Part 1: How to Model a New Business (Projections – Modeling)

Eric Beer 00:00

This is how we do it. And this is the roadmap to get there. And I show you I lay it out. And when you see that you’re like, I’m in - let’s do it.

I spent the last 17 years building my eight-figure performance business without using any of my own money, working with some of the most brilliant direct response marketers in the world today. Now I’m looking for entrepreneurs to join my affiliate army built on ethics, transparency, and good old hard work. Join me to change the perception of how people view the greatest business in the world, affiliate marketing, and follow along as I learn, apply, and share performance marketing strategies, working with some of the brightest people on the planet. My name is Eric Beer, and welcome to the Performance Marketer podcast.

Welcome, everybody. My name is Eric. And every day in this channel, we talk about all kinds of online marketing strategies to be able to go online and on a performance basis, drive some results. We measure our results by data, right? All you Performance Marketers out here, I want to talk to you today about something that’s happening in my company that I thought would be useful for people that are trying to start a business. Or maybe you’re in business, and you’re trying to grow your business, and you’re trying to figure out how to do that. And you’re not sure what to do. So, I’m going to take you guys through something that’s happening currently in my place. As an example, So, that you guys can see how it all unfolds, right? We’re Performance Marketers, right? When you talk about like, what’s your budget, what the allowable is for you to spend to test something, right? I do that all day long, right? I test things all the time. If I told you how many businesses we test and fail on before we find a winner, it’s probably nine out of 10, maybe 19 out of 20. Could be right, we’re testing all the time. The thing is, is that that one time, when you figure out how to make something work, that is where you scale that business, and you can make millions, right? And the concept is around you test, you test, but you limit what you’re going to lose on that test. I don’t care if it’s your budget is a million dollars a test. So, if you do it 10 times you got $10 million, you’re going to spend, right, but the concept of those $10 million, and spend one of those is going to work, right? And that one business that works is going to make hopefully $10 million a month, right? So, you make back all that money in one month. And then from there, keeps going right? And now you have this long-term sustainable business, you’re making 10 million plus per month, right? Obviously, that’s a big number. OK, So, when we’re talking about some of these smaller companies, right? It could be, you know, somebody new, who’s starting out, and if you’re new, you probably don’t have that much budget to work with. So, you’re going to be way more focused on driving some cash flow as fast as possible. If you’re a little bit more established, then you might have a little bit more time. If you have cash flow in your business may have some time to test this and, you know, put a little bit more budget towards this test. And give yourself the opportunity to make something work, right. But So, we’re doing something right now. Like we’re hiring, we’re bringing in new people, we’re trying to build out different businesses all the time. And I wanted to kind of talk you guys through more, how we’re modeling this out how we’re thinking about it, or mindsets, what we’re doing from the start, right, for one of the divisions, OK, and we email all the time, right? We always talk about like, lead generation and data. And the data that you have inside your business is an asset, right? If you’re going to go sell your business, you know, for example, if there’s a company out there that has some software, and they have 100,000 users, and the average price that that user pays on a monthly basis is 100 bucks. OK? Well, ultimately, you would look at that as the amount of users times whatever the cost is on a monthly basis, and that’s the amount of money that you’re making in a year. Right? If you were to go sell that business, you would get a multiple on that. OK, So, 4x 5x Whatever it is in that industry for the comps. OK, So, I just think I just want you guys to understand that concept, right? That’s why we say when we’re generating leads that you want to build up a database, because of the value of those names are powerful. OK? So, in the lead gen world, when we’re doing that, if you’re generating leads, your leads come in, and then you may be generating a lead for for a company that you’re going to go and sell that lead to, right, you may be generating a lead for your own internal business, where you have a core product of where you’re going to be making money. That’s how you