How to Recover When Your Ads Stop Working

0:00Alex, what's going on, man? My name is Ian. >> Go for it. >> I run Contractor Contractor Independence. We do search optimization and review generation for roofing businesses. >> Okay. >> Um we've been in business for 8 years. We've gotten up to 8 mil in revenue. We have aspirations to get up to 30 mil a year, uh but we have some big problems happening this year in 2026. So, this year in 2026 we backtracked. We're actually on track for 5 mil this year. >> Okay.

0:25>> so, everything that we've built over the past number of years has been built on direct response offers over cold meta ads, basically. Meta ads to cold audiences. >> Mhm. >> And, you know, lots of company strategy, but if I had to narrow it down, we were really just trying to keep CPL low, like get better and better at ads while driving retention up, getting better and better at the product. Uh but over the last 18 months, our CPL has 6X.

0:51>> As in, your CPL to get your customers or CPL to get their customers? >> Yeah, yeah, to get our customers. >> Okay, got it. >> Right, cuz yeah. CPL to get our customers has 6X despite trying to adapt to Andromeda, etc. And that's obviously it's it's strained and kind of broken the business model. Um we've recently turned ads off and we don't have new clients coming in, so obviously you're going to begin >> Yeah. >> descending or you're going to begin to churning. Um just wrapping this up, like my view on the biggest mistakes that we've made is like we just kept doubling down on direct response instead of investing in long-term like brand

1:26>> Mhm. >> Um and we also it was one offer, like one offer to one channel, which is great for a while, but we should have built a better money model, right? Like a better a better lead magnet, better front end. And so, this is the place that I'm in right now as I'm trying to rectify those mistakes. >> Okay. Heard. I think you've identified a lot of core issues. Um yes, building a brand would have been nice. Yes, building a second channel would have been nice. Um What's churn for your existing customers monthly.

1:58>> So, monthly churn is about 10%. >> Okay, and what's price point? >> Price point is averaging 3,700 a month. >> Okay, so 37K is uh lifetime revenue, and what are gross margins? >> Gross margins are about 72%. >> Okay, so call it, you know, uh 27,000, something like that, is what you're making in gross gross uh gross profit per customer. >> That's right.

2:24>> Right? Okay, so what are you paying right now to acquire a customer, or what were you paying? >> Uh we were paying it it towards the end it got out of control. We were paying towards 10,000, which is why we had to end up turning it off. >> Yeah. Well, it sounds like um some of the issues was a cash flow constraint, because even if you paid 10 to make 27, it's not bad. Um obviously you want it to be better than that because you'd be basically your conversion cycle's too slow.

2:50Um but like I wonder if it got shut off preemptively because of like, call it a slew of bad creative, and maybe a pixel getting trained on the wrong audience for a short period, which makes it really difficult to get out of, and it becomes this like death cycle. >> I'm pretty confident on the the tech. Like, we've gone really deep on the tech. I'm also confident on the creative uh because we've we've adapted a lot. Like, I've been to to uh ACQ working with my We've adapted all this stuff. We're doing 15 diverse creatives a week.

3:25>> Yeah. >> As much as the account can handle. >> Yeah. >> And my my take on it is actually um I mean, the CPMs went up 3x over 12 months. So, just just the cost to get in front of people. And then the second piece is I think the home services space I think trust has become the currency. >> Yeah. >> because so many they've either found successful marketing, and they stuck with that, or if they haven't they've been burned five times over, and they're just like very untrusting in the space.

3:53And I think that we haven't done a good enough job. Like we have great reviews, right? We have five stars, 30 reviews on Google, but I have no personal brand. I'm not pre-educating them. >> I hear you. >> It's been running cold. >> Well, let's Let me just ask you this cuz I I just want to zoom out for a second. What do you What do you want? Like what do you want to happen? >> I want to have a world-class product that I'm incredibly proud of and I want every for every customer that I get, I'd love to get to the point where that creates another customer. Like the referral flywheel.

4:22>> So, the the the really difficult part with the business you're in and you've you've you've consumed, I think, enough of my stuff to know what I'm going to say here, which is that the call the the the SMB, you know, lead gen agency is a very, very tough business. Um it's like the restaurant of digital marketing. Uh it's very easy to get started, very hard to scale, and the main issue is the avatar. Uh their volatility becomes your volatility. It's just like it's it's it's near impossible to scale a business with 10% churn.

4:58>> Yeah. >> Because you have to every Basically, in order to scale the business, the only thing that actually scales is your sales motion. Because if you lose 70% of your customers every year, which 10% churn does that, right? >> Right. >> Then your entire revenue on an annual basis minus 30% is what you sold that year. Right? >> That is That's definitely a core issue. I I agree with you. We can't get to our goal with 10% churn. >> Right. And so, but the thing but what I'm trying to What I'm trying to hit on here is that like it's like having an agency is a great way to make $3 million a year with, you know, 20 or 30% margins.

5:32Um it just It's very, very difficult to scale because churn becomes this monster issue. And the thing is is that it's an avatar problem more than a than a than a product problem. >> Right. >> And so, I've I've said this before, but I've only seen two marketing, like true turnkey marketing offers scale that are done for you. And I'll say with the exception of one thing, which is like you can keep all the things that you said and then just build a brand that's gigantic. Like if you had Neil Patel Neil Patel's brand in SEO, you could scale, right? But he's also been doing it for 15 years and, you know, etc. etc.

