The Dark Side of CRM Software - Shocking Secrets Revealed!

The multiples on the valuations are extraordinary. They're literally 5, 6, 7, 10 times as much in terms of valuation, they're subscription based and they're extremely hard to leave. I'm going to share with you five things that your CRM software company does not want you to know, where they're making their money and why they do things the way they do. And I know this because I've recently started copilotcrm.com, so I know what it's like on the other side of the curtain. And I'm going to tell you all the dirty secrets they don't want you to know. The the first is that most of these CRM software systems are simply running financial arbitrage. They're running numbers so they can sell their business later on in the year, a few years down the road. And this is mostly due to the fact that they've taken on investors, venture capital or angel investors, that are requiring some sort of exit within three to five years. And that means that exit means to optimize for profit, you cut support and you just make sure you hold on to people. Because guess what, with CRMs, no one wants to leave. You don't ever want to leave your CRM software. It's a pain in the neck and people don't want to do it. So what they know is if we spend a bunch of money on marketing and we grow very quickly, we can then cut support, we can cut a lot of research and development while still keeping a very good user base simply due to the fact that people do not want to leave their CRM. It's very painful to move all of your contacts, learn a new software system and so they know if they can grow massively, they can then they have a couple years where they can just really turn on the profit knob by cutting R and D, cutting support, and then optimize for an exit. And that's what most of them are doing. They do not care about the businesses that they are using their software. They mostly care about the financial arbitrage because these SaaS products, software as a service are very sticky. No one can leave them. It's very difficult to leave. And so the multiples on the evaluations are extraordinary. They're literally 5, 6, 7, 10 times as much in terms of valuation than compared to a regular business. It's because they're subscription based and they're extremely hard to leave. They're called sticky in the industry. Number two is achieved. They don't want you to know what ACH is all about because they want to sell you on credit card processing. I'm going to talk about credit card processing later, but ACH stands for Automated Clearing House. And a lot of them don't want you to use ach. So what they'll do is they'll have certain caps or restrictions on how much you can use ach, or they'll sell this as an additional feature because they don't make as much money on ach. But here's how ACH actually works. Think of ACH as just a technology to electronically move funds between bank accounts. Now, there's some problems with ach, and here's what they are. Number one, one is latency. When you make a credit card transaction at, say, a gas station, you swipe your card and then you pump the gas. And then whatever you pump then charges your credit card. That's because with credit cards, there is low latency and there's authorization, whereas ach, that doesn't exist. It could take hours or even days to actually authorize a transaction. So what that means is you potentially might have an ACH payment from a customer, and it looks like it's paid, and two or three days later it comes back as insufficient funds. Whereas with a credit card, it's very quick, it's instantaneous, and there's very low latency. Now, the best thing about ach, though, is the costs are dramatically lower. In fact, it's almost free to run an ACH transaction. So the reason that these CRMs want you to use credit cards instead of ACH is because it doesn't cost a lot to do ACH and they can't charge you as much. And so they'd rather charge you 3 or 4% on a credit card compared to literally what cost them is like 1% max in terms of ACH. And here's the thing. If they're charging you like even 1% on ACH payment, it's a set a dollar amount per transaction when it comes to the automated clearinghouse. And so if they're charging you 1% and you have $100,000 transaction, that means you're paying $1,000 in ACH fees. That is not required. And that's why at Copilot Serum, we have a $5 cap. Because after that, we do not need any more money. It's covered the cost. But if the CRM is taking that 1% in perpetuity without a cap, I guarantee you they're making a killing. Cause ACH doesn't cost very much to run when it comes to Transactions. All right, number three is referral fees. This is what most companies don't want you to know is that when they have influencers and talking about their program, they're talking about their CRM software. What they're not telling you is that they are paying these influencers thousand plus dollars per user that signs up. So when an influencer says, oh, this is the best software out there, this is the best company, I've used this CRM for a long. Keep in mind there's two things going on. One, they're getting referral fees and they're also probably getting paid to be an ambassador for that CRM to just say that they use the software. I've been offered tens of thousands of dollars to say I simply use a certain software. And this typically aligns mostly with the companies that are getting a lot of capital injection from investors, capital infusions from venture capital and stock market. And so they're just like grow at all costs. So they'll spend gobs of money because they know if they can get people in, it's very hard to leave a CRM. It's like golden handcuffs. It's like, hey, once you got them, you got them for a long time because as they grow inside your system, they don't want to leave. Now before we go to number four, which is the dirtiest secret of them all, credit card processing. We have to address the gentleman's agreement. The gentleman's agreement on this channel is that you simply subscribe. The transaction here is that I put all this work and effort and I have now five full time people