model the business, right? You know, on the lead gen side, if you have, you know, a debt consolidation company that’s looking for people that are looking to consolidate their debt, maybe they’re willing to pay you $25 a lead. So, you go out into the market, you generate a lead for them with all the requirements that they need, of somebody raised their hand saying, I need to consolidate my debt, great, you get that person to sign up and match them with a debt consolidation company to do that for them. And your goal is you want to do that for less than $24. Right? So, you generate a lead for $20. You sell it for 25, you made five bucks. Awesome, right? In the same scenario, you could be a coach, right? So, somebody that sells a high-ticket program where someone pays you $25,000 a year to be part of your one year long coaching program, right? Where you, you help them you assist them, you, you support them in a way that you teach them how to make money online, and they pay you to do that, right? So, you may go and generate a lead. Right? So, let’s say you go and generate leads for $10 a lead, right? So, if you generate 1000 leads, you spend 10. Grant. So, if you’re spending $10,000, and you’re getting $25,000, if you get one sale, you really got to convert one, right? On those 1000. Leads, right? So, So, great. Those are those are successful businesses, and the margins are there and you’re making money. Awesome. Well, they’re also, they’re also businesses that will do this, where they’ll generate a lead. And they’ll breakeven, because sometimes it’s just not that simple. You don’t go and buy media and make money. Right away, you make money on the back end. OK. And that’s really important for you guys to understand making money on the back end, right? They’ll call this the self-liquidating offer. Right? So, the idea of you being able to generate a sign up, and whatever the cost is to generate that lead. Right? So, let’s say, for a debt consolidation lead, right? We said that we’re gonna pay 25 bucks, let’s pretend like it cost us $25 To generate lead, right? Well, at that point, you’re not making any money. Right? If you cost you 25 To make the lead, and you’re selling it for 25, well, then you’re breaking even, right? Well, if you’re capturing that data, that person’s information, a person’s giving you all this information and saying, yes, here’s where you can use it, you can market to me, I want you to market to me, send me in for information that’s valuable to me. Well, in that case, now, the key is, you want to monetize that data, right. So, if you have your email address, you can send emails to that user. And you can do it with offers that you have that your own core offers, you can be nurturing them to get them to sign up, or you could be sending affiliate offers, right, other people’s third party offers that are going to pay you a commission when you get them to sign up for their offers. Right? Right. So, just I gave you the debt consolidation example, in the coaching program, right? Let’s say you generated those 1000 leads, and of course, 10 bucks, right? So, that’s 10 grand, and you got zero sales when you got those leads, right? Well, now, once you get them in, right, you’re just selling a product for $25,000 to get somebody to sign up on a form and spend 25 grand when they have no idea who you are what you’re about right you just generated this lead this morning and they know your when they woke up but now you got them interested. You got them signed up, you got them you hope then you got them interested, some curious, some curious headline or something of whatever bait you used, right? If it was a cool survey that you were able to use saying, you know, what’s your entrepreneur style, right? Like, what survey funnel should you use for your business? You know, how to take your business from $500,000 to $5 million in less than six months. Oh, interesting. I want to I want to know more. Right but they may not spend 25 grand with us right there. So, you got to work it right you got to you got to nurture that lead. You got to give them more information. You got to give them more value to show them why it makes sense for them to spend $25,000. So, you could send them to a webinar, right, you can create like an email series where you’re, you’re sending emails every day, driving them somewhere, and you’re just, you just kind of nurturing that lead, you’re not trying to sell them, right? Because the goal here is that you’re going to get somebody that sign up for your 25k program, right? The thing is, is once you pay for that lead, let’s say you spend 10 grand on that, well, to mail to those 1000 people isn’t very much money. You know, if anybody understands that, on the email side, it’s like the same way, when you’re when you’re mailing something, you put a stamp on something and you mail, hard snail mail, right from mailman mailbox to mailbox, in