking at 1%. We hope that’s not the end game, we hope that we can help talk about some things that might that might help you improve that. But again, we’re going to start out with that as a baseline assumption. The second piece of this is the marketing budget threshold of how much as a percentage of your sale you would be willing to spend on marketing. Okay, so step one, let’s just talk about lead value. What is lead value? So lead value is my…
Cory Miller 07:59
Hey, Jeff, can I back up just a second? Yeah. So there was conversation, just wanted to add this commentary around the two assumptions. And this is where Jeff’s input really helped me. I was like, Hey, I just want to know, I want to throw a conversion rate out there for you. Now we sent said goal conversion rate one nuance Jeff helped me get to because this could be you know, the conversion rate you have for a contact form or a sales page for a software product or something. So there’s that. And that’s an essential just kind of made broadly and you can change that. Now, the second is the big one that you made Jeff, which was thinking through, you know, the first thought would be okay, I have a $350 project, just as an entrepreneur stepping back for a second, how much would you be willing to spend on that particular lead? Now we just put a base like 20%. But I was talking to Adrian, who’s in here just a couple of hours ago, and he was thinking through a much deeper question for you, Jeff, more nuanced, which is what you talked about, I think it was gross profit, like thinking about cost of goods sold, and all those fancy terms you used, and I’m like, hey, what does that mean again? But um, so I mean, that’s another way to think through this, right? This, we just put the, you know, we try to make it simple for you to kind of approach this but another way, Jeff is like to really think through what’s your margin on this particular product or service that you’re selling? Right?
Jeff Meziere 09:23
Right, right. Yeah. So let’s start out we’ll take this kind of step by step right. So the one is, let’s first start out and understand lead value. Lead value is this simple calculation of what is my average sales price times my goal conversion rate, okay. Which means that at 1%, that basically equates to 1% of my average sales amount. So every sales price times my goal conversion rate, that equals my lead value, and what that means I equate this to this. Let’s assume that my lead is defined by the number of times that my phone rings where people are picking up the phone to call me. Every time I hear that phone ring, as I’m walking around my office as an entrepreneur, I can think of in this example, there’s $3.50, right? There’s $4, right? There’s my lead value every time that phone rings, and it’s a new customer calling, you know, it’s ringing off the hook. And I’m thinking, Man, there’s $4. And there’s $4, and there’s $4. That’s a good indicator that of those people who are calling 1% of them will eventually turn into customers. So 1% of those phone calls equals your $350 that we’re talking about here. Okay, so that’s kind of what we’re getting to, as far as what does it mean, the higher the conversion rate, clearly, the more valuable that elite is. But we’ve, we’ve made this assumption, this baseline assumption at 1%. For purposes of exercise today, this is the fun thing of actually digging in. And actually, you know, getting some customization in working with a client is to better understand that. Now, this is all to say that we’re doing this in a pre planning campaign. If we know data, right, if we, as we know more data, and we know our own history and our own performance, we should update this for our next campaign. If our conversion rate is actually less than 1%, we’re not going to continue to assume 1%, if we actually in our organization, can’t perform up to that 1% level. And conversely, if we are performing better than 1%, let’s say three, four, or 5%, well, we want to go ahead and make that assumption and update this document for our next campaign to reflect our actual performance. Any questions on overall just lead value and kind of what that means. So now we want to get into this is some of that detail, Cory that I know, I kind of start to geek out on, but we start thinking about the target spin per lead. And I get to target spin Absolutely. And thinking of gross profit, net income and marketing spin as a percentage of sales. Okay, this is a conversation, we kind of got a little bit deep into the other day, but lead value times my marketing budget percent, equals my target spend, which means if my lead value here is $4, if I spend $4, to get a lead, and my revenue is $4, I’m probably going to lose money, because I’m pretty sure that everyone out there is going to have some cost of delivering the product and service, right? you’ve either got sunk cost of things that you’ve already done to make that happen and or continuing costs to get someone to come to your site. So that $4 mark is like my it’s not a breakeven number, it’s actually a breakeven of total gross revenue. But I still have to perform on delivering my product and service so that we want to take into consideration and so my thought and my question that I posed back, and that we would uncover in working with individual specific clients is what is our gross profit percentage, right? Some of us know, some of us might say, Well, my gross profit percentage is 50%. And my net income of gross sales is 15%. Okay, what is your line item that you’re willing to spend on your income statement as a percentage of gross sales, that number is the one that you need to be focused on as far as a marketing budget percent, to think of lead value at that percent. That’s the amount of money that you should be willing to spend or could spin to maintain the net income that you’ve had in the past? Am I saying that eloquently enough? I know that you sometimes ask questions back and forth. So am I saying Yeah,
Cory Miller 13:48
I know, I get it. But we’ve been through this has to do this quite a bit. We try to really work on their language here and match it up with, you know, either commonly referred to marketing terms or whatnot. But, you know, the principal goal is like, like you just said, Jeff is going back to that benchmark percentage of 20%. So how much are you willing to spend? That’s something you go, huh. Now, you can back that up by data. If you have some of the things you talked about Jeff, but to me, it’s kind of going down to Okay, if I’m going to do a google Pay Per Click campaign or a Facebook ad, this is really helpful because you don’t want to get bid prices wrong. You don’t want to pay more, you know, for a bid. And I should share what I’m meant to in the beginning, Jeff was like, I have a client who has an addiction treatment center. And their price point is large. It’s like in the new car and I’m not talking like a you know, what’s a cheap car? A base level Kia, we’re talking about like, probably in the Infinity level, you know, nice infinity. And so I was like, Oh my gosh, when somebody hits your contact form, how much is that worth? You want? somebody picks up the phone? How much is that worth to you? And so, this if they and they do pay per click advertising, by the way, is figuring out those bids. So you don’t overspend on something going down?
Jeff Meziere 15:05
Yeah, absolutely. A core, you actually bring up a good point, which is a good CFO would actually help you understand the value of each of those types of sales channels, right? So the value of a lead, and the amount that you may be willing to spend for a contact on your website, hitting up the contact form, or sign up for a newsletter, is probably going to be different than those that pick up the phone, I think you and I, in that specific example talked about, you know, a close rate of say, 30%, when someone actually takes the step to pick up a phone, I in that, in that case, I’d be willing to spend a lot of money, right, in order to be able to get someone to pick up the phone, who was an interested party, and a prospect of becoming a customer.
Cory Miller 15:49
Well, like in that instance, shift in this, this would go back to the goal conversion rate. But you know, the CEO of that center told me like 4030 to 40%, close rates on phone calls, well, if we’re just analyzing that channel, that changes things up a bit. And the reason why I did this is an entrepreneur since 2008, full time, right. And I’ve never done this, and I just went by, you know, whim and instinct, mostly whim, if I’m being honest, one year, I spent about $100,000 on Google ads, and didn’t even know what the conversion rate was. So again, back to virtual CFO, better decision making it with data, this is just propping up some things to go the exception. Now I want to say, also, we’ll have part two of this. If you’ve done a campaign, we’ll have a form, we’ll have a worksheet in about two weeks that you can have to actually look at a post campaign. This is before, most of us have never done this work. And by the way, I talked about digital marketing spent 10 years building the business on digital marketing, and didn’t do it to this level. So we wanted to give you a tool to have at least have something to have better data driven decisions. Okay.
Jeff Meziere 17:02
I think that I think the pay per click is an easy one for us to pretty much all of us understand, right? We’re we’re paying to get a click, and we only have to pay when we actually do get a click right. And those leads are coming in, and how well we convert those if we’re converting those at 1%. In our example, right? Would you spend $4? In a pay per click to lose money? I don’t think that any of us would, right? So it just gives you some data to understand is thinking through a plan in advance, right? establish a baseline measures, and then we’ll come back and actually put the results of the campaign compared to what are what our estimates were, and then we can find out and make decisions as we move forward.
Cory Miller 17:47
Yeah, I want to mention a couple of things. One is I put the link to this spreadsheet if you didn’t get it into the chat. And the second is, please ask your questions in the chat, or in the q&a button. And the third is I want to be prepping you we’re getting toward the end of this. If you want to be a live guinea pig, let us know if you want to work through a model. And here Jeff and I talked to you that we’d love for you to do that. So I just want to prepare you get that ready to go Okay, you only need two things by the way, customer lifetime value. And your so sales go and we can walk through this because we did this the other day actually Jeff for the keywords virtual CFO, we went over into where I could find, you know, cost per click on those particular keywords. And we’re pretty rad on about where our money was at?
Jeff Meziere 18:31
Absolutely. Okay, let’s get down into we kind of understand maybe a little bit better about what the target spend would be. here’s a here’s a quick exercise that I think many of us fail to actually do. And that is how many customers do I actually need in order to hit my sales goal, right? This could be for the year, this could be for this specific campaign. But again, I know what my average sales per customer is. And I know what my sales goal is. So if I take that sales goal, and I divide the average sale per customer, I know how many customers new customers I have to have in order to be able to meet that sales target, right. So again, this is just a real good example of, you know, the hundred and 50,000 divided by the $350 average sales price means that I need 429 new customers, right? How am I going to get those? Right? This is just a good habit upfront of saying this is the plan. I now can measure not just at the end of the campaign, but I can measure and track Am I on target and on pace for getting that 429 by the end of the campaign, right? So I at the end of the day can know, you know, as I can track and monitor my progress towards meeting my 429 customers. And I’ll know as soon as this campaign is successful, right? I don’t have to wait until the end. I can actually pivot really quickly. If I say I’m spending money, and I’m not on pace to get 429. What am I doing wrong? Right? I can I can eliminate some of that spend in the middle of the campaign if I had to. Right. So again, what does the 429 customers equate to as far as leads? Well, we just said that you’re going to convert on average that you can convert, and we’re using the assumption of 1%. Well, 429 is 1% of 42,000 customers, right? I have to have 42,000 leads in order to generate 429 customers. Does that making sense? I hope it is. So a good example of the lead target is unique sessions, right? within Google Analytics, pay per click campaigns, I can go to Google Analytics, and I can see, all right, I’ve paid for a click. And these are unique sessions of a customer of a prospect or a potential customer who comes and visits my site. So now I know that I need at least 42,000 of those 42,900 to be exact, right 42,000 of those in order to be able to convert 1% of those to paying customers. Once again, this is just something as far as a target that we can track and we can monitor throughout the campaign. Lastly, this is the last piece of information that we can get with those two numbers that we’ve done thus far, in this pre event planning, and that is, how much do I have to spend in order to attain those 42,900 leads, we’ve we’ve put this up here and said what our target spend is going to be right. And so we end up with what our campaign budget would actually look like. That’s what we’re looking for is what is our campaign budget. And I noticed in here that this probably doesn’t make a lot of sense. So I need to actually increase this real quick to make it because $1 times 42,000 is not $30,000. So the number is actually right, the budget is 30,000. But it is by taking the target number of leads, times the amount that we said that we would be willing to spend, which is that 20% of total sales, anticipated sales. Okay. So again, I’m just coming back to if I already know up front that I’m only willing to spend this is the good information and piece of this as I start to reflect on it. If I’m only willing to spend $5,000 towards a pay per click campaign, I’m never under a 1% conversion rate, I’m never going to reach my sales goal of 150,000. It’s impossible, right? Unless I do a better job of converting. But I’m only willing to spend 5000. That means that I’m one sixth of the way there. So you can take my sales goal and just recognize that I’m far off from from expectations. And again, anger and frustration are nothing more than unmet expectations. Right. So what are we doing to establish our baseline before we do something? And are we going to get frustrated on the back end with our with our ad campaign? consultants or whoever it is that we hire in in content leads and that sort of thing? Are we gonna get upset with them, because we want them to generate more revenue? Again, let’s get back to this expectations of what is realistic.
