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.
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.
“And you want to spend less on Adwords?”
“Yeah, it’s really irritating me.”
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….
Live and learn,