email, there’s also cost to mail, it’s not a lot, right. Depending on the platform you using, it could be you know, $1 1000, it could be $5, it could be 25 $30 1000. Could be anything, right. And ultimately, depending on what you’re doing, what your business is, how much volume you’re sending, will dictate that the costs. But like, if you’re if you’re somebody that generated 1000 leads, he spent 10 grand, and your product that you’re selling is 25,000. Right? If you send 1000 emails, and it costs you $25, right? Well, day one would be 25. Day two would be 25. Day three be 25. Day four, right? Just spend 100 bucks, on four days of emails to those 1000 people nurturing them, right? Let’s say you do it for another four days. So, now you have eight days, or eight emails that you sent you spent $200. Right? With the goal of sending them somewhere where you’re nurturing them, educating them, getting them, you know, to watch more of your content, watch the webinars, and you know, let’s say hypothetically, you get them to some, you know, challenge that they’re with you for five days. All right, and after they go through the challenge, you convert 1% of those people, right? 99% of those people do not buy 1% of those people end up buying, right? So, 10% would be 100. So, 1% would be what 10? Right? For guys look at that do the math 25,000 times 10. Right. That’s pretty good money. $250,000 And how much you spent. It’s been 10 grand, see me 20 140 30 $240,000 Because what you did was you took this program and you emailed on the back end, right? And you stayed in contact with this person, you you added value, you kept just nurturing them and sending them information, right. And over time you convince them because you an awesome product that they’ll buy from you. OK, So, what’s going on our side is, you know, we’re trying to build out some new businesses. And part of that business is the email side of the business. And this specific type of business, like we mail already, we mail for different businesses, but you know, there’s different things that we have going on. So, when we’re looking to roll out something new, right, we have to model everything out and look to see like, how do we think this business could work? Right? So, the guys on my email team will say to me, Well, Eric, what is your budget? Right? And that’s kind of what we’re going through here. So, I’m going to walk you through that. And when someone asked me what our budget is, right, or Hey, Eric, what are you willing to spend on? On getting some email service providers ESPs to send email? And I would go back to them and say, Well, what are you projecting? Like, what are the numbers look like? And I can tell you, right, I want to know what the numbers look like, I want to know how much time it’s going to take for us to get to a break even right now. I’m not, I’m not spending a million dollars on tests, like no way, the beautiful thing about what we do, because we’re Performance Marketers because everything is measured, we know immediately for making money or not, we know immediately if this business is profitable or not, right. But in a scenario when you’re sending emails, right? These mailers who get paid to help you mail, some of them want you to commit for 12 months. Right? Some of them will take you months a month, right. And, you know, it depends on who you’re mailing with whatever but bottom line is, I’m going to show you a model here on how we looked at it to determine what we’re willing to spend for X amount of months to see if this business works. Could be weeks, right? And I’m going to kind of draw it out for you here. So, that you guys can see and I put some stuff on an Excel sheet just high level So, I can play with numbers just don’t have to do to my head and we can kind of move fast through this but I want you guys to understand this, OK, because if you’re generating leads You want to capture the data, right? Whether it’s you have your own products, or you’re doing it, where you’re selling the leads, you still want to be able to have permission to mail to those leads, OK? So, because that’s the most valuable thing, the money is in the follow up, if you’ve ever heard that, right, the money is in the back end, the money is what you do with the people after you get them, right, because you’re out there buying leads, generating leads, and you know, whether you’re buying traffic on Facebook, or you’re buying traffic on YouTube, or wherever, right, the ultimate goal is to get somebody who’s on Facebook to sign up for your offers. And ultimately, what you’re doing is you’re pulling them off of Facebook onto your list, right? So, the next time you want to communicate with them, you don’t have to go pay Facebook, you can now just send an email to them, alright, or SMS text message them or pick up the phone and call them. You know, however, however you communicate with your your people, OK? So, in this