A $5,000 Setup Fee Fixes Your Churn Problem

0:00John. >> Marketing. All right. >> Marketing revenue 1.1 million. Profit 130K. >> Okay. >> All right. John >> 1.1. >> John, I don't want to get ghosted again. >> Yeah. >> Feel like I'm in high school again. Making prank calls, dude. Where's the uh >> Hey, >> can you hear us? >> Hey, can you hear me? >> Yes, sir. >> Yeah. >> Awesome. >> Thanks for not ghosting.

0:27>> My pleasure. So, uh, tell us what's the constraint in the business? What's, um, preventing you from growing right now? >> Uh, great question. Let me pull up my notes. Um, so, uh, I help brands on Amazon, you know, gets their get their products seen, sold, and loved by customers. >> Um, right now we're primarily working with, uh, brands that are doing anywhere from 100,000 to 2 million uh, a year on Amazon.

0:53>> Oh, small. >> Yeah. And so they're really getting squeezed by, you know, rising ad costs, tariffs, Amazon fees, and then of course, you know, slow cash flow that comes with uh an inventory business. So I guess my question is, if you were in my shoes, how would you help these brands um again who primarily sell on Amazon solve this problem? Ideally in six weeks or less. >> All right. Ideally in six weeks or less. Wow. We got we got a big big timeline here.

1:20>> Alex looks excited right now. >> I'm pumped. He's he's got a good great idea. >> Yeah. No, so basically you've got you got two options, man. And I like I don't know about your six week timeline. That's irrelevant to me. But you have you have two options in terms of the strategy of this business right now. You have a you have a bottom feeder. You're you're you're doing with like barely entrepreneurs, right? >> And again, this is everybody's listening to this. 2 million a year for physical products versus 2 million a year for for services. Wildly different. All right.

1:48Because they have cost of goods. There's there's always cash flow issues. they've got supply chain, there's all the other problems, right? And then obviously if there especially with Amazon, it's like they also have platform fees on top. So it can be a pain. All right, so I just want to like put that out there. Now, that being said, I would say that if you're if you want if you want to stay in this business, I would say either if you're going to serve that avatar specifically, you're going to have to figure out the most automated, the most scalable solution. Otherwise you will create a churn factory that like basically your churn will be indicative of their volatility of the volatility of their businesses.

2:24So their volatility will reflect in the volatility of your business and so you have to price in such a way that they that even with their volatility you have to basically price to their worst month not their best month. >> Does that make sense? >> Yeah. Yeah. And I think that and I don't want to make you repeat yourself because I know you talked to another agency already about that situation. Um, so I guess my next question then is is that, um, if we did go with, you know, kind of that proumer, um, if you will,

2:51>> um, how would you do that from an upfront offer? Like, would you do something like you guys did with Gym Launch where you have, >> well, I guess Gym Launch probably isn't that good of an example, but um, where you'd have an offer of $1,000 or $3,000 upfront >> and then move them into a monthly fee of Yes., you know, 300 bucks. >> Yes. So, I would 100% do that. And there's there's two options, too, right? So, this is a wave fee offer structure, which is the I don't know what chapter is in the book, but it's the last one in continuity. So, uh the way that I would position the offer is, hey, um and this is again if you think that these people are worthy of like keeping their commitments. I'm going to guess as a proumer, they're just not. So, let's just go ahead and just NYX that. So, it's going to be $3,000 upfront one time and then it's, you know, pay as you go, you know, 300 bucks a month or you might be, can you control the processing flow or the income flow? If you can, then you'd want to do a percentage there. If not, then yeah, 300, you know,

3:48>> not really. >> Yeah. Then, yeah, 300 to 500 a month is where you're going to want to be. Uh, and then I would say you could probably get away with maybe even 5,000 upfront, but it probably like I'm going to bet 5,000, five or six, and then three to 500 a month. uh will be pretty good for that type of avatar. >> Okay? >> And it's a one-time setup. And then after that, obviously, the maintenance of the account should be significantly lower. And so, your gross margins on the recurring should still be very strong despite it being significantly lower cost. And the upfront is really just to offset cost of acquisition.

4:22>> Right. So, what would that um what would you recommend as far as that transition from the upfront offer into the continuity to make it as successful as possible? >> Well, they're sold together. They're sold together. >> Okay. >> So, it's $300 a month, $400 a month. It's $5,000 one time up front of setup fee. >> Got it. >> Yeah. >> Okay. Anything else that you haven't talked about uh so far that's would be important to know for this kind of

4:50>> Yeah, if you want if you want you can add in a second tier of service. Now you could just peel apart your existing thing into two two quote tiers. Give the second tier for free as long as they do XYZ just to make sure that they get activated. So that is an option because at the end of the day like you have to get them activated. You have to get them on board. You have to do all those things. So what are the things that can maximize likelihood that it happens which is either carrot or stick or both.

5:16Tell me a little bit more. I I don't think I fully understand. >> A a stick would be uh we'll charge you a fine, right? A carrot would be we'll give you a discount, right? Or we'll give you more of this good stuff for free if you do XYZ. >> Okay. So, just hypothetically, what would that look like? Okay, let's say it's a $5,000 upfront and maybe we give you $1,000 discount if you do this in your account and set up this and do that.

5:41>> Yes. So, I'll give you an example of how this would work. So, let's say that they pay $5,000 upfront and you say, "But it's you'll get a $1,000 rebate as soon as you do this thing that activates a user." Right? [clears throat] Now, that $1,000, you don't have to pay it all up front because then you're going to eat three months of cash flow, which you don't want to do, right? So, then you take that thousand and you spread it over 12. And so, really, all you're doing is decreasing by $83 a month. And so, you'd say, "Hey, our price is actually 3.83 383 a month and it's 5,000 down, but you get a $1,000 rebate if you activate. And then when they activate, you take that that $1,000, you spread the the 83 across all 12 months, drop 83 down to 300, and then you magically make it be 5,000 up front and then $300 a month.

6:27But now you put incentives like this is a money model. This is how it works. >> Perfect. Sounds like I just need to get to work. >> No, dude. Congrats. I mean, cool that you have business, though, man. That's awesome. >> Yeah, I appreciate that. and thank you for all you guys do. >> No, you bet. Thanks for calling in. Appreciate it. >> Have a good Sunday. >> Yep. >> Donate some bucks. >> If you like this video and you're a business owner who wants to break through your current revenue ceiling, I distilled every lesson from scaling 10 businesses past 10 million and three businesses past 100 million into a completely free scaling road map that I've used to go from 0 to 1, 0 to 10, and 0 to 100 plus. And so, you can click here and you can check it out. Again, absolutely free. And since you're a business owner, appreciate you. And uh enjoy.