just working on these videos and creating content for everyone for free. The latency needs to be very quick here. Go right to the subscribe button, click it and it authorize the transaction so you can continue on to number four. I can't verify this. I just trust that you're going to subscribe to the channel. That's the gentleman's agreement. I do this for free with the expectation that you do that in return. Now, number four is credit card processing. This is why so many CRM companies are being bought out by credit card processing companies. Because it's such a sticky product that if they can come in and require credit card processing of all users that are potentially transacting billions of dollars over the course of thousands of businesses, the transaction volume is so large, if they can just get a couple percentage points off the top, they're gonna make a lot more money doing that than just the actual fee for using their software. Their software might cost $300 a month, $400 a month. And people are like, oh, it's so expensive. But the credit card processing for a company that's doing $100,000 a month can easily reach 3 or $4,000 for per month in just credit card processing. And so you've gotta be very careful that the credit card processing rates that you're getting charged by these CRMs is competitive because that's the bigger chunk of where the cost is gonna be for using their software as you begin to grow the business. If you're running a small company with five, $10,000 a month, a couple percentage points doesn't move the needle very much. But again, if you're running multiple hundreds of thousands of dollars, you're gonna pay probably 10 to 15 times more in processing fees for credit cards than you are the actual software subs. Very important to keep an eye on what exactly those credit card processing fees are. Now, at the end of this video, I'm going to link to another video ranking and comparing all the different software systems and what their credit card processing rates are. The money is not being made in the subscription. The money is not being made on the software. It's being made in the fact that they can lock down the software and then require you to use just one payment processor and monopolize that transaction. They can guarantee themselves a lot of money and in perpetuity. And that's why they come and buy these companies out. Like, okay, there's a billion dollars worth of transactions, and we can take 2% off that off the top. And right now they're having five payment processes, but we come and say, okay, you have to use ours, and we can take 1%, 2% off the top. That's where they're making their money. And so although I am a big believer in putting credit cards on file, it helps your cash flow. If CRMs were really trying to help their users, they would allow them to use ACH much more often because it's much cheaper. Yes, it might take a day or two days to clear, like we talked about. However, it's much cheaper and the CRM just doesn't make as much money. That's why so many of them push you towards using credit cards instead of using ach. Now a lot of them are gonna say, oh, no, like ACH is bad because of security purposes. And yes, that's true. It's gonna take a day or two for you to authorize the transaction. However, ach, unlike wire transfers, still can be retracted, and there's still Fraud protection. When it comes to ACH, there's definitely great fraud protection with like Visa and MasterCard. Immediately you can get things fixed. But ACH, honestly, for the fact that it costs 20 or 30% of what credit cards do, will typically do the trick. And again, when you're talking about large volumes of money being transacted, the amount of savings on ACH is tremendous. And that's why at coppa, we allow people to put ACH their bank information on file and charge it on a recurring basis. A lot of other software systems, they'll allow the customer to check out using ach, but they won't allow them to put an ACH on file because they want to put a credit card on file, because the credit card processing fees is where all the money is being made. So be very wary of that. And again, I'm not bashing you, I'm just telling you this is where the money is really at when it comes to your CRM. Now, the fifth thing is something that's really happened the past couple years, ever since COVID and that is support has gone remote. When Covid happened, everyone had to get out of the office and go remote. And all of these companies, almost every single one, put their support on remote. I personally feel like this put the industry back a few years in terms of just supporting their product and supporting their users. I feel like it's partly why over the past couple years a lot of these software systems have not innovated because there's just no cohesion or culture. And you got people running Zoom and you call into support and there's people crying and little kids crying in the background, and there's no cohesion of the culture between the development team and the support team. And so that's a big reason why we are making sure we have a support team that's in house that I can walk over to and like, oh, no, that's so old school. You're so like behind the times. It's now remote. It's all about remote. Trust me. We've developed systems for in house versus virtual. And the people that are in house, we can pay them more, they stay longer, and the quality of their work is much higher. And so what's happening in a lot of these companies is they're having a lot of their frontline staff being remote, being out there and taking the inputted calls. And all they're doing is literally making a ticket for another division. And it's this hierarchy that begins to be created because you have to, because you can't train or maintain a level of quality that is required to have a high level of support for a CRM. So these are the five things that your CRM is not telling you. If you want a full comparison of 5 of the most popular CRMs available, check this video out here. I think it'll be really eye opening and I talk about copilot in there and it's not for everyone. So check this video out here.