Cory Miller 23:24
So I posted in the chat who wants to be the live guinea pig. And if you have questions, we’re here for you. We didn’t want to belabor the point that the worksheet you got that we wanted to walk through it. But all right, Adrian wants to be the live guinea pig Adrian you want to come I’ll promote you up so you can talk? And by the way, I hope I didn’t I messed up some of the… I tried to help with some of the design of the spreadsheet. Hope I didn’t mess up your formulas earlier. By the way, Jeff. All right. I’m gonna pull Adrian up to be a panelist. Right, He should be here. Hey, Adrian.
Cory Miller 24:10
our newest member to the business value Academy
Yeah, signed up signed up like an hour ago.
Jeff Meziere 24:17
Awesome. Welcome aboard.
Cory Miller 24:21
So, Jeff, real quick, in Adrian, you talk way better about your own product. But, Jeff, you’ll recognize a lot of similarities with my past. Adrian’s got a WordPress plugin, essentially, that does marketing automation. I’ll let him explain it in further but so it’s a digital product, I think is where you’re going to talk about today. Adrian?
Yes. So I have a couple products I have Groundhog and I also have another business called MailHawk, which is a service similar to SendGrid if you’re familiar with them. But I guess today we’ll do it based on Groundhog because their numbers are a lot better.
Jeff Meziere 24:57
Okay, either one, either one.
Yeah, so I should I just like start off listing numbers or
Jeff Meziere 25:04
let me just, I think this is good exercise and it helps other people kind of understand how I work as a virtual CFO as well. So I’m just gonna start peeling back the onion and uncovering and poking in and asking questions, and we’ll talk about it to actually analyze what could be a potential campaign for you. So we’ll start out with what is the average sale per new customer.
So our average sale per new customer, our average product price is around $480, you can probably shave off about 15% of that towards discounts in our lesser plans. So I put it around the 400 to $420. Mark. So let’s just say 400.
Jeff Meziere 25:43
Okay, $400. And I like that, because you just said between 404 20. And I always say let’s go conservative, right. I’m a conservative kind of guy. So
this would be for one year renewal. Because we do have work. It’s it is a yearly renewing product, although we’ve only been around for two years. And a lot of the renewals haven’t actually come through yet because they didn’t start until like, last month, so they’re starting to come in. So we’ll hopefully we’ll see that number skyrocket as the renewals come in. But right now it’s around there.
Jeff Meziere 26:11
Okay, so let me just let me pause here real quick. So this $400 is the annual revenue the annual subscription currently correct. Okay. So again, we’re also using I’m just trying to point out here, we’re also using a very conservative number, because we anticipate I would hope that we would have more than zero percent of our customers actually renew. So we’re going to be somewhere above 400. We just don’t know if we’re going to be at a maximum amount, which could be 800. If we get everybody to renew, right,
Which is not realistic,
Jeff Meziere 26:44
If not realistic, let’s say half of them do. And it’s 600. Right. So half of those renew, we’re now at $600. But guess what, Adrian, we also have to take that to what would be next year in year three? And how many of those percentage of people drop off? Is that half of the half?
I don’t know yet. We haven’t gone…
Jeff Meziere 27:02
We don’t know. I just want to point out that we’re using a conservative number here by saying this is our annual subscription, one year annual subscription for a customer. So I appreciate you being patient with me there. All right, and then give me a give me a target for what you may want to attain as a sales goal out of a marketing campaign.
I think… let’s be conservative again. And let’s say $60,000.
Jeff Meziere 27:30
Okay. So we’re going to get $60,000 from a specific campaign, we’ll say this is one of our sales channels. Again, we probably have other things going on in order to generate business, but $60,000 from this campaign. Tell me the assumptions. How does a 1% goal conversion sit with you? That’s something
I guess, it really depends, because this is the conversion from lead to customer. Yeah. Right. So I guess it depends on what we add qualifies a lead. If we get someone in our Facebook chat, or we get someone on the phone or we get someone in our trial, it’s it’s really close to like the 30%. area. If you’re going based on like, we got their email address, again, still sitting in that that hovering that 30% conversion area. Okay. If you’re talking about just like website traffic, it’s a lot less than that. But
Cory Miller 28:26
Yeah. Okay, that is so and that that is so invaluable what you just said, Adrian, I appreciate you sharing it with us, because, okay, when we put this together, you think through you want if you’re going to spend money on something, particularly with ads, or time and effort and paying a rider, whatever that is, you want to go to a high impact thing to now. So that’s interesting. You can use a sheet with all those different like areas. But what it does for me, what I just heard was like, Okay, if I’m thinking during a major in groundhog, I’m gonna be like, Okay, if I can get somebody on that chat, or on the phone, that’s huge. So that might be in my thought. I’m curious, what’s your thinking? You might think, though, Adrian is like, if I’m doing a specific campaign, I might go, let’s just start with a phone. That’s a high carb, you know, or the live chat or something like that. Let’s try to get people live chat, spend some money. We know we have a good hunch, we think those are pretty high. It helps. What this does for me is help focus in and go, Man, I’m putting money out there. I want to make the biggest bang for my buck.
Yeah, live chat has a massive impact on sales for us because people people like to know that there’s real people behind products. Right? And we don’t we don’t have the live chat that’s like the bot powered either. It’s like if someone’s around, we’ll we’ll just like jump in and answer it and we have an auto response. Just be like, unfortunately, no one’s around go. But here’s where you can actually go to get an answer. And we’ll get back to you a little bit later. So we have that going on. And that that has a good impact on sales. So if we’re if we’re qualifying some sort of interaction with our team at any point as a lead, then I would say Anywhere from 25 to 30%, maybe even 33%, um, or getting their email address, I was just looking at our trial. So we have a, we have a paid trial, and I was looking at the conversion rates for that. And that’s also at like 32%. So I, that’s where I would put our conversion rate, if that’s what we’re qualifying as lead. If our qualification of as lean as a little bit lower level, then that’s gonna go down.
Jeff Meziere 30:22
So let me say this as a CFO, to me, it doesn’t matter what I care about is talking a common language, right? amongst my business owner, my client here, and how they communicate with their advertising partners. Right, right. Because I don’t know if you guys have ever been in a room, but I know that I personally have of spending money in an advertising campaign, and not getting generated sales or not getting qualified leads. And a marketing partner will say, Yeah, but we gave you a million impressions. Well, thanks. But those impressions didn’t turn into anything for me, right. And so we definitely want to qualify, this helps us have these, the structured conversation to come back, and not start to have as we’d call fuzzy math, right. And we’re actually comparing apples to apples and saying, hey, marketing ad partner, I am expecting this many leads out of this when I’m defining a lead as x, right. So yours in your case is the is the live chat is other things inside of there, the phone call, whatever the case may be, right.
And so we have around a 50% conversion rate from free to paid if they go like direct through our free plugin. So literally any user interaction would probably round down and say conservatively, 30%, for any type of high level interaction with either myself or any of our products or services.
Jeff Meziere 31:49
That’s awesome. The last thing I’ll point out here, and Cory knows that I’m going to I’m going to do this, I talked about leading measures versus lagging measures a lot. And the lagging measure here is the converted person where they actually buy under a free subscription. Right? They go from free to paid. But how did we get that free signup? Right? So I’m one step ahead of you here and saying, that might be what we’re paying for? I’m not real sure yet, right? As I’m trying to talk through the definition of a lead for you. But on the front side is, is it those pay per clicks that get us to a point that then convert somebody into a free subscription? Because I know if I can get them a free subscription, 30% of them will convert, but how did I get them to a free subscription?
Right… So I’m not I’m not super huge on actually promoting the fact that we have a free option. I prefer to think of as a paid first business and then and then free is kind of like a kindness of our heart act. But free customers are essentially attacks on our business. So we try, we really want to focus on getting them into a paid program rather than spending money to introduce attacks on our business, because there’s no limit on the free. And therefore it’s not, it’s not a good business metric for us.
Jeff Meziere 33:09
Okay, I’ll just say okay, on that, because you just told me that 30% of them convert to customers. So I may professionally challenge you on that a little bit. But it does cost something and I can I can definitely appreciate the fact
I will say this, I don’t know if it’s causation or correlation, I know that 50% of our customers, or 50% of all of our active installations around the world are paid customers. Right. But currently, what I don’t know is if they went from paid, or they went from free to paid, or they went paid, and then installed, and then the other 50%, just start using it and have absolutely zero intention. Does that make sense?
Jeff Meziere 33:49
Yeah. So that’s why I’m gonna bring that up. And that’s kind of like my thinking on that. I don’t know if that’s valid, valid. And I guess we just I just don’t know, at this point, right?
Jeff Meziere 33:59
I raise my hand and wave the white flag. And I will, I will tell you this probably for everybody on this call, you know your business better than I do. I’m just here to poke and ask the insightful questions that arms you with the information to be able to talk to your marketing partners. So, um, are you happy with a in this case, and in your mind thinking through a conversion rate of 25%? Is that okay?
Yeah, that’s, that’s Yeah.
Jeff Meziere 34:25
Okay. Perfect. So let’s, uh, then let’s talk about the last piece of information on this budget threshold. You know, you’ve got $400 that comes in as far as an annual revenue, you have the cost associated with delivering that cost of actual direct cost of sales, and you have your general administrative, the GMA costs overhead. I see you in a building there, right. So you’ve got you know, utilities and, and all of the overhead that it takes to have your current support staff and things of that nature.
I’m in the fortunate position where the building doesn’t actually cost me money directly, which is nice.
Jeff Meziere 35:05
That’s nice… you do have costs associated with business?
Yes, I do.
Jeff Meziere 35:11
So when I’m working, what is your thoughts on marketing budget threshold?
I just have my calculator open up here. So I’m just going to do, I’m going to say that this year, our operating costs will be probably just under $200,000. So if we were to take that into account, and divide that divvy that up into the expected customers, and the cost of supporting those people probably say a little bit under 15%.