scenario, we’re modeling out the email side of the business. So, the way we did it was like this, you have to make some some projections, and you know, some guesstimates. And what you’re doing is you’re trying to look at where the variables are in the business, to be able to be able to project what the business will look like, right? Because when you come to me and say, Well, what do you want to spend? It’s all about risk and reward for me, right? Are you willing to spend $500? Are you willing to spend $10,000? Are you willing to spend $50,000? And, you know, I don’t have enough information to give you an answer on that of what the business is going to look like, if it’s worth our while, if it makes sense. Right? So, what we did here was we modeled this out. OK, So, we first had to call up some, some email platforms and say, Hey, what’s up, we want to mail? What’s that look like? What’s your pricing look like? Right? So, they give us some pricing. And I’ll just kind of make some stuff up here for for easy numbers, right? So, it’s all based on volumes. So, as an example, if a mailer comes to you and says, Well, if you mail 1 million messages a month, we’re gonna charge you $250 1000 If you mail 5 million messages a month, we’re gonna charge you $2 1000 we mail 10 million a month, they’re gonna charge us $1.50 If we mail 25 million a month, they’re gonna charge us $1. And if they charge, if we do 50 million a month, then they’re gonna charge us 75 cents 1000. Right. So, what happens is, as you mail more, you spend more money, they’re gonna you get discounts in the cost, right? And whether it’s a month, or it’s, you know, over a period of six months or a year, doesn’t really matter, right? It’s just the concepts, right? So, how do we decide if we can make that work or not? OK, so, we do it like this, right? So, um, the sentence, So, let’s model this out. So, on the sentence, we’re talking about 1 million, we said that we’re going to do $2.50. So, this is the cost $2.50. CPM, right? So, cost or CPM. CPM is cost per 1000. Right? So, it’s $2.50 for every 1000 emails that you sent. OK, So, on 1 million, it’s $2.50. On 5 million is $2. Right? On 10 million, we said that it is $1.50 25 million. He said it’s $1. And on 50 million, we said it was 75 cents. So, right here, these are the different models, right? So, let’s put a little line here. And this is what we’re looking at. Now, when you start to mail, you have to be realistic with what’s going on month 1am, I going to be sending two 50 million people. It’s not likely, right? Plus, anybody that knows the mode business knows that you can’t just come and start sending emails to a dedicated IP address and send 50 million emails, there’s, it’s not going to happen, you’re not going to get into people’s inboxes you need to be able to warm up the IP and slowly send volume over time. Right? So, because of that, because you’re limited even if you have the data, even if you have all this data coming in these leads coming in. You can’t just go press send to 50 million it it’ll get blocked. Right? So, you got to build up over time. So, that’s gonna be one thing that’s gonna take us some time and you have to put that into your mindset right? But I don’t want to go too crazy amounts of detail on that, right? That could be for another day on the male side of that whole strategy on how you do that. But the point is, is that you got to take that into account. But for just simple concept here, right? And we’re modeling this out. I want to know now, what’s the spend on this right? You guys got to figure that part out? This is how I’m modeling. Not if I even want to get involved in this business, right? Because we know that we’re gonna send this much. And that’s the cost on 1 million sends a $2.50 1000. OK, this is this is medium math, guys. OK? So, CPM is cost per 1000. So, for every million that you send, you’re paying $2.50 per 1000. OK, So, the math on that is, what you do is you take 1 million, and you divide it by 1000, which is the CPM right? Cost per 1000. So, when you do that, 1 million divided by 1000 equals 1000. OK, So, then what you do is you take that 1000, and you multiply it times the CPM, which is $2.50, right? Joint $2.50 per 1000. So, that’s how you do it, right? So, the math works out here that this is going to be $2,500. On 5 million at $2 1000. Right? So, it’s not, it’s 5 million divided by 1000. So, that’s 5000 1000. Right? Then you multiply that times two, So, that is 10k $10,000. Right? 10 million divided by the 1000 is 10 million times the dollar 50. So, that is $15,000. Spent 25 million now divided by the 1000 times the dollar equals $25,000 In spend, and 50 million times 75 equals 37,500. OK, So, this is what it’s gonna cost us. This is without your employees, this is without any overhead, all that good jazz, we’re just modeling out the business right? Here. Were this is what it will cost us to work with these ESPs these companies to send this amount of email. So, 1 million emails can cost 2500 bucks, right? 