What are the basic control levers of your business? When you want to generate money, what buttons can you press?
Well, there are 3 basic money levers in your business. Your car has a steering wheel, an accelerator and a brake… and between those 3 things you can mostly control your car. Likewise, your business has 3 basic levers:
- A product offer to sell.
- A funnel that sells it.
- Traffic to run through that funnel.
In this series, we’ve addressed the product and how to go about putting one together. In our last post, we discussed how to get traffic on demand rather than have to wait around for it. In this post, we’re going to cover the last basic building block…
The sales funnel.
… or as I like to call it, the blog profit funnel.
Once you have each of these 3 basic levers in place, then it all comes down to how you choose to manipulate your levers for the purposes of generating revenue in a controlled and predictable way. Those are tactics, and we’ll get there. 🙂
BUSINESS BUILDING BOOTCAMP – Putting Order Into The Chaos And Confusion Of Building And Starting Your Online Business. We get started on March 8th. Click to Learn More.
The 3 Ways To Grow A Business
There are 3 ways to grow any business. They are:
- Get more customers.
- Increase the average transaction size.
- Increase the frequency of transactions for each customer.
The mechanism for achieving each of these 3 things is your sales funnel.
The top of the sales funnel is usually something pretty cheap and something that appeals to the broad market. This front-end offer has one purpose: To get more customers. It isn’t really about how much each customer pays… it is about the fact that they paid something. Get that?
But, then immediately after that, you begin presenting followup offers. Essentially, they’re upsells. The purpose here is to increase the average transaction size as well as to get customers to buy more stuff. You do this by presenting a graduated series of increasingly higher priced offers until the person says “no”.
Simple stuff. You’ve very likely been through the sales funnels of many people already as a buyer. This shouldn’t be a new concept.
The Basic Funnel
The basic blog profit funnel as I teach it inside the Lab is laid out like this:
- Lead magnet squeeze page. This gives you the email subscriber and allows you the capability of followup.
- Front-end offer. As stated, to turn your lead into a customer.
- Membership site. The idea here is a higher-priced core offer. In my model, I’m a HUGE fan of the membership site with recurring billing in this spot, however there are other ways to go.
- High-End Offers.
Now, often your funnels will overlap. You’ll have different lead magnets all serving as different “on ramps” to the same offers. Or perhaps different front-end offers, but the same core offer beneath it.
Plus keep in mind, some funnels skip right over the front-end offer altogether. For instance, you may use a free webinar as a lead magnet and then present an offer on that webinar direct to a higher-end offer.
Point is… there is a structure to it. It isn’t as if you’re just sending traffic to your blog and letting it be a free-for-all.
The absolute best way to generate revenue from your blog is to set up a funnel just like that and then have your blog’s primary purpose be to get people into that funnel. In fact, I would argue that you should start with your offer, not your blog.
But, to turn this into a true money lever (which means you have control over the volume of traffic though the funnel), then you combine it with the use of paid traffic.
How To Make Paid Traffic Not Just Fart Money Into Thin Air
In the last Money Levers installment, I talked about how you can turn traffic into a true lever (something you can control) by using paid traffic. You put money in, out pops traffic.
Thing is… where do you send that traffic?
You send it directly into one of your funnels. This builds your list and then presents offers. And, hopefully enough people buy to break even (or more) on your spending on the ad. When you set it up right and get to know your numbers over time – and tweak accordingly – you begin to get a funnel which gives you fairly predictable results.
And, if you know a funnel will fairly predictably pay you $2 for every $1 you spend on it… wouldn’t you spend money on that all day long? Likely. 🙂
An Example Of How The Funnel Metrics Work
Let’s take this basic funnel:
So, in this funnel:
- 30% of people who are sent to the opt-in page sign up for the email list.
- 5% of new leads who opt-in end up buying the front-end offer for $7
- 25% of those people buy the upsell for $67
- 10% of them buy the high-end offer for $297
So, first off, how much is each customer worth (Average customer value)?
Your formula would be:
Front-End Price + (Core Price * Conversion Rate) + (High-End Price * Conversion Rate) = ACV
$7 + ($67*0.25) + ($297 * 0.10) = $53.45
So, every customer… every person who buys the initial offer of $7… is actually worth $53.45 to you.
What does this tell you? It tells you that you could spend up to $53.45 to acquire one customer and you wouldn’t lose money.
Since we know that only 5% of people who opt-in purchase our front-end offer, how much can we spend on every opt-in lead?
ACV * Conversion Rate = Average Lead Value
$53.45 x 0.05 = $2.67
This means you can pay up to $2.67 for every single new lead into your email list. Because you know 5% of them will buy. And the funnel after that will make it break even.
And since we know that 30% of all visitors to our squeeze page turn into a new lead, then we can figure out what we can pay PER CLICK on our ad.
$2.67 x 0.30 = $0.80
We can pay up to 80 cents PER CLICK and we wouldn’t go negative.
Now think about that…
Because you have a backend funnel in place for your blog, you can literally pay up to 80 cents for every single visitor to this squeeze page, and you’d be not losing any money. You pay less than 80 cents and you’d actually be MAKING money while you built your list and your blog audience.
And in many markets, you can drive clicks much cheaper than 80 cents. 🙂
So, let’s say you want to drive 1000 visitors to this funnel that you’ve built. At 80 cents per click, this is going to cost you about $800. Certainly not chump change. However, given our conversion rates, those 1000 clicks would result in 15 customers. 15 customers, with our average customer value of $53.45, would mean a revenue of $801.45. You will have broken even. But… you’d now have 15 new customers… and 300 new people on your email list who are now part of your audience and may very well buy from you later.
Combining Your 3 Basic Money Levers
This whole series is about showing you the controls of your business. If you know what the basic controls are of your business and how to use them, then you have the ability to grow your business in a predictable way.
The 3 basic money levers are:
- Products and offers you can sell.
- A sales funnel to sell them
- Predictable traffic
In the example above, it should be clear how you combine each of these 3 things to grow your business.
Think about that funnel up above again. Imagine you had a funnel like this in place.
Now, just like the throttle on an airplane or the accelerator on your car, you can just increase your spending on that funnel and you know your email list will grow and you will generate sales.
Obviously, when theory hits the “real world”, there will be some adjustments along the way. For instance, sometimes you will watch your cost-per-lead climb when you increase spending on a campaign so you have to be somewhat strategic about how you do it. Plus, the example above didn’t account for the high-end offer being dependent on the offer before it, which would lower your ACV.
But, those are details. Right now it is about establishing what the levers are.
And where exactly does your blog fit in here?
The blog can attract free organic traffic and move them into your funnel. So, now you can make that $2.67/lead but you paid nothing to get it. Pure profit. 🙂
The blog can build your retargeting audience, allowing you to run paid traffic to a more qualified pool of people who are already familiar with you, therefore (usually) driving down your cost per click.
The blog can further the relationship with people on the list, therefore attracting sales from people who’ve been through your funnel awhile ago but never bought.
So, surely the blog is a big part of the equation. But, it isn’t generally a money lever.
The 3 basic money levers will be found above.
Then, it is a matter of manipulating the levers in certain tactical ways to generate more revenue as you want it.
More on that…. next time. 🙂
Got A Question? Need Some Assistance?
Have a question about this article? Need some help with this topic (or anything else)? Send it in and I’ll get back to you personally. If you’re OK with it, I might even use it as the basis of future content so I can make this site most useful.