Funnel Economics - “Dirty Math” and Numbers You Need to Scale in eCom and D2C

Hey, what's up, everybody? It is Stefan Georgi here and I'm going to be doing this training on funnel economics and really the levers that can be the difference between, you know, scaling or not scaling an extremely profitable business or a business that loses money, a business that gets off the ground, or a business that never gets off the ground. I'm going to show you the kind of dirty math that you need to know. And you should note right out the gate, I am not good at math. In fact, I really struggled with all types of math. You know, besides a little bit of business math I like because it's about making money. But I really hope this should shift. Take off my headset. I don't need it. I'm pretty excited about this, to be honest with you. I hope, I hope you know, this ends up being as exciting to you as it is to me. Right. I'm gonna second because my camera froze. But I'll be back, I'm sure. Okay. I, you know, I really. This should be game changing. I don't see a lot of people talk about this stuff publicly. Maybe because it feels overwhelming or complex or complicated, but I really hope it doesn't for you. It's not that bad. If I can do it, you can do it. And again, it's like a superpower. And, you know, I've talked about it back in 2018-19 in copy starter Pro. So I'm tempted to be like, you know, everyone's a favorite guru and say like, I invented this and nobody's talking about this. I am the function of everything. But let's not go down that rabbit hole. It turns out, you know, this is the kind of math that really the, the world's best direct response marketers, CMOs and business owners are aware of it just doesn't get talked about publicly very often. And so I'm excited to talk about it with you here. Okay, so first and foremost, one of the big questions you're gonna ask, or you should ask and be able to answer is for whatever the offer, the funnel, the business that you're working on, it's kind of like, what's the goal? Right? Is it to maximize your net profit, as in both kind of like a percentage and volume? So you want to just make boatloads of cash and, you know, buy Lambos and houses and planes. Right? That's generally what it is for most people. Of course, some people might want to maximize revenue. They might say top line revenue is what matters. I know that if I can get a certain Amount of revenue and I'm not completely hemorrhaging money, then I can get acquired. I can sell my business. You know, revenue is my goal. Generally that should be there should be. That should be the reason. Otherwise, revenue is a vanity metric. So I know people have done 50 million a year and taken home 500,000 in profit, which is like not bad. But for 50 million, that's it is bad. Right. Maximizing new customers or leads. Right. So lead gen again, maybe acquisition. Wow. We're a machine. We're acquiring all these customers. This is like a lead gen or customer generation machine. We're going to acquire this customer is going to. You back it out by selling to them. This is like lead gen, right? And there's lifestyle stuff like, hey, high margin, low headache. Like, I don't. I'm not trying to buy a Lambo, but I can make a couple hundred thousand dollars a year pretty passively. Then, you know, a couple million, whatever it is, like, I'm happy. I don't want a lot of headaches. I don't want to spend a lot of time in the business. It's all about that lifestyle. Okay. And the decisions you make as you go around optimizing offers and funnels and the levers, pulling the levers really will depend on what your answer is and what your goal is. Right. I'm going to assume for this training that generally we're talking about maximizing net profit. But, you know, of course, I'm sure I can throw in tidbits on other stuff too. Okay, so here's some really vital basic questions we're going to go through. How much? And I could have done a PowerPoint, but I am good at it. And I was like, I just want to record this because I'm pretty excited. So I'm doing it as a Google Doc and, you know, you'll bear with me. All right. How much does it cost me to acquire a customer? On average? That'd be your CPA cost per acquisition or your cac, you know, costs to acquire a customer or cost per acquisition, you know, that type of thing. Okay. How much money do I gross on day zero when I acquire that customer? On average? That'd be your aov, Right. What's your average order value when somebody goes to a funnel and buys, you know, maybe upsells, maybe you have different package options. What's the average amount somebody spends that you're kind of grossing? It's like your gross revenue. Right. What's my cost to fulfill a customer's order on average? So, okay, when people come in and you know, buy something, what, you know, what is the cost? What are the cogs? So for example, supplement funnel, maybe we're about to get to examples. But say $200 and it costs you $50 between the supplements, the fulfillment, processing fees, some other stuff like that. Right. Generally these are like the fixed kind of costs related to selling the goods versus kind of other variable costs like staff and payroll. And that's, that's why all that leads to your gross but not net margin. Right. What