Daniel Fazio (creator) presents a practical economic breakdown of scaling online businesses by trading time and money to acquire customers. He contrasts two primary acquisition mechanisms — cold email (low monetary cost, high time cost) and paid ads (high monetary cost, lower time cost) — then walks through cost examples, LTV vs CAC arithmetic, and the funnel variables (response/CTR, booking/conversion rates, close rate, client retention) that determine whether acquisition is profitable. He uses real-world examples (Alex Becker’s SaaS, ListKit) to illustrate how initial front-end margins can be thin but lifetime revenue and high-value buyers drive profitability.
Chapters
You are allowed to be a millionaire. The matrix is not out to get you. This is not illegal. People actually do want to see you win. And when you do it, you're gonna get an extreme amount of respect and people are going to look up to you. We are going to be trading time and money for more money in an economic machine. Everybody wants an online business that pays them 10k, 20k a month or whatever. And in this video we're going to go through an economic breakdown of how these businesses actually work and how and how you can actually scale them. And the reason why I believe I'm qualified to teach this is because I currently run a high seven figure business with 32 team members across software consulting and recruiting. We're going to go over different marketing mechanisms to use the economics behind how these work and how to turn them into money multiplication machines. The premise of this, you buy income with money and time. And if you don't have time, you have to use money. And if you don't have money, you have to use your time. So, so we have two marketing mechanisms that we can use to acquire clients who will pay us money to do services for them. Number one, cold email. Number two, ads. These are the ways that you are going to get paying clients into your online business. So how much do each of these cost? Let's walk through it real quick. Cold email is extremely cheap, but it takes a lot of time and the most efficient operators I know using it can get it to around 200k to 300k a month. In exchange for it being cheap, you need to dedicate more time to it via building lists and managing all the responses that you get from your emails. This is called direct sales. It's outbound marketing. You are directly contacting people who you are prospecting to work with. Your business ads are extremely expensive, but to compensate for that it requires less time. Therefore, if you have more time than money, you should use cold email and, and if you have more money than time, you should use ads. Let's walk through some costs real quick. Cold email 10 domains, $12 each. That's $120 one time for the domains. Google workspace on each of the domains $7.20 per month. That's $72 per month to have the domains automated sending tools smartly. AI$99 per month. Affiliate link in the description list kit leads $0.08 each. Let's say we want to send 5,000 prospects new emails every single month. That's, that's $400 a month for the leads. If you can't close a client off 5,000 prospects contacted, you have a very bad business, you should be able to close someone. So total monthly cost to send 5,000 emails is $571 per month. If you can spend $571 per month to acquire one person who pays you $2,000 per month, don't you think that's a good trade? Ads will look something like this. $200 per qualified call. If you have a really good ad and a really good offer, let's say 15% closing rate, eight sales calls equals one client acquired. That would be $1600 you spent to generate the sales calls. And if you close one out of eight, it's $1,600 cost to acquire a customer. Ads typically hang around 4x to 8x, more expensive than cold email. But as you send more emails and as you spend more money on ads, the cost to get in front of more people increases because you're bidding and competing against more people when you hit a larger market. So. So the cost will always go up as you try to scale the business. So let's talk about Alex becker and his SaaS Hiros. So let's say hi roast about $4800 for six months and Alex Becker at scale, because he sold this for 110mil, it was an absolutely massive business. Let's say it cost him $4,000 to acquire a new customer with ads. Then he has a sales team. And every time the sales team closes one of the calls, let's say they get $500. So what that meant is that Alex Becker, in order to get $4,800 revenue, he had to spend 4,000 on ads and 500 to a sales guy. And now you're thinking he only made $300 in profit. But all of the money gets made when the client or the customer renews. You don't make the money on the front end. All of the money is in the back end. Let's take another example. Let's talk about List Kit, which is the lead generation platform for cold emails. This is where you can get the email addresses to actually send cold emails. Let's say the average person stays for three months and they spend about $100 a month. So let's say that's $300 that the average person is