How To Get 604% More Leads Without Going Broke On Ads
Sabri Suby explains how to scale from 1,000 leads per week to 1,000 per day without blowing your ad budget. Track customer acquisition cost and lifetime value by channel, model your payback period, and expect cost-per-lead to rise about 30% each time you double your spend because you're reaching colder audiences.
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Hey guys. This week on hey Sabri, I'm going to be answering Vishal Trivedi's question. He's written, hey, Sabri, how do you go from a thousand leads a week to a thousand leads a day without getting heart attacks of increase in massive ad costs? What should be the strategy when it comes to scaling? This is a great question and it's something that I have a lot of experience in. So first of all, in order, it's great that you're at a thousand, thousand leads a week. Great number. I love the target of trying to get to a thousand a day. The way that you're going to be able to get the confidence to be able to do that, because we both know that you're going to have to increase your ad spend to get there, is getting very, very clear of what your numbers are. And more specifically, what most people look at, you know, when they're running Legion campaigns is they just look at what their cost per lead is and they look at what the conversion rate is on the landers, more or less. Very few people actually look at closing the loop, finding out not only which are the ad sets or which are the key terms that are going to be getting the best cost per lead, but then how are those cost per leads backing into actually acquiring a customer? Right? And that's the thing that ultimately matters is what the return on investment is going to be and how much is each of those different individual traffic sources and keywords and ad sets within those traffic sources actually backing into not only a phone call, but actually a customer and then understanding that, okay, cool, I know what my customer acquisition cost is not only per channel, but I'm getting more, even more granular than just channel specific on there. So now if you've got your head screwed on right, most people, they're looking at like what the return on investment is or what the ROAS is, and they're looking at what is the customer acquisition cost. And then they go, yeah, all I need to do is get my customer acquisition cost to be lower than what my LTV is, my lifetime value, right? And that is true to some extent, depending on how deep your cash reserves are. So there is nuance to that. And what I mean is the real thing that you need to also be looking at is what I call the payback pendulum. Right? You're sending out ad spend, right? Money soldiers are going out and then you want them to come back to camp with more money soldiers. But the thing is, you know, if you're chucking it on A credit card, which I hope that you are doing it, you got, you know, 30 or 60 day payment terms on those credit cards, meaning that you send the money soldiers out and then at the end of the 30 days you have to basically pay that, right? You have to pay that cost. And if you've got, you know, a very healthy say a 5 to 1 CAC ratio that is your LTV is five times greater than your customer acquisition cost, then it looks like you've got the green light to scale. But let's just say that 5, 5 times ROAS or 5 times return on investment is collected over a 12 month period. And then you start to get into a position where you're digging yourself into a financial hole. So your ability to be able to scale that campaign really comes down to what your risk tolerance is or what is your financial position look like to really have go in the hole and go negative. It might be for eight weeks, it might be 12 weeks, it might be six months, right? Because ultimate, you're placing a bet that that thing's going to back out and at the end of the day there's going to be more money soldiers back at camp than what you sent out and that that period of time might be 12 months for you. And the only way that you're going to be able to have the confidence to go through that exercise is to have a larger, a larger enough pool of data to give yourself a level of certainty that knows, okay, I am willing to, to basically scale up my ad spend for me to hit that number at a thousand leads a day, because I understand, I understand these numbers and that I know that it will eventually back out. So a way to make that even more real is to have a look at total money out, total money in over a 12 month period. Take the total money that came in as a result of your ad spend and divide that by the total number of leads that you generated within that time span. That will give you what your value per lead is, right? Earnings per lead, as we call it. And then you know, your earnings per lead might be $60, it might be $100, whatever it is for your industry. And then you know, okay, I can spend up to $60 to acquire a lead, knowing that an average lead is worth $60 to me and you might be acquiring those leads at 10 bucks. So then you know that equation. But the thing that you will need to do as a once off and then ideally create some financial or some understandings around those payback periods because they can change and they can Change. When you go from a thousand leads a week to a thousand leads a day, you're typically reaching out to colder traffic pools in order to be able to hit that scale. And then typically, as a rule of thumb, for each time that you double your ad spend, you should allow for a 30% increase in cost per lead in order for you to reach that scale. And you want to factor that into your financial models. And then you start to look at advertising as a game of investing, not as a game of just advertising, right? As a business builder, you want to be an investor. You don't want to be like all these gurus online where they don't even have a business, they have a promotion that they run. They're like, you know, a circus elephant that has to perform every month and they live by their cash flow. Where if you're really understand the unit economics of your business and you know exactly how much money each lead is worth, you can start to then reverse engineer the system. You can go, okay, cool, I know that an average lead is worth worth $60 as a cost per lead from earnings per lead, right? And I know that I acquire Those leads at 10 bucks a lead or at 15 bucks a lead, whatever that is for you. Then you basically work out what the EPCs are, the earnings per click. So just as you looked at the total year in the money that came in, then what you also want to be doing is dividing the total amount of revenue that you generated from your ad spend divided by the total number of clicks that you generated from the ad spend to get that value that will give you your epc. That, my friend, is the golden metric. That is the only thing that really matters is how much that you are earning per click. And then the nuance to that is understanding that payback period. And what, how long does it take for that pendulum to swing back out with the money soldiers on it, right? So they're the things that you really want to understand. Because once you know your EPC will say that your APCs are at $2, then you know that you can spend up to $2 to generate a click. Anything above that is going to fold outside of your threshold. Right there again is nuance to this. But that's the way that you take this kind of esoteric thing of, hey, I want to get to a thousand leads a day from a thousand leads a week, and you make it real. And you build a scientific customer acquisition model off the back end of that. And that's how that you're going to get a level of comfort so you don't have a heart attack when you say those money soldiers going out every day, Google and Facebook is smacking and dinging your credit card. You know you can sleep well at night knowing that this is based on a model that you've got a good amount of data from. So that's the big key thing here. You don't want to be relying off three months, six months, ideally not even 12 months of data. You want long time horizons because the more data that you have in there and the accuracy of that data, the more confidence that you should have to be able to further go and reinvest in your customer acquisition. I hope this answer helps you. Hey guys, if you're enjoying these videos like subscribe and hit the bell button as we're dropping a video like this every other day on YouTube and if you've got any questions just leave a comment below with heysubrey and I will do my best to get to it.