Jeff Meziere 35:41
Okay. That would be your total operating cost?
Yeah, I think our total operational costs for this year will probably come under 200,000. Just under.
Jeff Meziere 35:53
Okay. And so if I’m, if I’m peeling back that onion there the 200,000 that you’re saying, is inclusive of marketing?
Jeff Meziere 36:03
Okay. So of that 200,000? How much would you be willing to spend as a percentage of the 400. So if I just have one customer of 400,000, in revenue, we have to spend money to produce the product and service, right? This product? Let’s call that 100 bucks, right? Brad, on average, for a customer, I’ve got gross profit of $300 per customer, then I have all this overhead that I’m going to allocate this 200,000 by the number of clients that happen. Let’s say that that, again, is another hundred dollars. So I have $200 in net income. Okay. But then I’ve got a marketing line item, how much of that 400 would you be willing to spend as a percentage of sales?
Well, I probably be willing to spend a lot consider if you put it so if you put it like that, I probably be willing to spend a little bit more because renew what like more than zero more than none of them will renew. Not all of them are but nor more than one of them. So I recoup whatever costs by spend up front on the following year. So if we say that, you know, concert like on on the leased side, like 50% of them are new, then I’d probably be willing to spend up to 50%, because I just recoup that cost and the next renewal period.
Jeff Meziere 37:21
So is your gross profit 50%? in total? Would your net income be 50%? for a client that a new client that came on board?
Ah, that’s a good question.
Jeff Meziere 37:36
Let’s take something conservative, and somewhere in between the two, let’s just say 35%.
Okay, let’s do that.
Cory Miller 37:44
Just for context, too. And I can add this to your story, Adrian is, I know, like, on most products that you’re you’re talking about to a lot of the support cost is in that first initial couple of months, you know, you might get some stragglers. So like, what he’s saying is, when he’s really making money is on the renewal. They’re probably really I’ve seen it test out like that is a lot that support introductions first or major update that comes in sporadically. But the bulk, if you look at a big, you know, is as really a front, which is where I’m gonna assume most of the cost comes from.
Yeah, I mean, you’re super familiar with that as after running WordPress plugins for a long time. Yeah, the support in the first two months is intensive. And that’s where a lot of our costs sink in for that initial payment that we get. But then after that, it’s like gravy. Right?
Cory Miller 38:39
Yeah. I will say by the way, these are the conversations we have in the BVA, and as our newest member, Adrian pumped to continue this conversation in the academy.
Jeff Meziere 38:48
Yeah, for sure. Okay, let’s find out what we learned. So out of all that, we just said, our lead value is obviously not $400. Right? Because we’re not converting every one of them. We’re only converting 25% in your, in your example. Right? So we’re converting 25% of our leads into actual customers. My Lead value is actually $100. Right matter of factly in that in the way that we convert customers. So it’s great every time that I get in your case, you have a live chat, right was your version that we’re using. So every time that I have a live chat session is worth $100 to me. Because if after I have four of them, right, that’s how you get one of them to a customer. One out of four is going to become a customer. So every time that I have a live chat session, it is worth $100 to me in my business. Let’s think about the target spend. If I’m getting $100 per every one of them, I could actually spend because you told me that you would spend 35% of your budget right 35% of your revenue. So I could spend up to $35 in order to encourage somebody to get to that lifetime session?
I do I have one question. So is this $35? Like the bid of the CPC that I’m willing to spend? Or just the amount of money in total that I’m willing to create a lead?
Jeff Meziere 40:15
Yeah, you defined lead as getting to a chat session. Is that correct? I mean,
yeah. Let’s just yeah.
Jeff Meziere 40:25
So the total cost that it takes to get someone to a chat session, you are willing to spend a total of $35 to make that happen.
Jeff Meziere 40:35
in order to maintain your customer click in order to maintain your current gross profit percentage, and your total net income percentage that you’ve been accustomed to making within your business, right. Now, if we go up from that, then that just means net income goes down.
Right? I guess, because I’m wondering is, so let the I did, I did some keyword analysis on Google Ads the other day, just to find out what keywords cost for, let’s say, marketing, automation, WordPress, and the cost per click, of those AdWords was was anywhere from 15 to $45 per click. Now, given that I have $35 target spend, is that telling me that I should feel okay to spend that cost per click? Or am I looking like well, how many people does it take to get to the page to then create a chat session? And then I’m averaging the $35? over for that what that is? That makes sense?
Jeff Meziere 41:31
I totally appreciate it. I feel like I’ve totally become an expert in this in like the month that it’s taken me to get here through my help with Mr Cory Miller here. But yeah, so think about this your clicks, I want to know, the ultimate answer that I want to know is of your site, your unique site, your unique sessions, right? The site visitors that are coming, you’re paying per click. And so for every click that happens, he would track that and say, after everything that happens, for whatever reason, they come to our site, what are we doing in order to get them to a chat session? So how many people have those? Start a chat session with us? Right? If it’s not 100%, then I can’t spend $35 a click, it’s got to be less than that. Because I get to spend more clicks, because there’s, we’re going to funnel downward, right number of people that come to my site that never start a chat session.
So it’s almost like we need a secondary conversion rate, where it’s like, okay, so if we say that 3% of all website, visitors end up actually starting a chat session, then what we’d be doing is we’d be divvying up that $35 to our, our CPC to get that level of traffic.
Jeff Meziere 42:40
That is correct, right? Do this, you can actually do this really quickly. I mean, it basically is saying just your total site visitors, a percentage of them get to live chat sessions, and a percentage of them become customers, right? That was your only method to get to a customer, right? I know that there’s more. But that’s the one that we’re focused on today. So I could actually look at percentages of what was the value of that chat session and how much I would spend in total to get to that chat session. But I could also look at the unique visitors to your site, and say, how much would I be willing to pay for that? Because I know a percentage of them will go through my funnel and become customers. So as I get more data, as you move forward in your business, and you get more data, you can start to really hone in on. No, I’m not paying $45 I’m unwilling to do that.
Yeah, that makes sense. Thank you for answering that question for me.
Cory Miller 43:33
Yeah. Hey, Jeff, don’t go down just for a second, I want to pause and go back. Great questions, Adrian too. So okay, here’s how I would use some of this data. So the lead value out there, whoever’s entering the live chat, I would say, when you get somebody on the hook, think of that $100 sitting there, you know, as far as we’ve calculated, like, according to how things convert, and that’s another dial to tweak and say, How can we increase even, you know, you know, this, but like, increase that percentage of people that come to customers, but when we initially talked about this, Jeff and I, I was like, This is a demonstratable value to show somebody listen. Yeah, like the treatment center, they get, you know, 100 contacts, it’s hard for them to get through, we could put a number of them that and say like, by the way, if we don’t respond to those, those contact forms, Jeff, you’re just talking about this doctrine, Oklahoma City, by the way, they didn’t follow up on their phone calls. That’s how much we just lost as a way to trickle down to the team, some impact for what they do.
Jeff Meziere 44:35
Oh, absolutely. This is exactly this is one of those things where I know we all do this, right, the phone rings, and we’re like, oh my god, I have to answer another phone call, right? This person has more questions. And instead of thinking of it as a time drain, right, sucking the energy out of me and my business oxygen that’s happening within my organization. My team can actually look at this, like, I just, I’m ready to get into that chat session, because we’re gonna make money. hundred bucks today, right? We’re going to make $100. Right now, if I can do eight of those in the next hour, I can make $800 today, right? So again, we can convert that and inspire our team a little bit by giving them some of that information as well.
Cory Miller 45:17
You might go, I’m not letting anybody else do this, I’m gonna do it myself. Okay, keep going. All right.
Jeff Meziere 45:23
So what else have we learned? In this example, I know that you’re telling me that you’re looking for $60,000 in your sales goal from a campaign and your and your value, that the average sales amount is 400. Therefore, I need 150 new customers, there is my target number that I would be shooting for over whatever series of campaign that I’m looking at. And this does not have to be a one time once a month, this can be a campaign that goes on for a while this could also be annual targets, you can use this calculator for any period of time that you want to, to look at. As a matter of fact, you could spend money today, and that customer might not come for six months. Right? So you’re trying to find out what is the conversion rate into customer for the lifespan of this campaign? Right.
Cory Miller 46:14
Hey, Jeff, would you scroll down a little bit more to the lead target? So here’s another thing like, if you’re bidding on campaign things, you know, you need to hit at least 600 people that that is that the lead target right there?
Jeff Meziere 46:26
Yeah. of the 600 leads that come in, right, have the 600 chat sessions, in this case, for Adrian 150 of those will convert at his current he his organization is performing right now. 25%. So he needs 600 people to join the chat session. How many of the and by the way, Adrian, I look at it like a daily number, like I would want to know, are we having a good day or a bad day? So real quickly, I can just tell you, there’s 30 days in a month? Are you getting 20 chat sessions a day? Because if you are you’re really on pace for being able to get to your $60,000 in sales
That’d be nice. Probably around anywhere from five to eight.
Jeff Meziere 47:11
Right? Right. And you might have some good days and bad days. But it’s a real good barometer to say every day, if I could consistently get and does my team know that I’m looking for. If I could consistently get 20 chat sessions a day, I can reach that $60,000 goal.
probably do that with ads. Right now, we don’t have any paid advertising running. So this is helpful.
Jeff Meziere 47:34
Well, so that’s a great exercise, right? Like, how much are you willing to spend? Right? And then, and then if you haven’t ever done any of that before, you can start out small with a with a beta test case of how much am I willing to just go and throw at it for a second, right? And then let’s just figure out what happens. And let’s track the performance of that campaign to really figure out whether I want to double down. Because if you spend 1000, and you get 1200 leads, I promise you, you’re going to increase that budget next month. Right?
Yeah, no kidding.
Cory Miller 48:08
So that’s, that’s, that’s really part two, when we did this, we’re gonna do everything one without known and now we need to start here. This is modeling, you know, for all of you that here that are so much appreciate your transparency, Adrian being willing to share this, but this is modeling, in order to say does this sound right? That’s the other thing. Now we go back to gut. Is this sound right? Like 600 100? Does that all look right? You know, now part?
I wouldn’t even probably go I mean, Mike, my gut is telling me to even go more conservative than that. Because the, my, the back of my brain is telling me, okay, you know, you can spend all this money, but the quality of leads that we get right now, because it’s organic is really high. Right? So when people find us there, I’d much rather have a much higher buyer readiness, stat. So my guts telling me to go toe to bring the numbers down even a little bit more conservatively to accommodate people who are showing up with an entirely different set of expectations and buyer readiness level? Certainly, you know,
Jeff Meziere 49:10
you mentioned, and we’ve been having this conversation around pay per click. But really, what did it take you and what was the cost of developing that organic content as well. You can also convert this in terms of where it is my position related to search, right, in organic content, and what am I willing to spend in that regard that will ultimately transition into customers because I can get a more quality lead potentially, is what I just heard you say? So what am I willing to spend on that?
