SFR 248: Kill The J Curve...
I'm going to throw rocks here a little bit. Ermmm, \u2018NO,\u2019 actually it's going to be mountains, boulders and things that are VERY heavy\u2026\xa0
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I'm vehemently against this idea that we need to take on funding in order to start a company.
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The J Curve is what's taught in most of our education and mainstream entrepreneurship today.
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Case in point, the J Curve is the very model that Shark Tank operates under.
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And while I love the show, I\u2019m vehemently against the concept of the J Curve...
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In fact\u2026
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It\u2019s time to kill the J Curve.
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If you don\u2019t know what the J Curve is, all will become clear\u2026 but first, let me tell you a story of about how to make a million bucks\u2026
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THROWING A J CURVE\u2026
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I was working with Russell on a project for one of his personal clients\u2026
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For every dollar we put in an Ads, they were getting $1.30 back out. For every dollar they were putting in an Ad, they were getting $1.30 back out.
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However, one day they called, us a bit ticked off, and said, "We're barely breaking even on this?"
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I was like, "You're NOT breaking even. You're actually making 30 cents for every customer that comes in."
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They weren\u2019t happy with that answer, and they said, "Exactly, we're not going to make a ton of money on that."
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We were like, "You guys are missing the entire point here. You now have a machine where you're acquiring customers for free."
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We\u2019d created a bottom of the value ladder offer that was expanding their current customer base.
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They already had their middle of the value ladder product and they had an expensive club as well\u2026
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But what they needed was MORE blood in their value ladder to bring people in and ascend them to their more high-end offers.
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We were putting a $1 in and they were getting $1.30 back out\u2026 but they were mad about that.
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We asked, \u201cWhat are you mad about? This is a success."
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They were like, "It's NOT a success."
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We were like, "Yeah, that's a HUGE screaming success."
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BREAK-EVEN WINS
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\u2026 we said, "Let's think about this for a moment\u2026\u201d
\u201cYou have a machine that\u2019s giving you customers for FREE and you\u2019re even gaining 30 cents \u2026\u201d
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We told them:
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\u201cAnything you sell to those customers afterward is pure profit!\u201d
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Break-even is a million dollar scenario.
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\u2026 AND now, these customers are also MORE likely to purchase anything you tell them to buy.
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Still, they weren\u2019t convinced\u2026 they were like, "What are you talking about?"
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Here\u2019s a FACT:
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Second money is ALWAYS easier than first money.
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A percentage of your list will ALWAYS purchase simply because they like you and they\u2019ve had a good experience previously
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We're not just tweaking:
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But what's so incredible about the way this works is this...
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STARTING A BUSINESS THE WRONG WAY?
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In college, I was taught that the first things you do when starting a business are:
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- Write a business plan
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- Gather the who\u2019s who and get people on your team
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- Think more about your idea and do some market research
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- Competitive and SWOT Analysis
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- Look into the probability of success and do lots of analytics.
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Probably my least favorite class was Quantitative Marketing research. \xa0
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I HATED that class\u2026
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And that\u2019s literally where the phrase \u2018J Curve\u2019 comes from...
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When you start your business, since there's no revenue yet, \xa0you are expected to go into debt in order to fund the business, the people, and the systems.
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There are a series of systems in business...
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For example:
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There's a system for:
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- Support
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- Fulfillment
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- Helping people actually have success.
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All that stuff costs money.
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At first, when I started my business, it was just me... but that's NOT the way I was taught in college.
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SAY \u2018HELLO\u2019 TO THE J CURVE
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In college, I was taught to get a loan and go into debt. \xa0
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#EyeRoll
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I would expect to be in debt until a magic moment three to five years away when I finally become cash flow positive.
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Meaning, I'm not losing money faster than I'm making it.
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I\u2019m NOT breaking even; I'm just finally going in a straight line.
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I'm NOT making any money, but I'm NOT losing anymore.
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Then you keep tweaking and tweaking until you reach the mark where... *hopefully*... you\u2019ve made more money than you took on to fund the business.
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And *this* is literally what I was taught in college\u2026
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When the curve moves upwards enough, then you're profitable.
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The moment the curve starts to get to a certain zone (see below) you can take profit - which is great. You make a lot of cash...
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But as soon as you start increasing at a decreasing rate, meaning the curve starts going level, you're taught to sell.
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You go into the stock market with an IPO, and you sell off your company and you no longer own your baby.
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That SUCKS!
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You work your face off, but then most of your decisions will be made by a board\u2026
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You gave away your business with golden handcuffs when you got a loan.
