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One of the goals of any business is to maximize the amount of revenue per customer

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region, right?

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Welcome to the game where we talk about how to get more customers,

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how to make more per customer, and how to keep them longer.

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And the many failures and lessons we have learned along the way.

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I hope you enjoy and subscribe.

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In this video, I'm going to talk to you about one of the questions that I get

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most frequently and that one of the problems that I have to solve again,

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most commonly in some of the companies that we take on in our portfolio.

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So one of the goals of any business is to maximize the amount of revenue

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per customer region, right?

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And a lot of times you want to have what's called like an accommodating buying curve.

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And so what that basically means is at every rung, right?

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If someone is wealthier, you want them to buy more and spend more money with you.

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And if someone has less money, you want them to still buy from you,

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but potentially buy for less, right?

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And so this gives way to a lot of these crazy product and service listings.

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Where people will have 100 different services and products that they offer

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because they want to have the ability to serve everyone at the maximum degree.

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The thing is, is that most times that will create so much operational complexity

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and create so many little appendages, right?

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Little sticky things that are stuck on to the side and bolted on and globbed and duct taped onto a business

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that it becomes incredibly distracting for all of the employees because they're thinking

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about all these different things.

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And here's a funny one is that most times if your employees don't understand

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all the different types of things you sell and the price points you sell them at,

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your customers for sure don't, right?

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And so one of the things that we will do when we're looking at a company is we will

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simplify the product offering and instead try and reach the maximum buying threshold

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per prospect by changing the payment terms, right?

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Now, in a perfect world, if everyone had absolute information

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and everyone was unbelievably well trained and you had a great infrastructure and all that stuff,

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then yes, the more products and services you offer in theory, you would make more money.

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But we don't live in that theoretical world most of the time and most small business owners

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are not that good at operating, right?

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It's the number one issue they have.

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They're super disorganized.

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They feel like they're spinning their wheels all day.

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They're in team completely has no idea which way they're going.

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They change things all the time, et cetera.

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And so in an effort to combat that, we have used this process over and over again,

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and it has worked very well, all right?

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So it is as follows.

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We sell two things, all right?

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And I've done this in virtually every business that I've ever owned.

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We sell two things, two products or two services.

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And this is once we're going from one to 10 million, all right?

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Zero to one million.

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You sell one product to one service, one avatar, all right?

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That's it, one channel, one product, one avatar.

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That's it, all right?

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But once you're going from one to, you know, one to three-ish million,

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and you're trying to go to 10, you introduce the second product line, all right?

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And so here's how this works.

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If you have two things that you sell, you'll have a front end thing and you'll have a back end thing, all right?

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Now, we can still have a massive accommodation in the buying curve

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based on the payment terms that we introduce, all right?

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So for example, people will look at their monthly expense more than the total contract value.

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All right, that's a huge money hack, giving you right now.

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This is a wealth hack.

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This is something that will make you a fortune in your life if you can properly understand this.

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People do not look at the length or the total contract they're signing.

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They will only pay attention to what is it going to cost me every month,

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because no one is good with their money, all right?

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So they only look at the cash, low expense month over month over month,

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and they just think, can I make it happen?

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Yes, cool all sign.

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They don't think about the total contract value.

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For you as a business owner, the contract value matters almost more than anything, right?

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Right.

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So I'll give you a quick hack on this total side note tangent for you, life hack, pro tip.

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If you want to extend the contract value that you have,

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I have a sag, which is the bigger the head, the longer the tail, all right?

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And so what that means is the more you can get someone to pay up front

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and relative to the upfront cost of signing up or what they paid down,

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the lower their contractual recurring payment is, the stickier it will be.

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So I'll give you an example.

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If I had someone sign up for $99 a month for whatever, it doesn't matter, right?

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That that price point might be medium sticky, depending on the value that I have.

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Now imagine I had someone pay $5,000 down and $99 a month after that.

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How much more sticky would it be significantly more sticky, right?

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Now, the beauty is if you have one of these upfront type payments,

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you could also use that to liquidate your ad cost, cover, cover,

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you know, your commissions for the salesperson, cover the upfront

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fulfillment and onboarding, which is going to cost more for a new customer than an existing customer.

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And so you can build all that in if you know that the thing that you were selling

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has very high gross margins, then you can still have a lower cost

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as long as you know that the person is going to stay for a long time.

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And so based on how you structure the pricing, you can actually get some,

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you can use the pricing to actually get people to stick longer, all right?