10 million is going to cost 15k. For 50 million, it’s going to cost us 37,500. So, you know the company and say, Hey, Eric, can we spend 37,500 and commit to 50 million messages? Over 12 months, you can always increase it right? So, this company wants to be guaranteed. So, we would be committing to 37,500. Right? Now how you would pay that is also a negotiation. Come into my say, OK, we got to pay all 37,500 up front. Or they might say you got to put down 50% Right now, and then you could pay monthly, or you could just set it up where you pay on a monthly basis. Right? So, you just evenly break out like if 12 months divided by 37. Five, doesn’t really matter, right? I mean, it matters to somebody, but at the end of the day, you’re gonna be paying 37 Five, just a question of, you know, who’s taking risk here? Are we going to take all the risk and spend the money now? Or do we want to spend a little bit of time because then we can generate some revenue, some cash flow that will pay for that sin? And then some, right? Obviously, that’s the course that we want to take root, we want to do as much as they’re comfortable with, but the least amount to us, the least amount of cost was the beginning. Right? So, less risk, we’re still going to pay it. But it gives us time to generate revenue So, that I don’t have to come out of my pocket to spend this money. Right. Let’s pretend like I need to put some money up front. And I’m a new business and I haven’t any money coming in or anything. Normally, like a strategy that some people will use companies will use is they’ll go and they’ll take out, let’s say a credit line with a credit card. Like let’s say AmEx, right. So, if you set a deal up where you’re going to get monthly terms, net 30 terms, which means OK, month one, at the end of the month, you have 30 days to pay that bill, right? So, in that scenario, let’s pretend like your cost that month is $10,000. So, on the 30th day, right now they’re gonna bill you So, in 30 days from now, you got to pay So, on that 30th day, you let them charge your credit card. Well, what that does is yes, you have $10,000 in debt, but in Now the credit card company says you don’t need to pay us for 30 days. So, what you’ve done is you’ve doubled the time that you can now work to generate revenue for that 10 grand. So, you don’t have to come out of pocket, right? You got to figure how to generate revenue, right? You got to know if you can do it quickly. So, that, you know, you can pay it back. Right? If you don’t, and it doesn’t work, well, then you’re dead, you got to go figure how to pay that off. But a lot of people get started this way, a lot of people do this, and they build their businesses way without having to go and get money from other people, right? It’s a risk, there’s definitely a risk here, right risk reward. But if it works, you still own 100% of your company. And now you have tons of upside, right, versus if you go and you get money are you gonna have to partner with someone, for them to give you money and give up 50% of your business? Well, short term, you it’s great, you offset that risk, to have debt. But long term, you’re now giving up 50% of your profits forever. Or third way, maybe you you take out a loan, So, you’re going to pay some high interest on that loan. But again, that’s very similar to doing it on a credit card, right. So, if it’s small amount of money, you can get a credit line, that’s a good play. Right? I’m all down for that play, right? And it gives you the chance to generate some revenue. Now what we need to do is we need to model out the business to figure out if this is something we can afford or not. OK, So, you got to understand the business, you got to understand what kind of industry you’re in what your business model is, right? We talked about generating leads for a debt consolidation company. And then let’s pretend like we’re gonna sell that lead, and then we’re gonna start to mail third party affiliate offers, OK, in this scenario, you don’t own anything, right, you don’t have your own offer. At this time, you don’t have any data, and you don’t have an ESP. So, now we’re starting a business where we’re doing a deal, we’re going to go sell this leads to the debt company. And we’re going to go get the mailer to do a deal. And then we’re going to start to mail and we’re going to go get other offers that are relevant to a person who wants to consolidate their debt, right. So, someone that wants to consolidate debt, if we can learn more information about them, right. That’s why we you survey funnels, more information we learn the more than we can send higher, more targeted messages to the user that are relevant. So, you could generate that lead for debt consolidation, sell it, and then send them a survey asking more questions, get