That's why Shark Tank irks me.
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But you can skip this entire model with what I\u2019m showing you here.
KILL THE J CURVE
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Let\u2019s go back to the ClickFunnels and the people who weren\u2019t happy with $1 in and $1.30 back out \u2026
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Here\u2019s the CRAZY part...
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$1 in and $1.30 back out means that you're skipping the J-Curve.
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It means that from the get-go, you're going up.
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Is it fast? \u201cNo, but you're not losing money,\u201d and remember, we already know that second money is ALWAYS easier than first money.
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A percentage of people will ALWAYS buy your upsell
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That's why this is such a big deal - that's why we freak out so much about doing this stuff.
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https://media.giphy.com/media/8B9hGl5neRTNK/giphy.gif
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Then when you understand more about how to create the offer and the order to build in, it means you don't have to do that VC garbage. That's why it's so awesome.
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You kill the J Curve and go straight to profitability.
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Even if things are level for a while and you're not making any money:
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- You're not losing money
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- You own your entire business
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- You're actually making your own decisions.
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Merry Christmas! ;-)
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So then you start making HUGE profit... and you can sell if you want, but you don't have to - \xa0you can have cash cows like a lot of my offers are now.
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Tell me any other investments on this entire planet where I can put a dollar in and get a 30% return in a week?
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People boast when they get a 10% return on a mutual fund.
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Seriously, think about it!
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Do you know how much money you already have to have in order to actually make a living off of something like that?
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In my mind, there's no other logical way to invest in your future than doing a funnel and creating an offer the right way.
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I don't know another way.
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LET\u2019S TALK MONEY
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\u2026 when that Facebook apocalypse thing happened a while back, it kinda jacked up our stats a bit, but before that, we had two months where we were putting $1 in and getting $8 - $10 out.
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It's not as high anymore, but it's still like a $1 in and $5 out \u2026
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That\u2019s a weekly return of 500%.
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You don't take profit, if you just keep putting a dollar in, and getting a dollar back out...
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Congratulations, break even is a million dollar scenario.
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The asset is the list; so when you can build a list of buyers for FREE - BOOM!
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Most corporate companies can't even begin to comprehend what I'm teaching you right now. They don't get it.
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They're so indoctrinated in the traditional stuff that when we show them other options they're like, "I don't think that's going to work?"
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And we make it happen and they're like, "Oh, snap. HUH!\u201d
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TURNING DOWN 100 MILLION!
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At one time, there were a lot of companies trying to give ClickFunnels $100 million, and we kept saying, No.
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They were like, "Why? We'll give you $100 million with the BEST rates you\u2019ve ever seen."
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I got to sit in the room where a lot of these conversations were going on.
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I\u2019d hear Russell and the VC guys talking, and I'd be listening\u2026
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https://media.giphy.com/media/Ll1rEkDebTIdO/giphy.gif
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They\u2019d be offering all this money, and Russell's like, "We don't need it," which blew their minds.
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Russell would go to lunch just to kind of humor them, and because it would make a cool story... which it did ;-)
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The VC guys would say, "Come on, $100 million. How much money does it cost you right now to acquire a ClickFunnels person?"
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(And these are stats from a long time ago, so I'm sure the changed a little bit.)
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But at the time, as I recall, it was costing ClickFunnels about $120 to generate one trial.
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Now for the SaaS software world, $120 in ads to generate on average, one trial, that's actually very, very good.
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So when Russell said that, they're like, "Oh my gosh, are you serious? $120 to generate one trial? That's awesome.
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Here, let's give you $100 million, and then you can just go and get a butt load of trials and lots of customers."
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Russell was like, "No, no. We turned those ads off." And they were like, "Why would you do that?"
He's like, "Well, because that\u2019s coming out of our own pockets. $120, that's URRGH."
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(What I'm teaching you now is the reason to come to OfferMind\u2026)
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HACKING THE VALUE LADDER
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So if ClickFunnels is in the middle of the value ladder, ( and I'm using ClickFunnels as an example because we all know them), we\u2019d create acquisition-styled funnels\u2026
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For example:
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- Trip Wires
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- Book Funnels
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- VSLs
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- Invisible Funnels
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- Summits
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- Small eCommerce stuff shipped out...
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\u2026 things that generate a buyer very cheaply.
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I know these numbers aren't accurate anymore, but the principle is still the same\u2026
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It was costing ClickFunnels $22 to generate one Expert Secrets buyer, but the average cart value, (because of upsells, the way funnels work and because we're dang good at creating offers), was $66.