And I’d be willing to spend a lot more money than I would on ads on organic content, that’s for sure.
Jeff Meziere 49:48
For sure. Yeah, for sure. Okay, so the last thing that we learned here, we need 600 targets and our campaign budget because we said that we wanted 600 leads The $35 that we could be willing to spend, in order to get that we would have to spend $21,000, because that’s 35% of your $60,000 budget.
Cory Miller 50:12
And one quick look. So before I get Adrian to check on everything. I want to tell you where we are, we got 10 minutes left the webinar, but I want to say like, this is a model to make better decisions, just put the zoom link in the chat, is we’re going to talk about post campaign analysis. So now, let’s take our assumptions and our model and see how it actually runs through. And it occurred to me, Jeff, in particular, like, what this exercise does is one identify levers to pull or tweak, you know, like, if Adrian goes, man, we can close 50% live chats, like with this one little tweak, let’s go tweak that lever. And the second is a model to test like continually testing and experimenting with good data. So just wanted you to know, here we are, this is the model side, let’s figure out and we’re gonna get ready to hear that data. Third is our test right and get Adrian’s feedback. Part two is throw some ads at the ad campaign, take some of this as data and go throw some money and see and test our test the model that you put up, and then then you start really narrowing in. By the way, this is next level entrepreneurship to me, you know, a lot of the Fortune 500 publicly traded companies have these sub models have like 500 Jeff sitting there. Now you have access to Jeff right now on this webinar. But like, this is next level stuff where you get ahead of your competition, you stay ahead and you achieve your goals. Alright, so should we Yes, we should we review real quick, Adrian, what do you think? What’s your gut saying all this when you see these numbers?
I think I think this would make sense from an organic standpoint. I know that but organic is generally a higher quality of lead for us. Uh, I mean, I, when we were talking earlier, Cory, I, you said you spent you wasted a ton of money on ads, I also had an experience where I wasted a ton of money on ads. I mean, there was a lot of things wrong with it. But we the traffic that I did get, in addition to just our entire funnel being terrible, was you could tell poor traffic in and of itself. So even if the funnel was better, it’s still probably wouldn’t have been great because the traffic that we’re actually able to extract from that was poor quality traffic. And there’s a lot of other reasons for that poor targeting etc. So I probably go even more conservative on this in terms of conversion rate. So if we were to say like, I probably go down to something really conservative like 5% on ad traffic’s just because of quality. I’d much rather spend based on but it’s on this, the money on organic, because I know that it consistently creates high converting leads for us, for example, we spent we’ve invested over time, a lot of money into creating courses, which act as lead magnets we create a lot of, we spent a lot of money on creating educational material, and documentation and blog posts and all of that, and creating and fostering relationships with people way smarter than me. And that has all really turned into to a lot of organic traffic for us, where we don’t have to spend money on a ton of ads in order to be a profitable company. But if I would go to 5%, I probably go I’d leave it at 35%. And I think I’d be comfortable with those numbers for paid advertising.
Cory Miller 53:33
Seeing that’s, that’s helpful for me what I heard, too, and I’m I love organic as well, Adrian. So if I get down to you and I look at these numbers, I go 21,000 man to hit my goal, I’d have to spend 21, or in ads to say, there’s again, a better decision making process. So then you can say, that’s just I don’t know, it’s not gonna test out, you can use the campaign spin to and just say, Okay, what am I willing to allocate to write that organic, you know, or produce that course content? What we know, like, we know we got a home run here. Okay, this gives me some backed up model with data to say, we could spend five grand on creating the next course because we know it’s gonna convert.
Jeff Meziere 54:15
Let me do one thing. One other thing real quick. So you moved your goal conversion to 5%. But real quick, last want to dump in a number and that is, let’s, let’s Cory, you mentioned in the chat here that you thought maybe 16% renewals, let’s just say 50 because it’s an easier math for me right now. Let’s look at $600 as the average sales per new customer, which means that they come in for one year, and then next year, we get 50% of them to renew and then there’s nothing beyond that. We’re not gonna go anywhere beyond that we’re looking at just that piece. Notice that my target spin can go up, and that my lead value also goes up.
Cory Miller 54:56
In our space, you all know and those of you that are familiar with WordPress Press, the people that have this down to a science is the hosting companies think of the Bluehost to Go Daddy’s like Bluehost with their affiliate program. They’ve done this modeling. They know how much a lifetime customer is they know their conversion percentages and all that kind of stuff and renewal percentages. And then they offer big time bucks to certain affiliates that you’re like, that’s year and a half of the first hosting fee, you know, kind of thing. They’ve done this type of math to get there. So hey, I just want to pause for a second. Thank you so much, Adrian. But we got about four minutes, five minutes left in the webinar. Anybody have any questions? Thanks for being a guinea pig too
Yeah, no, it’s my pleasure. I learned a lot. Thanks. Thanks a time Jeff. And I learned a lot and it was very insightful.
Cory Miller 55:51
Alright, thanks, Adrian with the last couple of minutes. Anybody have any questions? And while you’re posting your questions, I just want to say like, Jeff does the season virtual CFO, he, I love his perspective. It’s a fresh perspective. It’s an analytical perspective, but it’s also an entrepreneurial one. He’s not just an accountant or a CPA. He is an entrepreneur lived it been there done that grew our business medical supply business sold it for the past year, not half, Jeff and I have been partners. And it’s been a great we call ourselves the yin and yang because I love having someone with his ethical analytical mind. Plus, he’s able to ask the questions that are just really good and get down to it. So I’m going to put a link here in the chat, you can book a free 30 minute conversation with Jeff to talk about virtual CFO services, how you might translate something like this to your business. But this is a great thing like Ask Jeff keep saying ask a tough question. And then let’s go through this model. And that’s what a really good CFO for hire virtual CFO does. Jeff is the best in the business. I’ve been urging him for a long time to do this, because it is so needed, especially in a lot of the services, or the markets that a lot of you I know serve, which is WordPress type markets. I’ll put a link in the chat. But you can go to business value Academy, hit the virtual CFO Services tab, and book a 30 minute call with Jeff, I promise you it’s going to be worth it. Alright, thanks, Mike for coming. A lot of good information, definitely some work to do on our end. Murray, thank you so much. Good to see a familiar name. Thank you very helpful looking for the next review? Yes, be sure in sign up for that next webinar. And if you haven’t got the link to download the spreadsheet, I’m going to post that as well. This is the next webinar and then I’ll post the link to the spreadsheet again.
Jeff Meziere 57:46
Yeah, I’m looking forward to the next conversation, because that’s really kind of where the fun begins, is having some past performance. And I think some of the questions I heard earlier were: can we see it side by side, like as it relates to measuring gets performance. Right. So now that we have these baselines, now we’re going to come back and look at what are the actual conversion rates and really hone in on what decisions we would make based upon activity. So if anybody that is on the call now is wanting to be prepared and wants to be a guinea pig for next time. In two weeks, please let us know we can use some real live data and evaluate one of your campaigns.
Cory Miller 58:24
So put a link to BusinessValueAcademy.com. You’ll see virtual CFO right at the top menu, click that at the very bottom is his calendly link, but also put the calendly link in the chat today to book that free 30 minute consultation with Jeff approach. He’s gonna escalate questions, Jeff is a person to what I value is a lot of entrepreneurs I know don’t have a lot of accountability, he is able to ask the tough questions in a way where you’re like, man, if anybody else asked that I would be a little bit perturbed. But know Jeff’s asking it because he wants me to be better. He’s an entrepreneur himself rooting for you, as I am. And so hope you do that and hope you get a lot from today’s webinar share this, we want this link to get out this worksheet because it’s helpful for me, we’re using it in our own business. By the way,
Jeff Meziere 59:11
Hey, and if you’re not already a member of the business value Academy go out and sign up. We’d love to have you we’re growing that membership. Lots of good conversations happening there. And we’re all dedicated with the philosophy of growing our businesses for value.
Cory Miller 59:26
Unless anybody else has anything, another question, we’ll go ahead and sign out but this recording will be on the business value academy.com blog, so watch for that later and we’ll be emailing you about that. Good for thinking strategies and costs through thanks, says Simon, thank you for joining us. He joined us from the UK. Alright, everyone. Well, thank you so much for your time, Jeff. Thanks again for doing the hard work, man. You’re making my job a lot easier as we start to think Through how the value of a lead now can go back to my true senior client and say it’s this
Jeff Meziere 1:00:07
Yin Yang, my friend Yin Yang.
Cory Miller 1:00:09
Yep. All right. Thank you all have a great day.
Machine Transcript – Part 2
Cory Miller 00:03
Everyone, welcome back to another business value Academy comm webinar. I’ve got my partner and good friend Jeff Nazir, virtual CFO. And we’re gonna be talking about the second part of our lead value exercise. Jeff, not for what how long? Is this been going on that we’ve been working on this? Oh, this is like two months, three months?
Jeff Meziere 00:22
Yeah. A couple months in the making for sure.
Cory Miller 00:24
Yeah. And so we’re pumped, we synched up this week to do part two, of course, Jeff’s done all the heavy lifting, not just good to come in and say, This is what I want to see. But this is really a deep dive into making sure like, what I love about virtual CFO service that Jeff offers, that I’ve done in the past with other people, is that it’s taking the hunch and the gut, you know, just the I have got this hunch I’m gonna go do this and spend this money and we’ve all spent a lot of money on things that didn’t work. Now, we’re drilling down with Jeff’s help, we’ve got this awesome fresh sheet we’re gonna walk through to really think through plan ahead for your digital marketing campaigns. evaluate them. I mean, this feels like Jeff, like, it’s, it’s I was playing triple, you know, Double, double a ball, baseball, and now I’m in the in the big leagues.
Jeff Meziere 01:14
Yeah, it’s been a lot of fun to drill down and kind of uncover peel back the onion, if you will, we kind of start at the tip of the iceberg. And I think we’re starting to really get deep into some value for people and thinking through the best practice of cadence, really, in the planning phase of digital marketing, and then coming back and actually comparing that to results. So the best way that I can phrase this, as we were talking yesterday, I think that this is just a really good way to kind of hold our marketing partners accountable. In had, I wouldn’t even say this, I hold them accountable, having good quality conversations with our marketing partners about what is driving our business value.
Cory Miller 01:58
Well, I think you know, like we’re talking last night, you don’t want to just throw a bunch of money at something and hope, wish, something’s good to get to happen. I love this is a granular approach to really one forecasting. And you and I learned a ton about this. I’ve been doing digital marketing for a very long time, but I’m still learning really good stuff. And this is, I mean, I ran a multimillion dollar company that was all online. And this is further than I’ve ever done with digital marketing efforts. And with just help and guidance and key questions, I think is what he’s really good at to, were able to really look at this now we’re going to be using this in all of our projects too
Jeff Meziere 02:37
Cory Miller 02:39
I’m turning my friend, my CPA, buddy, entrepreneur, buddy, virtual CFO, and I tell him, I said he needs to say virtual CMFO like a marketing financial officer. All right,
Jeff Meziere 02:53
I’ve got the screenshare up. And let’s just, let’s dig in. If you’re ready.
