Eric Deeran argues that monthly recurring revenue sabotages profitability in high-ticket service businesses. Most owners price based on delivery costs, hitting only 70-80% gross margins when they need 40% net after ads and sales costs. He recommends outcome-based pricing with high upfront fees and a one-month-free discount for pay-in-full clients to eliminate churn and accelerate ROI.
One of the number one reasons I see people struggle with ads is because they only charge monthly for their packages, and I'm gonna explain in this video exactly what you need to be doing differently so you can ROI faster on ads and actually make a profit faster instead of constantly billing people on a monthly basis and financing them through your business. If you don't know me, my name is Eric Deeran. I've built an 8-figure business. I've booked over 15,000 sales calls, and I've worked with over 800+ high-ticket business owners to help them install a system using paid ads so they can actually get more clients faster and sign more clients predictably. And in today's video, we're going to be breaking down why you don't want to only charge monthly and why instead you want to use a different tactic so you can ROI faster from ads because most people are only charging monthly and they're leaving a lot of cash on the table when they're doing that. And one of the biggest things that you can do to make your business more profitable is to just simply charge more money at the end of the day. Because if you're not charging enough, you have to hire more staff, your margins are compressed, you don't have as much time you can actually dedicate towards the client and getting them the best result possible. And so first off, we want to look at what are you actually charging every single month and what sort of outcomes are you getting the client, right? Because all of your pricing should be outcome-based, not based off of how much it actually costs you to do the work, which is what most business owners do. And so we want to shoot for at least 70 to 80% gross Profit margins. This means if you charge a $10,000 fee, your cost should not be any more than $3,000 to fulfill on that client. COGS. And the reason this is important is because if you're going to ROI off of ads, you're going to have other costs associated. You're going to have your ads, which are going to be typically 5 to 10% acquisition cost. You're going to have maybe a closer who might be another 10%. And so after all of these fees, you should be netting around 40% margins on your packages, on your business as a whole. And if you're not doing that or your margins are too low, then you're going to be in a place where it's going to be really difficult to be able to ROI off of ads because you don't have a lot of money left over. Right, and so that's number one. Number one is, are you priced high enough? Because if you're not priced high enough, you're gonna run into these issues. Number 2 is if you're only charging monthly. I see so many people who are like, oh, you know, I want more MRR, I want more recurring revenue, I want more monthly recurring revenue. And while that's great, the problem we see with that is that if you're delivering on a result for your client and then they get the result and there's not a lot of reason for them to continue to pay you, it's gonna be difficult for you to continue to charge them monthly because they already got the value out of what it is that they paid for. It's kind of like if you bought a book and then you had to keep paying for the book month after month after month after that. If you already read the book and got everything you needed out of it, then why would you keep paying for it, right? And so that's what a lot of people are doing in their business, whereas you need to charge a higher lump sum upfront for whatever it is that you offer. So number one, you can ROI on ads faster, but number two, you don't have to worry about churn because if you can get— let's say you sell a 6-month package. If you can get all 6 months upfront, your churn is naturally going to be zero because they've already paid all upfront. Whereas if you charge someone on a monthly basis, let's say, you know, whatever it is, $5,000 a month on a monthly basis, but then they don't get a result within the first month or two and maybe it takes longer for you to get them results, well then they're not inclined to continue to pay you and they're probably going to cancel after a month or two if they're not getting the result that they want, right? So this is specifically if you have a longer time horizon for getting clients results, it's even more important then. But there's a reason that softwares and subscriptions and all of these companies, they give you a discount to pay upfront because they know their churn is going to be zero when they do that. And so if you are only charging monthly, I would really encourage you to have a pay in full or PIF pricing that's a little bit of a discount. And typically we give them a month for free as a PIF discount. This incentivizes them to move forward on paying in full because they're getting an entire month free, your churn drops to zero on that client because they've already paid all upfront. And then you can also ROI on ads a lot faster because you don't have to continue to worry about are they going to keep making their monthly payment. And this also is one of the main reasons people can't ROI on ads is because they're just simply not charging enough or they're only charging monthly. And so it takes them 2, 3, 4, 5 months to actually ROI on the ads and turn a profit because they're charging so little upfront and they're only collecting monthly. And so if you're struggling to ROI on ads or you've struggled in the past, this could be one of the main reasons. It might not even be your ads. Your ads might be working. Things might be getting like you might actually be getting good calls at a good cost. But if your unit economics Don't make sense on the back end as far as how much you're collecting, then you're not going to make as much money upfront on the clients that you're working with. So hopefully that helps. And if you want our help installing this system into your business so you can book more calls and scale your high-ticket business, click the link below, schedule a call with our team. Happy to see if we can help. And if not, keep enjoying the videos. See you in the next one.