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And so, think about this\u2026
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Now that we've generated a buyer for free, (put in a dollar and get three out), 22 bucks to generate a buyer with a $66 cart value.
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Divide them out, a dollar in, three dollars back out - that's awesome. I don't know another vehicle that makes that kind of cash\u2026
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And frankly, I don't know another vehicle where you can be really, really bad at it and still make a lot of cash.
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Things like the stock market, (I'm not trying to throw rocks), but the majority of the time, you gotta have freakin\u2019 ninja skills to make a lot of money - hopefully... (with flash in the pan kind of strategy to tactics). \xa0
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You can be bad at this and make a lot of cash. I definitely was!
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One of the first funnels I put out ended up making MORE money than I was making in my job.
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I was like, "Dang. That's awesome. I really can be bad at this and still make a great living."
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WHO ALWAYS WINS?
I'm not just approaching value ladder design from the aspect of, \u201cOh, this is the good order to go in\u2026\u201d
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You're playing with the reality that those who can pay the MOST to acquire customer always win, even if they have a worse product.
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Let me explain\u2026
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If I can spend $66 to acquire a book buyer and the book is only seven bucks, I'm going to dominate those who are on Amazon who have a locked average cart value that only enables you to buy one book with no upsells and OTOs...
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That's why this works. That's why what we do is so killer.
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So if I generate a buyer for free or breakeven, (if I'm making money, all the better)...I will never dare take profit at this level.
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Instead, I create sequences that invite them to ascend to the next step, and then... it's pure profit.
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The reason why we make the money we do and we don't have lots of overheads is because we're actually marketers.
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So Russell was with the venture capitalists who were trying to give ClickFunnels $100 million telling them that he\u2019d turned off adds, that in their eyes, were very profitable
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The VC guys asked, "Why would you do that?"
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Russell (very clichely) \xa0explain by drawing on a napkin, ...
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He said, "We turned \xa0those ads off and now we actually MAKE $40 per ClickFunnels trial now."
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The VC guys said, "That's impossible. How are you doing that? That makes absolutely zero sense to me."
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Russell said, \u201cNo no. It totally does."
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REWRITING BUSINESS
So let\u2019s look at it the Expert Secret \xa0book funnel numbers \u2026
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- Average cart value in that funnel is $66
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- Cost to acquire was $22.
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(I think the cost to acquire is lower now, and the average cart value is higher \xa0- but anyways, those are some of the stats I remember.)
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So they're making $40 per ClickFunnels trial - because, at the end of the book funnel, they say, \u201cGo get a free ClickFunnels' trial,\u201d and then people do - it works.
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Do you understand how mind-bending this is? \xa0
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This changes the entire business model - that's why I'm like so fierce with some of this stuff - we\u2019ve gotta push it out there more.
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Then they create all sorts of front ends - that's why he launched the \xa0Network Marketing Secrets book.
And afterward, Russell promotes ascends them on the value ladder for FREE. He already owns the list. He doesn't need to pay to acquire the customer again, and so, he just invites them to take the next step...
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*Pure Profit*
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By approaching business in this way, you can
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- Completely negate the need for VC funding
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- Completely negate the need to give up ownership of your company
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- Completely negate having to make decisions that you wouldn't want to make with your baby.
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That's why it's such a big deal.
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I started in the middle of the value ladder so that I can have MORE money to acquire a customer than my competitors.
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If I sell my book on Amazon for $20... but dang it, Russell's generating $66 per book purchaser (average cart value)...
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Man, he's going to wreck me. Do you see what I'm saying?
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If I can spend 60 bucks in Ads (especially on a book) before I start losing money\u2026
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*GAME OVER*
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Again, you can be bad, but if you're breaking even, you still can upsell your most expensive things - that\u2019s straight up monetization.
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For example...
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There are several people every month who are like, "Hey, I really just want to get an OfferLab. That's the kind of hand-holding I need."
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Or ...
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\u201cI don't want to have to go read the book and go through all the stuff, Stephen. Just give me the result."
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READY, FIRE, AIM
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One of my favorite books is Ready, Fire, Aim - you can see I have it all tabbed out and stuff...
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The methods that I\u2019ve shared are something that I've been teaching and doing for a while, but then, this book validated the crap out them.
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Now if you've never read this book, and you don't know anything about it:
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- The first third goes from zero to 1 million - \xa0so I studied that a lot when that was the phase I was in.
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- The next phase of the book is 1 million to 10 million
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- The next phase (I think) is 10 million to 100 million.