Cory Miller 02:58
Yeah, I’m gonna give you a link everybody in the chat to this spreadsheet, it’s what we done is if you were in part one, it’s the same spreadsheet. Now we’ve added a second tab for the post, but I’m gonna let Jeff take over and I’m gonna go find that link and put it in chat for them, Jeff,
Jeff Meziere 03:12
Okay, great, high end. Let’s just start here. You mentioned the first version of this. And I want to take a step back real quick, and kind of just real, real quickly, two minute recap of what we had done before. So the pre campaign digital marketing planning, that’s in our first tab here of this spreadsheet. And I think that it was, it was really eye opening. For all of us, as we were involved to kind of get the input of trying to understand what our lead value was, I think we really focused a lot on lead value and trying to understand what that was. And now we actually had a plan going into our marketing campaign. So today is all about the analysis. But I want to real quickly just recap and talk about the things that we spoke spoke on last time. And that is with just simply two pieces of information, you know, what is your sales, your average sales for a new customer, your lifetime value? And then what is your sales target. And we threw in a couple things in here on the assumptions, which was the goal conversion rates, as well as a marketing benchmark for our marketing budget. We’ll get into that a little bit later, even in our analysis here. But out of those two pieces of information, we were actually able to look at and see what is our lead value, right? The average sales price at a conversion rate, we know what the lead value is, and this is that, you know, if you’re looking at it just from a from an old school, kind of as the phone rings, that’s a lead that comes into your office, every time that phone rang. In our example, we basically netted $30, right. That was the amount of revenue that we were able to that we should be able to get with an average conversion rate and this goal conversion that we had a 5% at The average sales for a new customer. So we were able to look at lead value, we were able to, to identify a target spend per lead and the amount of money that we would be willing to spend for that lead. And that was, again, just our lead value at the marketing budget threshold, meaning if I got $30, in our example here, how much would I be willing to spend on all of my marketing efforts, and we threw out 35%. Okay, every business is different, but we said 35%, we’d be willing to spend, if that’s the case, then we can’t spend any more than $10 and 50 cents, right? Because that’s our that was our original budget. And then from there, we were able to look and see what we knew what our sales was, what our goal in this campaign was going to be. And we know the average sales per new customer. So we knew kind of what our target number of customers were. From there, we look at the lead target, well, if we know that we need 100 customers, and we know that our conversion rate was 5%. Well, we needed to, to work through an AR and look at a lead target of 2000. That’s how many people we needed to pick up the phone and call us was 2000 people, right. And this could be contact form on your website, an actual click on a link to your web page and gaining traffic there. Again, that’s the lead target. And then from there, we were looking at a campaign budget spend. So we had all of these things that we did in a pre event campaign marketing plan, right. So now, let’s jump over and we say, All right, now that we had a plan, let’s look at how we did. And this exercise is really just going to help you evaluate that performance, right and get you the ability and armed with the ability to be able to have questions with your marketing partner.
Cory Miller 06:47
This is Jeff, can I can I can I just give a comment back on the pre campaign. If you were on part one of this, you heard all this, Jeff, just give you a great overview. If you scroll back up to the top real quick, Jeff, by the way, I put the link in the chat. And we said it wasn’t working. But others have said it is working the data input so on the PRI one. So before you get working your campaign, you know those two data inputs, the two blue boxes, that’s what you enter, we’ve made these assumptions on the green, but you can change those two. Now. I wanted points of nuts, because I learned this from you, Jeff is like the benchmark marketing budget was really interesting, because it was a way to say how much of the total value what I want to do. And I learned a lot from that it was really helpful. Because again, you know what? It feels obvious, Jeff, but you’re like, you don’t need to spend more money than you’re gonna make. And I was like, you know, it’s kind of a good point, I think you can lose track of that when you’re in a PPC campaign, or some kind of ad campaign. But that was a good way for me to adjust. Now, all of this part is the forecasting. Now we’re getting to this is what actually happened. So Jeff, I just want to mention a couple of those things in the link in chat.
Jeff Meziere 08:00
Yeah, certainly. And I think the marketing, the benchmark of the marketing budget, if you will, just to hit on that just real briefly, a lot of times, our marketing partners will look at and say you spent $3,000, but I got you $3,500 in sales, right. But we had to produce something we had to there was a cost of that production on that $3,500. So if you really think of it from a gross profit perspective, we’re not actually netting the $3,500. Right. So if it takes us some dollars in order to produce our product or service, then we actually made less money as far as cash goes. And yet, we still paid our marketing partner $3,000 in those ad spins. So again, we start thinking through how much are you willing to spend on your marketing budget, that’s where the 35% comes in. So we’ll get into that even a little bit more at the end of the analysis for today’s session. Okay, without further ado, here we go. data input. So we’re looking at performance here, right? And not only are we looking at the performance of a past campaign, now, this can be a single campaign. This can be a single an analysis of the single keyword search, if you will. And so we’re looking at the analysis and performance of that, but it’s also then going to help us start thinking through the next campaign and what we’re going to do with this information, anything that we’re ever going to review. So let me put my CFO hat on real quick, anything that we ever review. If we don’t have an actionable item, then we’re looking at the wrong things. Right. So we want to we want to dive into that a little bit today and talk through what does this mean for our next campaign? What questions do we have for our marketing partner? Okay, so let’s look at the facts. We are we are again today we giving you an example of just this is kind of what we estimated, right? Well, you would actually be able to come in here and input your own individual actual items. And that is How much did you spend on the campaign? Right? What was this? We’ll use the pay per click, how much money did you spend in a pay per click campaign? So we were willing to spend $5,000. And that was our budget. And that’s what we spent. Well, how many leads were generated from that campaign? In our example, we use 500. Right? So we got 500 leads, we spent $5,000, we had 500 of the actual click to our website, or a content of the of the contact on our website or something, right, whatever that however you define the lead, whatever that goal was, when you were talking with your marketing partner. So we got 500 leads, the number of customers specifically that were generated from those leads, this is really important. So you had people visit your site, but how many people actually bought from you? How many people did you convince that your product was right for them? And again, we use the number of 30. Then we come back and said, All right, what was the revenue, the sales that were generated from those customers from those 30 customers? What was the sales that were generated? So from there, let’s jump in and immediately look at the one thing that everybody wants to know, was my campaign profitable? Okay. In this example, we had this is the campaign profitability is the revenue or sales that are generated times the original marketing budget threshold is less the cost of the campaign. Okay. So in our example, we were using 35%. We got we have 17,500 as the revenue that came in, okay. So if we had 75 in revenue, and we had a 35% marketing budget, we should not have spent on this campaign any more than $6,125. Okay, that’s our 35% threshold. The cost of our campaign that we had was $5,000. And therefore, we actually had a profit, we made more money, because we spent less money to get the revenue that was anticipated. Okay. Before we get to any comments or questions there, does that make any sense?
Cory Miller 12:10
I mean, I like, starting with this, how much did you make? And again, we’re testing our, our forecasts from the previous one we’re getting, I think we talked about it this week, Jeff is like this, this section is now laser guided missiles, your marketing, like are we hitting down? And how’s it going? And the two tabs are linked, right, Jeff?
Jeff Meziere 12:35
Right. Yeah, oh, they’re absolutely linked, it’s linked to your original estimate and the pre campaign marketing planning worksheet there. So if you’re, if you’re for your business, if you’re using something other than 35%, this spreadsheet in tab number two would actually link over to your actual results, right, your actual estimations that you had. Now, how this is different than most people, again, notice that I’m not looking as a CFO, I’m not looking at those top line revenues, because I know there’s costs that go involved in delivering our product and service. So I’m actually looking at the gross profit of the campaign. Right? I’m down one level from just looking at hi hide the top line revenue numbers compared to cost of campaign. So I’m happy to answer any questions. And I feel like I’m probably not doing a very great job of that. So if there’s any probing questions into that, we can have those here at the end, or as you haven’t throughout the conversation today. So let’s let’s move on down the page to lead value. Remember, this was the this is the value of every time that that phone rings, what was our lead value? This is the revenue that was generated, and then divided by the number of leads. So matter of factly. In this case, we had $5,000. No I’m sorry, I’m sorry, where are we at here? So lead value is the revenue per the number of leads. So we actually have sales of the 17 five, right, divided by the number of leads, which was $500 or 500. leads, that is our actual lead value, okay. The original goal that we had was $30. So the goal value of $30 compared to the actual lead value of 10. That number is a little bit different, right? So again, we just come back to what was our actual lead value in the campaign. Okay. cost per lead. This is pretty important, right? This is the How much did it cost us to generate a lead, and in a pay per click campaign, these numbers might be $1 $50 75 up to you know, 10, 20 $30 per lead per click, that happens, but we want to look at Got the original cost per lead, and then we want to look at are the actual cost per lead, compared to what our original target spend, we had estimated. So in this case, we had an actual cost per lead of $10. That’s the $5,000 that we spent divided by the 500 leads that we got. And compare that to our original target spend, which was $10 and 50 cents. We said we didn’t really want to spend any more than 10.50 per lead at our marketing budget threshold. Therefore, are we positive or negative compared to that cost per lead? So these are this is where you really get into the was the individual phrases, the keyword searches, the pay per clicks that we’re spending? Are they profitable, at a cost per lead perspective, compared to what our original budget was?
Jeff Meziere 15:51
Anything else say on cost per lead, Cory?
Cory Miller 15:55
You know, the thing that kind of sticks out is probably like lead value is 10. And cost per lead is 10.
Jeff Meziere 16:01
Yeah, except to be honest with you, I have to make an adjustment here, this is wrong. So we might as well just do this real time. I like it, sorry. So the actual lead value, in our case, as I was having the conversation, I recognize my formula was wrong. So sometimes your CFO can give you bad formulas. But the sales was 17, five, and the number of leads generated was 500. So therefore, our lead value was actually $35 in lead value, compared to our original goal, which was 30. So sorry, for that error, I’ll correct the spreadsheet there.
Cory Miller 16:44
That’s, that’s good, that still walk into how these are calculated to I think, is really valuable for us. And so, you know, back to the original benchmark, just kind of the term you used with me is because I kept saying, Tell me my lead value, and you’re like, well, how much of your sell overall sell? Do you want to spend on marketing? I was like, No, no, tell me my lead value. But he don’t want to spend the entire cost. I think this is to get clarification there.