going to spend on List kit. But there's one psychopath out of 100 who's going to spend $5,000 on leads. And there's one psychopath out of 500 that's going to spend $30,000 on leads. So if you get 1,000 customers for $300 each on ads, you spent $300,000 on ads. To get the 1,000 customers you spent, you made $60,000 from two turbo psychopaths, you made $50,000 from 10 standard psychopaths and you made $296,400 from the normies. So the total revenue is $406,400 over a three month period. So on the 300,000 you spent on ads, which led to $406,400 in revenue, you made $106,400 in profit. And, and almost all of it was from the turbo psychopaths. But now you have a list of buyers. And the thing about buyers is they buy more things. So what's going to happen with those 1,000 people over the next nine months? They're going to keep buying and you're going to keep making more money. Everything is an arbitrage between cost to acquire a customer versus ltv, CAC CAC to LTV lifetime value because it works like this. And any person who ever enters your business ever is going to elapse through their cycle and they will have spent X amount of money. So if you get 100 customers and then you take how much each customer spent, what you can get is the average lifetime value of each person. And now what this lets you do is do economic modeling to try and see how can I scale this business. Because if The LTV is $1,000 and you can get new customers for dollar, that's a five times return. But something that you might not be aware of is it's not that you spend 200 to get a new customer and you immediately make a thousand back. They have to go through their actual lifetime of your business. So it might take you 12 months to recoup all of that money there. And this is where people fail. Because they start a cold email campaign, they start up a bunch of ads. It doesn't work absolutely. Immediately they write it off as if it's a scam, they quit their business and then they're a fucking loser. All this is is an arbitrage. Can we spend money to acquire someone and then make more money from them than we paid on the acquisition? All it is is that one equation. Cost to acquire a customer versus ltv. That's it. Some guy said this, I don't know who it was, but he said if you can't buy customers, you don't have a business. And it's so absolutely true. And the same system works with services. Let's say you're a marketing agency. You have a $2,000 per month service. The average customer stays for six months. What that means is that your LTV is $12,000. Let's say your cost of fulfillment per month to fulfill those clients is $800 per month. Over 12 months, that means you have to spend $4,800 in hard cost to actually fulfill for the client. So Your profit is $7,200 per customer. If you know that number, don't you think it's a reasonable proposition to buy new customers for $2,000 each? Don't you think that makes economic sense? Now, what determines the success of your business is going to fall within all of the following variables I'm going to explain to you. Number one. The click through rate of the ad or the response rate of your cold emails. 2. The landing page conversion rate if you're using ads or the call booking rate if you're doing cold email. 3. The call close rate. How many of the calls you generate actually turn into a paying customer. 4. How long the clients stay. If you can double the click through rate or you can double the response rate, your cost to acquire a customer will cut in half. If you double your landing page conversion rate or you double your call booking rate, your cost to acquire a customer will also cut in half. If you increase your call closing rate from 10% to 20%, the your cost to acquire a customer also will cut in half. If you get your clients to stay for just one more month, your LTV increases by $2,000. So you can take all of these variables and operation of a funnel and move these variables around and test this, and test this, and test this just to try to influence all of these individual variables. Because the combination of all these variables is what determines the arbitrage play that you have between the cac, CAC cost to acquire a customer and your ltv. If the cost to acquire a customer goes down and your LTV goes up, that is a successful business. That is how this works. This is a machine. It's the casino. You just went to the Hard Rock. Except you can influence the odds of all the games. You don't have to play at a 49% odds. You can play at 55, you can play at 60, 70, 80. You can influence these odds to the absolute rest of infinity that are directly correlated with you, how competent you are. You get to influence how these move continuously for the rest of time. And you're not at the casino. You're at a game that you're playing that you make where the odds are in your favor. If you become competent and knowledgeable enough to know how to move these variables in your favor, that is how you build successful businesses. And if you want to learn how to do cold email to to get clients for your business, you should go watch this right here.