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I spend most of my time with new people and people who are $1,000,000 to $10,000,000 in revenue - that's where most of my expertise lies for our business; new all the way up to about 10 million.
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After $10,000,000, I don't deal with people too much.
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Anyway, in the book, Masterson says\u2026
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(This is on page 118)
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\u201cAlthough your primary focus should always be on customer service, your quantifiable goal as a beginning entrepreneur should be to acquire as fast as possible, what we call a critical mass of qualified buyers/ customers.
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This is the number of loyal customers you need in order to make all or most of your subsequent selling transactions profitable."
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This is key.
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Masterson continues:
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\u201cYour goal as a stage one entrepreneurship should be to acquire as many customers as you can to make all of your subsequent selling transactions profitable...\u201d
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It's literally the exact same thing I've been talking about here
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He says:
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"And if you made your primary objective and satisfaction in selling more products to existing customers who enjoyed their prior buying experiences with you, it will be relatively easy as well as cheaper, therefore more profitable.
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Once you have a good number of qualified customers\u2026 (i.e., the middle of value ladder)...
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Hundreds or thousands, or hundreds of thousands depending on your industry, you'll be in a really good position where almost every new product you come up with will be successful because so many of your existing customers will buy it.\u201d
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Break-even is a million dollar scenario.
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*I\u2019m gonna keep pounding that point in*
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So I go in and test out my entire idea in the middle of the value ladder price point because it makes MORE sense for:
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- Average cart value
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- Cost to acquire
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- Ad costs are very real today.
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I have flex room and I'm able to go and actually test stuff.
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SECOND MONEY IS EASIER
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Once you have a lot of customers, you just focus on that core offer for a while.
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Then once you've got a lot of people, anything you drop afterward is highly likely to succeed.
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As long as they enjoyed their first buying experience, it's highly likely that you're going to be successful.
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I read this and thought, "Oh my gosh." I was on an airplane and I was like, "This is exactly what I've been talking about."
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Anyway, check this out\u2026
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Masterson continues:
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"Understand the dynamics of generating long term profits through the development of large circulation, low-cost products sold at a loss\u2026\u201d
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(* NOTE ...but you don't need to do this because you can break-even)
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\u201c...by upselling high-end products to this larger base."
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Basically, the whole point of this entire thing is that, once you now have an existing customer base and you sell something more expensive, that's where you're going to cash flow hard.
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A lot of profits.
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I start at the value ladder and then move to the top, but once that\u2019s working, and I want things to be MORE profitable; how do I do that?
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I create a mechanism, (I mean, funnel/offer), at the bottom of the value ladder to acquire more customers at a break-even level - which makes subsequent selling transactions really profitable.
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If 10 people out of 100 bought my middle tier product, maybe half a person out of 100 would buy my top tier...
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But then, I just fill the hopper up.
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Q: What's introducing a lot of these things to the marketplace?
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A: The fact that I podcast.
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Dang, it! I just let that out ;-)
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- I'm creating a relationship
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- I'm telling a lot of stories
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- I'm breaking false beliefs that I know the audience is having as they start to say things that I know are not real.
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I create a story around my episode - at the end of each episode, pay close attention to whatever it is that I'm promoting in the outros.
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The outros often introduce a new thing inside of the value ladder or reminds people that my product\u2019s still there.
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So I'm creating the relationship and leading with a butt ton of value. I give so much away on my podcast - it's ridiculous.
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#GetRichDoGood
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Hey,
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I know this game can take a few tries to get the money flowing, especially the first time, right? And that can suck.
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I also know from experience how frustrating it can be to know your business is just a few tweaks away from your next big payday, but you don't know what tweaks to make.
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I've felt completely paralyzed by that in the past, and it sucks.
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I've been blessed to work with thousands of new and successful businesses over the last three years, and two things have really shocked me.
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#1: I began noticing the pattern to success is vastly the same, but everyone's spot on the path is obviously different.
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#2: I've been shocked and overwhelmed by the number of people asking for my help, my systems, and funnels in their business.
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Well, until now I've never had a system or product in my own business to help you build yours.
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Now, I'm finally able to be public about all this...
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If you'd like my help to build your offer or sales message funnel and even your content machine, go to myofferlab.com.\xa0
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The path to online and offline success is 80 percent the same regardless of the product, price point or industry, and it works if you're new or already a killer in business.
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You can get more details on how to get my personal attention and frameworks in your own business by going to myofferlab.com
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In-person classes are limited to 60 people each, and frankly, I can only do about two of these a year. Get more details, and even jump on the phone with us for free at myofferlab.com