6:06But the the other two angles are like you go purely AI automated, very low cost because then you can cut churn down. But you have to do it so it's high gross margins but low price, right? Or you have to go up market, which you have to earn the right to do that, which you kind of have to slog your way through what you're doing right now to eventually get to the better customers or the multi-location owners. >> Right. Right. >> Now, I think that is there a sub cohort of your customers that are more valuable and churn less than the existing customers?

6:37>> I'm absolutely sure there is. I need to get better on the data. I mean, we've narrowed down over time, right? We're We're basically going for 2 mil and above for first at this point. We used to be generalist in home services. So, we have narrowed down, but I we can go further. >> Yeah, I think that you would probably like it might be worth looking at like roofers in at least three markets. You know what I mean? Something like that. Because they're just going to have a different time horizon in terms of returns and SEO is one of those things that just needs time in order to work.

7:05When does churn happen for you guys? Cuz you might be at 10% monthly churn, but if you look at it by a cohort basis, I'm sure you have a you call it 2 and 1/2 million of the five that you have left right now has been with you for over a year, something like that. That's my guess. Is that true or is that wrong? >> Say the question one more time. >> Call it two or two and a half million of the of the five that you have has been with you for a long time. >> Yeah, I would say between one and two years for sure.

7:32>> Yeah. Right. And so basically you stacked up the people who two years ago were in that 30% and once you get them to month six, the likelihood that they stay goes up by a lot. And that's we've just seen that across all services independent, not just marketing. Just like all services, if you get someone to month six, churn typically drops to below 2%, which is wild. But when you look at blended, which is what you're looking at with 10%, um it feels like So, basically the objective has to become how do we get them to month six, which is a much more solvable issue than how do I cut churn from 10% lower. Is that like tactically?

8:03Okay. Um and so, if I were to do that, I think that the CPL going up I care less about. I just care about LCD hack. >> Right. >> So, like that that matters very little to me. Um in fact, one of the highest ROI uh campaigns I ever ran at Gym Launch, I had the highest CPL of all time. >> Right. >> So, just something to consider. And so, I think that um the algorithm has gotten so good at pulling who you want that you can be even more selective than ever now. So, that's a good thing. Um because I'm trying to get you out of your current situation because like, you know, I could say, "Yeah, go build a brand." It's like, "Yeah, you should have done that 2 years ago. You can't do that right You know, like tomorrow." So, what are we going to do?

8:40>> Right. >> Um so, I I've called called my like my three-step fast cash, and then I would still want to deploy this into uh into marketing um on the ad side cuz I I don't think it's I don't think you're done there, dude. That's the thing is like I don't think it's done. I think we can still market where other people aren't, which is being more selective and going up market. And so, I think roofers with at least three three locations or something like that might be a better start. Look at the people who've been with you for 2 years, see what they have in common, make that the messaging in the avatar.

9:13If you need to do a lead magnet or something like that, you can. The lead magnet is not really going to be the thing. I'm just being real. Like, lead magnet really just serves as just a different hook on the front end so that you can refresh and when you have a smaller market, more so than like, "Oh, the lead magnet is why people are buying." Now, if you're able to get mass mass mass distribution like my book or something, then it can serve a different purpose. But by and large, the lead magnet is not like the thing. You want it to be good, obviously, but like the you if you want to turn a large percentage of the audience warm, you have to do that with the least amount of friction, which is what content is. Like content is the lead magnet. It's just free.

9:47>> Right. >> Right? So, I think that short-term steps are number one, I would go past customers win-back campaign. Number one. Uh number two, if you are cash constrained, you could get some people to pre-buy future services and give them a deal. Uh number three, do some sort of attraction offer from Money Models to the leads list.

10:11Uh kind of like a the countdown in the campaign, maybe giveaway. Um that would pull some cash forward. With that additional cash, I would step two, uh reimagine the avatar from the messaging and the funnel uh perspective, and I would call out what you don't want, which is like if you want somebody who's going to get you leads in 3 months, this is not the thing for you. Like SEO takes a minute. But, let me show you what my 1 year laters look like. So, my campaign would be and this is the highest ROI campaign I've ever ran at Gym Launch was a 1 year later campaign. And so, you have those customers right now. I would capture what their lead flow was before and what their lead flow is now, and it automatically frames like whenever you talk in 1 year and 2 year increments, you're going to get a far better customer, but the cost per lead will be higher. So, what we just care about is LTV to CAC more so than than CAC. Now, you're not going to know LTV, but if we have leading indicators that this is the type of people who stay twice as long, three times as long, willing to pay more, then at least gets us on the right track.

11:05>> Right. That makes sense, man. >> That would be my That would be my one, two, three. If I had um if I had a an item four cuz you're trying to kill yourself, um I would try and post as much content as I possibly could, obviously. Um but I'm trying to get you out of the current situation that you're in right now. Um if you want to build something that is world-class in terms of product, you're going to end up having to go upmarket or downmarket. It seems like you're probably better situated, given you have a service business right now, to to upmarket and just niche down and up.

11:34>> Awesome. >> Appreciate you, Ian. >> Thank you, sir. >> Hey, just so you know, man, everyone's been through this. Like, it sucks, but like, you're not going to die, and the worst-case scenario is that you have a bunch of money that you probably saved up from the years that you were doing well, and you could just start something new knowing everything that that you know right now. That is the true worst-case scenario, which isn't that bad. >> Really good perspective. Thank you, Alex.

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