My Blood is Boiling – Apparently 12,400% ROI isn’t Enough?

by Tim Francis on December 20, 2012

I can’t help but tell this story, it just makes me so mad.

I got a call from an entrepreneur working in the Real Estate world.

(note: this is not a past client, or anyone else I’ve mentioned here before)

She wanted to know if I could help her improve her Google Adwords account.

Turns out she was spending around $200/mo, and managing the account herself.

Cool.

Can You Get my Adwords Expense Down?

She was upset with spending $200/mo on Adwords, and wanted to know if I could get it lower.

Seeing as $200/mo is a microscopic budget for Adwords, there probably wouldn’t be much that I could do to improve her expenses.

PLUS… once you factor in my fees to work on the account (which alone exceed $200/mo) there was definitely no way I could help her achieve her goal of reducing her overall expenses.

But “expenses” aren’t the lifeblood of a business…. cashflow is.

So I kept listening and asking questions – maybe I could help her rake in more sales, allowing a spike in revenue that far exceeded any expense increase from hiring me?

Examining the Numbers

I asked how many clients she was getting from Adwords.  She said 1 per month.

So in my brain I’m thinking, “OK, around $200 to get a new customer… Real Estate has big transactions… $200 for a new client is probably a pretty good deal for her.”

So I asked her how much money she made from each successful sale.

She said:Oh, between $25,000 and $45,000“.

“At least $25,000 per sale?” I replied, stunned.

“Yeah”

“And you want to spend less on Adwords?”

“Yeah, it’s really irritating me.”

CONVERSATION OVER.

Let’s review the details here.

This entrepreneur spends $200 and gets $25,000 in return.

That’s 12,400% ROI.

And she wants to spend less on Adwords?

Lemme tell you, if someone offered me that deal… convert $200 to $12,500…. even after expenses, I would be trying to do that deal as many times as humanly possible.

If I’ve got something that’s proven to convert $200 to $12,500, I would be wondering…

  • can I 10x my ad spend, and convert $2,000 into $125,000?
  • can I 100x my ad spend, and convert $20,000 into $1,250,000?

…basically if that lead channel is bringing me a 12,400% ROI, I want to max that thing out to the absolute brink of existence…. pushing the market as far as I can until I’ve capitalized on every ounce of market share!

OH MY GOD.

Where I Missed the Ball

When this conversation happened (long time ago), I was absolutely incredulous.

But my emotions got the better of me.

What I Should Have Done…

With a monster opportunity like that, I should have:

  • Calmly confirmed the numbers with her
  • If indeed $200/mo was turning into $25,000, then propose a new arrangement where she got exactly what she wanted… her adspend being decreased to ZERO… this was, after all, her most important goal
  • Offer to become her exclusive partner for Adwords management; I will manage the account for free, at absolutely no cost to her, and I will even personally pay the $200/mo adspend myself.  In fact, I will pay all adspend, irrespective of amount, for every month I continue to be involved. She will never pay Google another dime, even if I choose to spend $20,000/mo of my own funds.  I’m sure she would have loved that.
  • In return, I would get a straight 20% commission on all resulting sales

Just do those numbers for a minute.  Those are some pretty tempting profits.  Under the right circumstances, I would seriously consider that opportunity.

One of Three Outcomes Would Have Happened

Had I pursued this calmer path, one of three possible outcomes would have happened:

  • Outcome 1: she realizes the absolutely idiocy of her perspective, switches to my profit-mindedness and we work out a deal where she hires me at a monthly retainer that’s commensurate with the tremendous value I’m bringing to the table.
  • Outcome 2: despite me explaining things to her, she doesn’t realize the folly of her thinking.  I land some of the easiest commissions of my life.
  • Outcome 3: she short-circuits and her head blows up, effectively ending the conversation.

Unfortunately – if I had to guess – the 3rd outcome was most likely.

But geez… had it been outcomes 2 or 3, that could have been very tasty for me….

My mistake.

Live and learn,

Tim

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