Jeff Meziere 17:13
Okay. conversion rate, this is all the operational side. So how good is your messaging, when you get someone to visit your website, right? visit your site, hit you up on a form, call your office, join a mailing list, all these different things that you can actually drill down into, but we really care about the individual conversion rates for all of those avenues, all of those channels. So our conversion rate was actually 6%. We had up top again, I’m going to take a quick peek here, we actually had 500 leads, and we were able to convert 30 of those to customers. That’s the real big number that we care about, right? We care about how much money are we making want to increase sales? Well, our job is to find out and maybe even perform some AV testing in here to figure out how do we tweak? How do we get a higher conversion rate, our number right now, when we were able to convert 30 customers to paying out of the 500 leads that were generated, tells me that my number of conversion rate is actually 6%. Now remember, originally, we said I think we’d probably be able to convert maybe 5%, right? Our industry average is 5%. Or historically, we’ve been 5%. So this campaign right now, whatever it was that we’re looking at, is actually doing better, it’s actually 20% better, and an entire percentage point above where we thought we were going to be from a conversion perspective. So again, this campaign was extremely successful in the eyes of the conversion rate number. So now that we know all that those are the things that we know, we know lead value, we know cost per lead. We know whether our campaign on its surface was profitable or not. And we know that we were successful in converting more leads than we actually anticipated being able to convert. So now what? Well, let’s look at the next campaign. Right. So as we move forward, what are we going to do differently? And in here, we have a couple things. Again, we talked about sales target. Originally, we said we wanted $60,000 in sales, we weren’t really anywhere close to that, right? We only got 17, five out of the campaign. So if that campaign is only generated 75, what’s our new, what’s our new sales target? Right? So we’ve adjusted that and reduce that down to say, $30,000. The average sales per customer is the exact same that hasn’t changed for us. So that number remains the same unless we have information that has changed along the time, right? Maybe the average customer doesn’t spend as much with us, or maybe they’re spending more right. So again, we’re asking these two things here, sales goals, and average sale per new per new customer. With that, we’re going to get all the exact same information that we got last time. We now have an actual conversion rate. Is this the same? Do I think that I can continue that? Or do I need to go ahead and back that down and make the conservative assumption and reduce that back down to the 5%, which it was last time, okay. But we know that we were able to convert on 6%. So I would hope that we can maintain that momentum and continue to convert at 6%. Again, the information that we get out of it is we can look at the target spend per lead. This is our lead value times the marketing budget threshold, what was our lead value, and we’re willing to again, spend 35% of that number. As far as a target spin, that’s how we come up with the $12 and 2025 cents in our example. So our actual lead value here is what our lead value is $35 $35. At the again, 35% that I’m willing to spend on marketing budget gets me to a target span that I shouldn’t spend any more than $12 and 25 cents per lead. Okay.
Cory Miller 21:02
Hey, Jeff, Emily came a little late and asked about the marketing benchmark. And after that, I want to make a comment too. But could you explain the benchmark marketing person is to
Jeff Meziere 21:14
Yeah, I know, we can. This can, this can be a little bit complicated, but I believe it’s, it’s extremely valuable. We’re not always looking at top line revenue. In your income statement, if you go to your p&l, right now, you’ll see gross revenue, cost of sales, getting you down to gross profit, and then you have all those expenses that it takes to actually run your business, one of those line items being the marketing budget, okay? The marketing budget shouldn’t be more than X number of percent, whatever that is, right. But we have to keep our doors open, we have to pay our staff, we have to deliver the product and the cost of either product or service. There’s a lot of costs involved in there. So when I get $1, in, when I get $1, in sales that comes in the door, there’s a percentage that I would be able to attribute that I should mentally attribute to the amount that I’d be willing to spend on my marketing line item of my financial statement. And I’m just suggesting here in saying that number can’t be any more than 35%. That leaves you 65% to deliver your product and have some profit at the bottom line.
Cory Miller 22:21
So Emily to the nuance here is like saying your product is the lifetime value of the product. So say $100, of what you’re trying to use a campaign to promote. And you just go it’s kind of a shortcut way for all that Jeff was talking about to go. If my lifetime value for that product is $100. I’m willing to spend up to 35% of that. So this number in my campaign to get a new customer. So we’re making assumptions here, but you can change that, of course, but it’s not in clarification for your question. It’s not that it’s 35% of your total marketing budget, it’s okay product is worth $500 to you, I would spend it’s like an eyeball method to I think I’d spend 20% on marketing this, you know, $200? Or what would that be $100 for a $500 product, does that, you know, kind of eyeball worth it to me to spend on the product. So we did this through some of our software products I’ve done in the past, even our membership at business value Academy, by the way. And this was Jeff’s method of saying like, hey, Cory, you gotta have some benchmark in here for how much you’re willing to spend to get a customer. Yeah.
Jeff Meziere 23:40
Let me just piggyback on that real quick. So again, I’m going to drive this home, because I need you to drill down to get to actual campaign profitability. All too often people are saying, I gave you and generated and brought to your door $10,000 in revenue, new sales, and you only spent $8,000 in cost. So therefore this campaign was profitable. My point in saying that is if I’m using the exact same example here, you got $10,000 in sales, but your gross profit is not $10,000 it costs you something to deliver your product and service. So we really only want to spend 35% of our sales dollars to go towards our marketing budget or marketing line item. So in my example the $10,000 I really don’t want to spend any more than 30 $500 to do that. That gives me 60 $500 to pay my people and for the cost of the product and service delivery and overhead running my business everything else. So again, I’m just drilling down when I say this marketing budget threshold
Cory Miller 24:46
And, I just want to make come as we get to this now what So in the first tab, you’ll see pre campaign that’s the forecasting, look into your magic ball and trying to get the best like taking as much of hunch out of it and making data decision. Decisions, data based decisions. This tab is the first part is how that campaign go against our forecast. Now, what I love about this, Jeff is the second part of this tab is going Okay, so let’s say first part, you’re like, I want to run Google PPC. Okay, then I go run my campaign with that data. And now the now what is, can I take some of those assumptions? And do even better for my next campaign? Or what if I apply that now to Facebook, you know, like, now I want to, or another option. An example of using this is saying, like, I can’t remember his name, Jeff, but our friend, new member that helped us with our first like, he was live giving us numbers and stuff, so good that we use in this. But you know, he had a big goal, I think it was $60,000. And we even had this roleplay we did between us to go, okay, maybe I don’t want to spend 20 grand, but now I’m laser got it. I’m getting closer, I’m really using this as an experiment and trying to use data to kind of fire and to go, Oh, man. And this is where we talk about big leagues and stuff. But now I can apply this same campaign and forecasting stuff to my next campaign to a different channel. I can try to drill down, I want to get this on lockdown. You know, Jeff, you were even mentioned like, in Google, all the ads are auctions, essentially. And like, what’s my tolerance for, you know, how much am I willing to spend for something, and you get this on lockdown. And it’s just this system you built really. And I guarantee you most small businesses, medium sized businesses are not even doing anything close to this. But Jeff and I ran multimillion dollar companies in the past and grew multiple companies and didn’t get at this level. Right. Thanks, Jeff.
Jeff Meziere 26:51
Cory, even if as you had that conversation about Pay Per Click right look at our in our example here, look at our target spend, you can directly go and look at keyword searches. And in your auction bidding and find out how much you actually paying for those clicks, right? those clicks are coming to your website. And we know right now that our lead value is the $35. And we no matter of fact that if we’re only going to spend 35% of that we know exactly what our pay per click auction. Maximum threshold is? Yeah, if you go $13, you’ve spent more than 35% of your revenue in marketing budget, right? It’s just arming you with the information to be able to make that decision.
Cory Miller 27:40
Okay, and we talked about this earlier, I want to give one more minutes, and then I’ll shut up. But there’s a way to use all this. If you’re understanding where we’re going with all this, then you can reverse engineer. So over the weekend, I was telling Jeff, I went for a project. And I was snooping on competitors paid media campaigns. And I was looking at I wasn’t even looking at volume, I was looking at how much they’re spinning bidding on those keywords. And using this spreadsheet going, Man, that’s been a lead is worth $30 to them, that I can go back to their product page, by the way. So like using a tool like sem rush, by the way, sem rush calm and I’ve got a link, by the way, for a free trial. I’ll put that in the chat when I get a second. But you can snoop on your competitor’s ads, and see, especially if they’re a much bigger company. So the one example for me was psychology today. And I’m like, this is a big company. They’re doing specific ad spins for very low volume keywords, but they’re spending like $9 a key I click? Well, if you look at Jeff’s spreadsheet, here, you can go back and go Hmm, this is probably what they’re they’re saying their leads are worth lifetime value of a customer. That’s something we should poke in on. For like Step three, maybe Jeff is like how you can use this to reverse engineer a competitor’s lead value, especially if you’re going against a big powerhouse, I think of our our our friends that Do you know, cleaning, commercial cleaning and restoration and things I go? That’s interesting. We can Snoop in and see what they’re doing. So there’s even a competitive analysis to this. And I promise you, a lot of people aren’t doing this. So okay, sorry.
Jeff Meziere 29:24
Yes, that goes right here on just the target spend is a big one for me, as I think through the next campaign, because it opens up the opportunity to have some conversations with your marketing partner. Right. So what are we spending right now on any of those clicks? So it gives you a good threshold and ability to be able to have a conversation. So again, we already know, with our sales goal that we have our new goal, we’ve now re-established a new goal for the next campaign. And we know what our average sales per customer is. And if that hasn’t changed, then we leave it alone. And if that’s the case, then we know exactly How many customers we have? And again, I’m just moving back into, again, this is the cadence, I evaluate monitor, and then I come back and pre plan for the next campaign. So again, how many customers do I need? And the answer in this case is 50. Right? So if I need 50 customers, and my conversion rate right now is 6%. Boom, I reverse engineer and get back into how many leads? Do I need to come in the door? So I need 833 clicks, or I need 833 phone calls or whatever it is that you do, the phone calls are easy for me, because you know, you hear it ringing. I was thinking that mental cash register, like, Oh, I love hearing the phone ring. Because I know that I just made what was my lead value $35, that phone rang, and I just made $35, right on average. So it’s a cool thing to kind of think about that mental register, if you will. But again, here’s the lead target. I’ve got 50 customers that I need. So I know at 6%, I need 833. Now let’s look at the real big one. If I want this the $30,000. Again, I’m going to come pick up here real quick. We said sales goal was 30,000. If I want 30,000. And I know this lead target of 833. Then I know what my total marketing budget, the campaign budget would need to be right. Does that make sense? compared that to the estimated campaign budget, right. So this is the estimated campaign budget right here that I would need a cost per click, because you told me what your cost per click was up here, we already know. It’s exactly $10. So the $10 to get the 833 targets is going to cost me 833. For my budget, the target marketing budget is actually 10,000. And that’s my lead target times the target spin but I’m willing to spend for my campaign at the 35% marketing budget. I hope that I’m not getting too in the weeds, or I hope I’m explaining that properly.