some more information, based on how they answer those questions after day one, then you can then set up some emails to be sent to them based on how they answer those questions. Right? Do you own a home? Are you looking to refinance your home? Are you looking for taking out a credit card? Right? Um, are you looking to go back to school, get a job, all kinds of stuff, right? There’s tons of companies out there that are buying leads for this kind of stuff, right? If you’re in the coaching business, very different, right? If you if you’re the coach, right, and this comes in, you’re not going to be mailing these people, third party offers at this time, you’re mailing messages from yourself or from your business, and you’re going to be sending things to them a value to try to increase the trust between you and that person. Right. And then you nurture them over time to get them somewhere. So, if they’re willing to take out their credit card and spend 25, grand, different types of businesses in that scenario, these numbers don’t make sense, right? If you generate 1000 leads, right, you can build a serious business, if those 1000 leads are real people, you can build a serious business that selling at 25k a pop, right? Like, if I’m, you know, I’m gonna roll something out here, I’m gonna start helping people training people, I’ll sell for 25 grand a year, right? So, if I work backwards on modeling out that business, the way my mind would look at this as I want to make $5 million in that business, you’re one, right. So, if I, if I’m gonna charge 25k, because I’m going to need money to fulfill on that I’m going to have to hire a lot of people that I want to over deliver to these people I want to like, like, obsess over customers. Like what Jeff Bezos does that’s my plan is just do everything for the customer, like 100% support be their false sense of support, like convince them that they can do it because I believe in you more than you probably believe in yourself and fears holding you back. So, I give you the confidence and the mindset that that that will catch you when you fall, right where this this parachute. And I know I’m never gonna have to catch you. But that’s what I need to do to get you to take that next step to take that leap of faith. Because you’re So, scared of like, what can happen, right fear holds back people like you wouldn’t believe. So, I get you to think that, right? And now You take that step, and now you’re successful. Boom. Right? But we were there to do that for you. Right? And I want to do that I want to over deliver. That’s the concept here. Right? But in that scenario, if I get 200 People over a 12-month period, to sign up for a $25,000 product, that’s $5 million 200 people, some a lot of people, right thing is, is that it’s a lot of people, if you’re selling something for $25,000 a pop, it’s a lot of money. Right? If I told you, I was going to sell you something for 25 grand right now, you probably be there like, you’re out of your mind, crazy. Loco, I’m not spending 25k on a program. Dude. Are you serious? No way. No way. Because I can’t come to you and ask you to do that, right? I need you to come hang out with me, I need you to, I need to nurture you need to explain to you the value that I’m going to bring to the table to help you. Right. You wouldn’t do that today. But what if over a period of time, I showed you that if you spent a year with me and give me 25k, I’m going to show you the strategies, the tactics, the systems that you can use with my survey detective, and how you use survey funnels to go generate leads that you’ll generate a million dollars in a year, once you understand what I teach you, would you spend 25 grand for that? If I guaranteed you that? Right? The answer is yes. Of course, if you know that you’re gonna make a million dollars, would you spend 25 grand to learn how to do that, and mind you year over year and scale it no brainer. But I gotta get you there. I gotta spend time with you. I got to show you what I mean by spending time is I got to get you to consume my content. You got to listen to my podcasts, got to listen to my videos, and watch my videos. Right? I got to get you into like maybe like a challenge and show you all these things. Show you case studies show you how I do it convince you get you to overcome some objections, whether it’s you don’t believe in the product that I’m selling, or you don’t believe that you can do it because you don’t have the marketing experience. Or maybe you think that you can’t afford it. And I got to figure out a way to show you this in a very clear way that’s digestible. That yeah, you can do it. And this is how we do it. And this is the roadmap to get there. And I show you I lay it out and when you see that, you’re like, amen. Let’s do it. Right. I find the right people that are my avatar, they’re going to do it.

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