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So pro tip complete, that is it.

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Moving back to the original thing that I'll talk about.

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Hey guys, love that you're listening to the podcast.

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If you ever want to have the video version of this, which usually has more facts,

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more visuals, more graphs, you know, drawn out stuff,

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sometimes it can help hit the brain centers in different ways.

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You can check my YouTube channel.

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It's absolutely free to check that out if that's what you are into.

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And if not, keep enjoying the show.

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So in one of our portfolio companies, we actually had this as a really

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in depth discussion that we had to make a decision about, all right?

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And so they had a different, you know, mentor and a person, whatever advice,

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who told them that they should have three products, right?

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And they should have a, you know, low, a medium and a high product and then

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based on, you know, what the salesmen thought, the salesmen would sell them,

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the low medium or high.

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In my experience, it is not that effective.

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And that is because the salesperson can't decide which of these things they're

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trying to sell most of the time.

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And so what we have found is more effective is you give the salesperson the one

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dream to sell.

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This thing is going to solve this person's problem and we make it the most

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valuable thing that we're trying to sell because at the end of the day,

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you do want to solve the, the customer's problem, right?

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We do want to actually make sure that we're providing value.

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And so rather than having a diet, a medium and a, and a great, right?

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Simply having one thing that solves all the problems and then based on the,

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the customer's budget, we can decrease how they pay, all right?

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So hear me out.

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So let's say that we want to do a,

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this is a six month implementation of whatever kind of solution you sell, right?

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If you have a six month duration,

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you can have the person a pay the entire thing up front.

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So that would be for somebody who has the highest budget, right?

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Version two would be a split pay.

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Version three might be three payments, right?

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With at 20% higher, right?

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And then finally you might have a, have a, have a, you know,

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a six pay or whatever over that period of time, right?

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So one, two, three, six.

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Now here's the cool thing.

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The more payment options you provide, the higher your conversions are.

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That's proven, all right?

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So the more options you give someone to pay, the more people will buy period.

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Now you might not make more cash flow because if you give your sales guy

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more options, then they might use the end of defaulting to the lower ones, right?

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But if you have one thing to sell, then they only have one thing to convince the

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person up because a confused mind doesn't buy.

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If you have too many options, the salesman won't know what to sell and the prospect

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won't know what to buy.

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And so I prefer when I'm coming into a portfolio company, I'm thinking what is

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this true problem that we are solving with this business for what avatar?

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And we make that the main thing and we communicate it clearly in the scripting

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and the salesperson has clarity on what they are selling and they're always

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solving the same thing.

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And so the question becomes no longer which of these things are you going to buy?

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But once you are buying, how would you like to pay?

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And so then the discussion is around what payment plan is best for them rather

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than what product is best for them.

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And so by doing that, you can get people to go between different payment terms.

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That is not going to change whether they're going to buy.

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But if they're unsure about which product is going to best suit their needs and the

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salesman doesn't know because at the end of the day he's just trying to sell the

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most expensive thing, then you'll have way more confused people who leave unsolved.

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All right, so this is a single tactic that you can use to execute within your

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business, which is why I'm a big fan of making offers.

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People cannot say no to is that you can focus all of your sales and all of your

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persuasion attempts on selling the one thing which is getting them to say yes.

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Once they say yes, we can we can reach the we can accommodate their wealth and

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their budget based on the payment terms that we provide.

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And if we have done or we have structured our offer properly,

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the offer in and of itself should already be very high gross margins,

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which means whether or not the person pays a thousand dollars a month,

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there are a hundred dollars a month, it's still almost all margin for us

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because of how we structure the thing that we are selling.

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And so we are able to capture higher,

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higher LTVs by getting the people who have more money to prepay the thing up front.

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That is how we do it.

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And with those people, you'll be able to ascend into the second thing faster

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because they've already prepaid that thing.

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And then you can solve the next natural problem in another sales conversation

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rather than trying to pick all of the things in one conversation,

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which makes it incredibly difficult to do.

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This is just for everyone again, a broad brush stroke of statements

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for most entrepreneurs who are not very good at operating their businesses.

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Our operations is not they're strong suit and are below $3 million a year.

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All right.

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So anyways, Mosey Nation, there's a lot of people who broke.

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I don't want to be one of them, which is why I make this video is keeping awesome.

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I love you and I'll see you guys in the next fit.

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Bye.