Cory Miller 32:13
Now, I mean, again, so you go, Hey, for this quarter, most of us go Okay, into the year, we want to try to increase our top line revenue so much. Now we come to here and say, Okay, this is what we need to get there. I love breaking big numbers. And this is what it does. For me, Jeff is I like taking a big number and going, if I just look at the big number that looks like overwhelming to me. But if I can break it down, like you’ve done here, okay, I need 833 lead targets to get to my campaign. This is how much I should be willing to spend, then you can make some data informed decisions about that. But the principal like breaking it down going, is this doable? You know, is this does this feel right to then you can get into instinctual and hunch. But you’re richer, more looking at the numbers. I think I’ve told the story before about, you know, when we first hired our CFO for virtual CFO back almost eight years ago, is we had all this hunch and emotions in things. And we had all these products. And we started doing cost center analysis on them, how much does it really cost? And are we making any money. And some of those ones we hold on dearly to became, oh, we’re losing money on these. And you can start to take emotion out and going in, probably feels worse actually to lose money on something, you know. And I just love that we’re walking through these types of spreadsheets and have a more informed way of, of getting there. All right, everybody. If you have a question for Jeff, please post those in the chat or the q&a button. We’re here for you want this to be highly actionable and practical. If you’ve hope you’ve got the link to the spreadsheet, so you can start using it. But if you have questions or want to even offer a product or service you’re trying to consider on their marketing campaign. Let’s do that we’re here for you. And Cory, why are you posting this? Let me just go ahead.
Jeff Meziere 34:07
I think that what we’re trying to do here is to arm you with information to be a savvy entrepreneur. Right. And, and I think that most times that I’ve seen is that clients are reluctant to have conversations, even with their own marketing partners in a way that the marketing partner drives the conversation and tells you how successful their campaign was. Right? I’ve seen this time and time and time again. Everyone always comes in and says this is what you spent. This is what you made. Congratulations, pay me my money again next month. And I’m going to flip that script a little bit. If I go through this effort. Instead, I get to really drill down and say, Hey, marketing partner, how do I get 833 leads this month? That’s a completely different conversation to lean on them for their expertise, but ask the question, How do I get 833 leads this month?
Cory Miller 35:03
And I’d also say savvy marketer, you know, for those of you that work in marketing in your organization, being able to have data to go back to people being able to justify an ad spend, being able to break down bigger numbers into goals, it’s great. Simon asked for the amended spreadsheet, actually, Jeff edited that live. So the link, I put it into the spreadsheet, that will be included on the replay of this video. In the notes of this video, you’ll have that link. And it’s all together. So you have one spreadsheet with two tabs. And I advise people Jeff, like, so you’re considering wading into Instagram marketing, right? PPC stuff goes through the forecast the pre planning, measure it on the post plan and give it let’s say two weeks, 30 days, something like that, a measure that, you know, you can actually get some real good sample size data plugged into the spreadsheet. Now go, okay. So, you know, make a copy of this spreadsheet today. Name your tabs. So instead, it could be Instagram, you know, 923 20 campaign forecast, and then you have another tab that says Instagram, you know, same project and all that kind of stuff. And then when you’re ready to go to another channel, Facebook did the same thing. But now you’ve got better numbers to do. And then you’re evaluating multiple potential channels and saying, Man Instagrams where it’s at, or, you know, Facebook performed better than Google AdWords or my content that I’ve got going in that too. All right. So if you have any questions for Jeff, please post this. We don’t want to belabor the webinar and just kind of riff. But while you’re posting your questions for Jeff, I do want to mention at the top of the spreadsheet, you’ll see a link to the book, a session with a consultation session. with Jeff, I highly suggest you do that if you’re an organization, if you’re a marketer in the organization, mentioned this to your leadership, too. You can see how like I get the benefit, because just my partner to do this kind of stuff. Like Jeff, I want my marketing campaigns that do even on projects he’s not involved with, and this kind of words showcases the value of a CFO for her specifically one that understands online digital marketing. You’re a rare bird, Jeff, and I know you keep pushing down this. You didn’t go to school to be a marketer. But now you’re talking and all this language, I’m like, it’s pretty cool to have a CFO that also understands digital strategy.
Jeff Meziere 37:31
Yeah, let me just add one thing here, this spreadsheet these two tabs within this spreadsheet, this can be used for not just a specific campaign for like a one time, you know, one month period of time, you can use this as cumulative numbers, you can look at an individual and break it down by the again, as I say, the individual keyword searches or the individual clicks or any of the individual campaigns that you’re running, right. So when you go and you’re looking at digital marketing, you have individual campaigns within that, which ones of those are actually profitable, and not just the totality of the entire project, right? Have the entire campaign that you do or the entire campaigns, plural that you do with your marketing partner, and lean on them and press on them and ask these kinds of questions. Which one of my marketing campaigns are the most profitable? Do we know that we can easily get there right with something like this to help us out?
Cory Miller 38:30
So thanks, Emily, she said this has been very valuable. Thanks, Corrine, Jeff, thanks, Emily for coming on and, and others that are here and spread the word, I just put a link to the where you can book Jeff for 30 minute free consultation, can talk to some great stuff here. We’ll be sharing these things again in different projects. But I love Emily comes from a great company called go WP comm they’ve got an outstanding Facebook group that’s very, very active. And we’re gonna be having her on the webinar for other venues here shortly. Real quick.
Jeff Meziere 39:08
Anybody can you can use this time right now as well. If anybody has a question that might not necessarily be related to the spreadsheet or campaign analysis. If there’s a question then let’s talk about it. Let’s openly talk about any other questions you might have around how could you measure or what would you need as far as an end? Give me some feedback. Is this spreadsheet valuable? Or is it missing something? What does that look like?
Cory Miller 39:34
Get your get your consultation right now. Absolutely. Simon says Greg drill down thinking. Thanks, guys. Thanks so much for being here. I know it’s late for you to over overseas in Europe. So thanks for being on today. Can you go back to the top there. So if you look on the spreadsheet Also, you can also say I want everybody to know The go to the very top place, you can click on that versus book a virtual CFO, you can go straight to the link to book, Jeff. So if you’re listening recording, go to the link in this page where you’re seeing the video. business value academy.com. By the way, business value. academy.com is where we talk about how this is one facet of what we talked about business value Academy, about increasing the value of your business is a thing is the best strategic way to grow a business, by the way, because you’re thinking about the person that could value not just the products you have in your company, but your company as a whole. So we invite you to do that. We’ve got annual and monthly subscriptions, you can do that.
Jeff Meziere 40:50
If you’re going to say it, you’re going to talk about the Business Academy, you got to give me the mantra, right? My business is my product. A potential buyer in the future is my ultimate customer. And building for value is the ultimate way to do strategy. I love it. I live it. I wholeheartedly believe that statement.
Cory Miller 41:21
Yeah, indeed, Simon asked, Can you make this bigger for project budgets? Can you give us a little bit? what you’re thinking there? What do you mean by that? Can you make this bigger for project budgets? Unless you if you understand the question, I’ll ask for some clarification. As I’m in there,
Jeff Meziere 41:41
bigger for projects, budgets… and scale, the only thing that I can think of is, you know, you can easily drill down the individual and turned into a spreadsheet that now that we understand these concepts, you could get all of these calculations and be able to drill it down, you know, project by project or line by line. So I think we have one that I just saw recently that had, you know, two or three individual campaigns within a Google Analytics, pay per click campaign. So they had two or three campaigns running. And you could, in totality, look at the individual performance of each of those. I’m not sure if that’s what we’re talking about. But we could definitely turn that into a spreadsheet. In version what is now three, right?
Cory Miller 42:30
Jeff Meziere 42:36
I’m just always, you know, I’m always looking for value. All right, I want to add value back to my clients as well. And just looking for what is it that’s important to you what’s missing from something like this in a spreadsheet, when you say I don’t know, or I don’t understand, or I’m driving to, you know, lead value, cost per lead, and then some sort of understanding of lead target. That’s what I’m looking for is establishing a budget and not just being so reactionary into it almost feel like it’s your tail wagging the dog when I’m having conversations sometimes. So I want to try to get the best value back to my client and answering questions. Right. So it all starts with a question of what does that mean? Well, what questions do we have? And we’re here to answer those today.
Cory Miller 43:25
So Emily, I shall talk about CPC campaigns, but imagine the same worksheet applies for any sort of marketing campaigns? Absolutely. In fact, Simon just says, thinking about direct mail. Absolutely.
Jeff Meziere 43:38
No, it’s easy, right? The only thing is you have to be able to track it. So if I’m doing a direct mail campaign, I sure hope by now that we have dedicated phone number or something where we know that this is where that referral was coming from right. They picked up and they dial the number that we could track or we could actually get the specific result for a direct mail campaign right an email campaign whatever the case may be, we know what it costs to send that out. We have a link and we know how many clicks we got right? We don’t have any phone calls we got out of a direct mail campaign. Yes, this can be used for any of those channels or mediums.
Cory Miller 44:18
We keep using CPC because you know the web’s the best advertising you know, communication channel ever invented and you can drill down really granularly but the next thing where we really originally started this was I wanted to know the content marketing, ROI so I create a blog post the common example i get i gave is in like 2008 I wrote an article on our theme site called what is FTP and it has to do with some of the blocks and challenges that time with WordPress and you know, around our product right or company and products. That one post over 10 years. Continue to get into Traffic, continue to get email signups continued to get purchases. And we originally started the conversation with, how can I quantify that that’ll be our next step with what we’re doing with this that I want to talk to Jeff about is we want to drill down, we’re open to ideas do I’m pretty sure that’s really interesting. How to kind of measure the activities, you do more in the eye because I come from the organic digital marketing side, mostly. And, but really, I want to get to, okay, we have a blog post. So my question for Jeff, next will be as my virtual CFO, Jeff, I want to figure out the return on investment for our organic digital marketing efforts, specifically, our blog post writing, that’ll be my question to Jeff. Now, Jeff, what would let’s just roleplay for a second, this is where our virtual CFO works.
Jeff Meziere 45:55
Yeah, I mean, the first thing is just simply the ability to be able to track that, right. So you’ve got an amount that you’re paying for a budget to someone to help you with that. Content Marketing development, right. So a lot of times there’s a monthly fee or something like that. And there’s a couple blogs that are being done per month, and general awareness at the top of search pages and things of that nature, right. That’s kind of what that content marketing is all about. And so you’re paying that fee that that fee, every time is racking up into additional monthly costs. But let’s say that that number is, I don’t know, throw a number out, say 1500 a month? Well, at the end of the year, you’re gonna have $18,000 in costs. Now, how do we come back and actually track the number of clicks within that, within that content at various any of the individual types of content that we’ve put out, right? And the direct sales related to people who entered our cart, and actually completed a transaction, so we can get those numbers, we can track that. And again, then that cost sits out there. So what did it cost you, Cory, to actually develop that, that one blog post that you’re talking about?
