SFR 226: The 4 Kinds Of Cost...
Not all resources are created equal. What I'll teach today will show you why I don't do certain roles in my business… When I left my job at ClickFunnels on January 1st, 2018, my goal was a million dollars. On February 1st, 2019 I hit a million. It too
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Show Notes
Not all resources are created equal. What I'll teach today will show you why I don't do certain roles in my business…
When I left my job at ClickFunnels on January 1st, 2018, my goal was a million dollars.
On February 1st, 2019 I hit a million. It took me 13 months straight outta the gate, and I'm really psyched about it.
My goal this year is four million. Holy Crap!
I haven't actively been selling on some of my core products during this past little bit... but the systems I've built have enough pressure in them that we're still doing just about six figures a month.
Right now, you may be thinking, “Steve, you’re crazy, man… why haven’t you been selling?”
However, there’s method in my madness... and it’s because of what I'm gonna talk about now.
LIGHTING A FIRE
I wanna walk through the 4 different costs and the benefits and cons of each of them. There are some costs that I'm willing to pay and ones that I'm not.
When I first started this game, and this is an epic failure... I couldn't feed my wife, (a lot of you guys know the story), so I asked my Dad for cash and thankfully, he said, NO.
I'm glad he said, no... because it put a fire in me to provide. I started running and trying tons of different kinds of businesses, (and trying is the wrong word).
I was actively selling but it wasn't working for me.
Looking back, I’m thankful because otherwise I'd be stuck in businesses that I didn’t love you know. This might sound bit weird, but sometimes you're meant to fail.
Hindsight's 20 20, but it’s hard to feel that way in the middle of it though.
I BORROWED $15,000
One of my first businesses was trading stocks and auctions. I studied the financial markets. I had a ton of fun learning about it…
BUT…
About five-six months in, we found out that the guy teaching us knew that he was teaching was old, outdated strategies.
In my mind, that's very unethical, and so I was like, “Crap! Is this gonna work? Are you serious?”
I borrowed 15 grand I didn't have at the time to join the course.
One of the major strategies we were taught was OPM … or how to leverage other people's money.
That's very sexy as a sales message, but it's also incredibly stressful.
Using other people’s money comes with handcuffs… and you need to be aware of that!
OPM was the BIG thing I was taught in college too.
At college, we were taught that when you get into business it's all about how to write a business plan so that you can get VC funding aka OPM.
The emphasis was on how to actually acquire funding MORE than how to actually make a product that sells... or how to make a sales message that sells.
It's mind-blowing to me. I don't understand why that message is there!
There are several ways to acquire the firepower you need without OPM, and I wanna walk you through the four of them so you can see what your options really are.
You don't have to borrow. You don't have to do a lot of the stuff that's taught out there.
If you don't wanna be handcuffed my friends, this is how you do it!
THE FOUR COSTS
In the funnel game, there are two specific metrics that matter a lot.
- Average Cart Value
- Cost To Acquire
Average Cart Value = Meaning how much money comes in with each new customer… (Because of upsells it's usually higher than the price that you're selling your first product at).
Cost To Acquire = When we say average cart value, cost to acquire, or cost per acquisition, we're specifically talking about ad or dollar cost, i.e., “How much money can I spend in orders to go acquire a customer?”
As I've done more of this game, I've realized that on a macro level, there's MORE cost to acquire than just money.
There are actually multiple costs and multiple ways I can spend resources to get what I want.
COST #1: YOUR OWN MONEY
The huge benefit of your own money is speed. Lots and lots of speed. Money is faster than time.
Money is faster than time and I wanna spend money rather than time... so the benefit here is SPEED.
COST #2: OTHER PEOPLE'S MONEY
This is what I was taught in a lot of these early courses and stuff that I did: “Use and leverage other people's cash.” i.e, OPM
That's a sexy sales message, but it comes with the most ridiculously insane handcuffs. I hate using other people's money.
I can use other people's money if it’s the money that comes from my customers. I can make sales and create a self-liquidating offer that allows my customers to pay for my ads...
But I'm not gonna go borrow money.
The benefit of this of OPM is….
I actually can't think of what the benefit of using other people's money is.
There are very few scenarios, in my mind, where you actually truly need VC funding.
If I'm going to build a stadium or a factory, that makes sense... that kind of stuff, something that has to do with infrastructure, but even then…
I'm gonna buy an office soon, (which I'm really excited about), but I'd rather create the cash flow than use OPM.
I'm sure there are other scenarios out there... but in internet direct response marketing (which is what I’m in ...