Eric Deeran argues that referral-based growth caps agency revenue because it's unpredictable and unscalable. He shows a concrete funnel: $1,000 in ads reaches 1,000 people, 4 close at $7,000 monthly recurring revenue each, yielding $28,000 MRR from one investment. Once clients are on retainer, ROI becomes effectively infinite.
Here's why referrals are actually capping your growth as a video agency. You see, when clients refer you, it obviously means that you did a great job working with them. But every referral has a ceiling because you really don't know if a client is going to refer you more people and you can't predictably measure it. This is what makes it so inconsistent and caps you at a certain ceiling of growth. Additionally, when your warm contacts run out, business ends up stalling. This means referrals do not equal predictable business. They're based on chance. And this is why most video and creative agencies cap their growth because they can't get more referrals than people that they actually know within their personal network. And referrals can't be targeted, they can't be scaled, and they can't be predicted. And while they are great, you can't build your entire business off of only referrals. It should be one arm of your business, not the entire business. This is why inbound changes everything. Let's say that you put $1,000 into ad spend and that got you 1,000 people to see your ad. Well, then 50 of those people end up watching your VSL, and then 20 of those people fill out an application. That leads to 10 people booking a call. Of those 10 people, 8 of those people actually show up for the call, and you close half of them, which is 4 people on a close. And those 4 closes are at $7,000 a month MRR, which equals a grand total of $28,000 MRR. This means that you invested $1,000 to make $28,000 recurring. Now, as long as you do a great job for these clients, they will keep paying you every single month, which means that your ROI on this $1,000 could be infinite as long as you keep these clients paying you every month. You could theoretically never run ads again and still keep this $28,000 because you have these clients on retainer. And when you can pay for ads like this, you get a level of predictability because you know that I put this much in and I got this much out. In other words, you can control the tap because with referrals, they are luck-based, they're capped on your network, and you can't actually optimize them. But with inbound, it is a system-based approach. It's infinitely scalable, and you can A/B test different ads, different languaging, different types types of content which get you different types of clients. So if you want our help implementing a system like this, click the link below. I put together a short video going over how you can start doing this. You can click that video, watch that video, and book a call with our team to see if we can help.