Cory Miller 47:11
Yeah, so we could I use my prior business experience, we could have we paid a freelancer, I want to say $75 an hour. So a blog post would probably cost us about, you know, four hours for five hours, maybe for 1500 word blog post, I’m estimating off a memory. So level of effort for a blog post will probably be around, you know, I’m gonna guess like five 600 bucks, maybe all told, plus, then we’ve edited kind of some back and forth, publishing all that kind of stuff.
Jeff Meziere 47:47
Okay, so you’ve got $600 in costs. And you’re able to even today, as you mentioned, like, Oh, hey, back in 2008, I think is what you said. So 2008 was your cost that was expended. But you still have ongoing revenue from that campaign. It didn’t just end the day that you hit post, right. It didn’t end an expired. That’s the beauty of the internet, right? It didn’t just expire 30 days after you published it. Correct?
Cory Miller 48:13
Right, exactly. It’s set there. That’s the beauty of organic digital marketing.
Jeff Meziere 48:16
And you are able, and you’re able to track the sales that came from that correct. Like, you know, how many clicks on there?
Cory Miller 48:24
so using Google Analytics goals?
Jeff Meziere 48:26
Yeah, those things right there is a cumulative number where the cost associated with this is still the $600. And the revenue is continuously is exponential, which drives down the, quote, cost of the lead, right every time you get an additional lead, right?
Cory Miller 48:44
it kind of gets that’s the beauty of organic, he gets amortized over the life of that as long as you know, you can join with search rankings. But if you get Google unless you’re right, if you get Google Analytics goals and event tracking, connected you can ongoings beauty of it. Hey, Simon has a question too. This is a great one. How do you work out the lifetime value of a customer-generated from a blog post or direct mail gift? For instance?
Jeff Meziere 49:09
And I’m seeing a second question there too, which is, that’s an interesting question. should get a lifetime value be dependent on the source of acquisition? The answer is no lifetime value of a customer has nothing to do with where it came from lifetime value as a matter of fact. So lifetime value is the average time that my client would be with me if I am in a one time sale transaction, and I never see a customer ever again and they buy one thing for me for $100. my lifetime value of that customer is 100 bucks, period. Now, as I then get into well is this customer a monthly subscription, right in a SaaS model or something? If I’m a monthly subscription, that $100 is $100 times the average lifespan of a customer being willing Me. And again, if this is the only product, so if I’m in a subscription model, hundred bucks a month, is the lifetime value 1200? No, not if they continue to renew. So I have to use my data from the history of my company and find out how long is a typical client with me? Right? If I don’t know that, then I’m only looking at that first month sale. But I might be willing to spend a lot more, if I know that my average lifespan of a customer is say three years, right? So again, let’s just use the same example. One transaction is $100. But in a monthly subscription model, it’s $100 a month, times 12 months is 1200. And let’s say the average customer is with us for 36 months, right three years before they actually drop off on average. So I’m at 30 $600, in total cost. So how much am I now willing to spend knowing that I can retain that customer in my business practice for 36? months?
Cory Miller 50:58
So in only what’s awesome about your business, is you’ve got recurring revenue. And you probably because your business has been around for a while, know what your renewal rates are probably most likely and Jeff, correct me on all this, okay. But to get to that is, you know, how long does the average customer stick around, get the number and you say, Oh, it’s it’s two years, you know, two years times, whatever your annual or monthly is? And then say, okay, does that bench test is that kind of for real, like, if we get one customer, they’re likely going to stay with us for two years. And you can just, you know, see what those that customer lifetime is. Now, this brings up some stuff we’ve been talking about, by the way, Mr. Our churn and all that and battling those type of levers. But now you’ve kind of got narrowed in on customer lifetime value. And I’m asking Simon specifically, because he asked what they sell to. So like, you know, let’s take business value Academy, for instance. So we sell a monthly and an annual product. So we were very early in this. So we’ve only got a couple months of data. But we can start to kind of track that. In another project, I work on his digital marketing kitchen. So we’ve got a little bit more time history to start to see when turn heads when new renewals and all that kind of stuff hits. By the way, the holy grail of business is recurring revenue, subscription revenue mailbox, many people call it. So now Jeff, and I kind of like either butchered customer lifetime value, or what’s your thoughts on that?
Jeff Meziere 52:34
No, you’re absolutely spot on. I mean, that’s that is lifetime value, it is the customer, an average customer. And the more data you have, the bigger sample that you have, the easier it is for you to calculate what a quote, lifetime value is, right? So, I look at that thing to just think through it, just think through this model with me $100 a month, but bear with me for three years, okay, that’s 30 $600 in cash, and I’d be willing to spend at 30%, or 35% number that we just we were talking about earlier, I would only be willing to spend $35, if I just right had blinders on. And then the hundred dollars, I’d only be willing to spend 35 of that to get a new customer. But to be honest with you, I know that they’re going to be with me for three years. So it might cost me more money up front. But in the long run the lifetime value of that customer, I could actually spend 1000 bucks. And I have to come up with the cash today I get it. But long term of a company perspective, I’m eventually going to get that 30 $500. Now if you go ask somebody like Warren Buffett, right? Would you spend $1,000 to get 3500 over the next three years, he will do that? 100 times 1000 times, right. That’s how they scale businesses. That’s how guys savvy business owners, I say guys and women, right, but my point is business owners. That’s how you scale a business, right is to think through that kind of thing right there.
Cory Miller 54:06
So Emily said, right, we have a good idea that our lifetime value Rukh Khan, but I never had thought of looking at it from the angle of customers coming for our ebook average lifetime value of x while our referral customers average lifetime value of x. This is great. Okay, so like, what we would do here,
Jeff Meziere 54:23
hold on, first off, I love it. Right, because you’re already starting to ask the next question, right? Yeah, just because I look at something in totality. And I say my business is doing great, right? Yep. Cory, I know you for a fact, Tom. I hope I’m not throwing you under the bus. I know you for a fact, when you first started with your CFO for hire that you did years ago, that was one of the questions that you came up and you actually ended up doing some cost center analysis. Do you remember this conversation we had? And you said oh my gosh, I had no idea that one of my products was actually losing money. Right? Yeah, even buries everything offline. Like the conglomerate. We got so much money in the bank. We’re doing so well, we got a multi million dollar company, don’t even worry about that one product that sits over there that Hey guys, did you know that we’re actually losing money in this product? We need to think differently about how we either sell it or scrap it.
Cory Miller 55:13
Yep. What I like about your thought here, Emily’s you’re thinking about the channels or the avenues for in value. So this and to give you some context for this whole conversation with Jeff was, I have a client that’s a treatment center. And the CEO told me when people hit our contact form, it’s like 6% conversion rate, and I go, I told her I go, I said, That’s web wise, that’s pretty good. And they’re selling a $30,000 product, right? In addiction treatment. But she goes, Yeah, but when people call, we’ve got a 32. No, it’s like 40 to 50% conversion rate. I said, Okay, now that’s different. Now you got actionable data as a marketer, like you are Emily to be able to share with team and go, Hey, if it fits, who’s answering the phones? How are we? You told me about a friend you have that like they were complaining that the people operating? The phones are doing terrible, right? Well, if you’re measuring conversion rates, you might go fun, doesn’t do terrible, but that shouldn’t be if somebody picks up the phone and calls like, you should be able to kind of close that. Right. So you now you have a way to go back and start to tweak the dials of your system and say, oh, man, so the conversation I had with addiction treatment, the CEO, I was telling Jeff about was like that reorients our marketing, how do we get more and better phone calls? tweak the system? Now stream? Can we increase that conversion rate even more? How do we better weed out some of the contact form, you know, inquiries and suss out the better ones? And then get those in the phone calls? You know, for instance, like your site, I think you all have a book a calendar thing and be curious to see like, how does your ebook convert to a customer? Or is that the primary mechanism? And then they book a call afterwards? You know, you can go down that rabbit hole forever. But I just think about that’s pretty exciting for you to even be like really thinking out of this, thinking through those things. Because it’s it this is the good data that we get,
Jeff Meziere 57:21
because let me even challenge that a little bit further. Let me say this. And let me just add some value back here. Emily, I think you and I Cory have talked a lot about the map messaging audience and product, right? So your product
Cory Miller 57:30
… and Systems…
Jeff Meziere 57:30
…it sounds like your product is the same. But you have somebody who is sending them as a referral, versus somebody who comes in and goes from the eBook angle, right? The challenge here is how do you bridge that gap? And what is being told to the types of customers that are coming from referral, versus the ones are just going the eBook route? How do we communicate to them and bridge the gap from what they’re getting to buy the eBook into what else it is that we do so that we increase that lifetime value? There’s, there’s a gap there somewhere and I can’t fix that for you, I don’t know what it is. But the messaging is not the same, what is being told to a person who’s coming to you from a referral. And again, that’s loyalty. You know, that’s, that’s all of the goodwill that you have and brand recognition and all the wonderful things maybe that’s testimonials, whatever the case may be, but again, I think there’s the challenge in the end the opportunity is to try to bridge that gap.
Cory Miller 58:36
I wanted to point out Simon mentioned he’s selling English exams and I think Lisa has a digital product as well there’s a lot of us that have digital products and I hope you all come back for the next webinars we’re going to be having on these subjects because I geek out on marketing where I really talk about that unless I’m pulling my buddy Jeff my own freeze virtual CFO is saying let’s let’s drive down metrics and good decision making but I do all my marketing stuff Simon knows this because he’s a members digital marketing kitchen calm but I’m excited to do more of this we’re going to actually have Jeff over on the kitchen very same to do all this again for our marketing crowd specifically over there. Emily says love it y’all are getting really getting the gears turning I’d love for you to hear back I know we’re connected and you can on post that as Emily you can share your results because I’ll we’ll drive those back with Jeff and we’ll keep this turning. I’ve turned that Jeff into like I think it’s a full full obsession now in the digital market and I can’t wait to continue to share this all our takeaways with you all right, well, hey, we’ve hit the top of the hour Hey, Thanks Jeff. This is awesome. I hope you got the link. Come visit business value Academy comm if you’re an entrepreneur founder or you know someone share that because what we Drill down every month, twice a month, we have a QA for an office hours where we just talk about business value. Keep that on first and foremost. And then we have a topical conversation, or we talked about one of the 1110 or 11 key value key levers. I’ve got to get better at this. Jeff. You’re gonna zing me afterwards. You’re like Cory, it’s 10 number, but like, are the key levers that drive business value. That’s the conversation we’re actually having tomorrow. We have these twice a month. It’s really great. We got a slack community that’s pretty active. So hope everyone will join us there and thanks again, Jeff Meziere, for a great presentation today.
Jeff Meziere 1:00:35
You bet. Thanks for having me, partner.