is the average gross profit when I acquire that customer? What's my gross margin? And we're going to talk about the lifetime value, which is OTV a bit later. Okay, so let's look at some examples. Let's say it's a supplement offer and it costs you $150 on average to acquire a customer. Say that your AOV is $220 on average. Let's say that your COGS are about 22.7%. And no, I'm not a math genius. I just had looked that up earlier. But that would make it that about $50 to, you know, fulfill. So basically 150 plus 50. $200. That's costing you, right? It's costing you $150 for, you know, acquiring the customer, whether that was buying media. Right. For your ads. Cost $150 to get a customer from an ad. Or say you were working with affiliates and you're paying affiliates $150 CPA, so they're risking their money, but every time they make a sale, they get $150. Okay. And then, you know, your COGS, let's say on average are $50. You're grossing, you know, through the AOV, 220, which means your gross profit is $20. Now that's not bad. Of course, if, you know, we extrapolate out to like a thousand sales a day type of thing, you know, I mean, and we're going to get to a thousand sales a day. Let's say it's 100 sales a day, right? So 100 sales a day times 20 equals. Right. Like basically $2,000 a day equals like what about $60,000 a month. You know, you do that, you've got a, you know, probably a seven figure business. I mean, 100 times 220 AOV, right. So yeah, you got, you have a, you know, healthy little business. You're netting close to a million dollars a year. You know, was that some 720,000, I think, right. So like, you know, this is probably a good like lifestyle business. If you could figure that out. Now there's still a lot of things that you could do. There's a lot of levers you could pull that I would want to pull for me. But the point is it's actually right, you know, it's kind of about volume typically for, especially for saying like a supplement offer. Okay, okay. But now let's say you got a supplement offer where you know it's costing you $300 to acquire each customer, whether that's, you know, through a affiliates or more realistically, this would happen with ads, right? You know, let's say you're only, your AOV is only 150. Your COGS are still $50 at 22.7%. So now you're losing $200 of every customer you acquire. Right. And that's where I typically say, you know, when people like I, I've gotten in trouble for being like, not everyone should be an offer owner. It's like that's not of the question that this is what the numbers are going to look like when you first, you know, go out the gate. Especially if like something like a physical product, like a supplement offer. And so, and you need data to be able to optimize, right. And so if you, you know, are losing $200 per customer, how much money can you really afford to spend? Right. And if you've got $5,000 saved up, it's like, okay, so basically what you can run not that many sales before you're out, right? And it's hard to optimize that period of time. So just keep that in mind. But of course, you know, if we're being a CMO or an advisor and kind of growth engineer, whatever it is for, you know, another company, company that has a testing budget that understands the way things work, all of that then, or you have the budget for it, right. Then this is cool. But that's, you know, this is not out of the question that you're going to have something like this. In fact, I'll show you an example momentarily. Okay. Just so you can see the, the metrics for a few other kind of types of offers. Okay. Like let's say it's a low ticket info product. Let's say your CPA is $40, right? You run ads on average, you spend $40 per customer or affiliates promote it, whatever it is, on day zero, you know, you got a customer, let's say $60, which is great. There's no cost really to fulfill, you know, because it's an info product, it's digital. So your gross is $20. So from that context, if you get $20 of this or $20 running, you know, physical, you know, there's an allure to doing info products, right? And I think that's what certain gurus kind of talk a bunch about, like offer owners. But then they, they go to like info and low ticket info and it's people spending like a couple grand. Maybe they scale up to like, you know, 30, 40 grand and ad spend a month or whatever it is, which is again, nothing wrong with that. It really depends on you and your goals. And it's typically hard to scale. It's harder to scale low ticket info products and offers compared to physical products, right? Okay, last example, high ticket funnel. Okay, let's say it costs a thousand dollars on average because you know, you're getting a lot more money on, you know, day when you do acquire a customer, right? So say it's a thousand dollars, you gotta acquire a lot of customers. It's like a phone, phone sales thing, right? They apply, book a call, you know, you sell them a high ticket package. So say on average cost you a thousand bucks, you bring in $3,000. Let's say, cost you a thousand dollars for fulfillment. Let's say that's because of maybe you've got like a high ticket closer you pay commission to. Maybe there's like a coach or somebody who is, you know, doing the coaching. You kind of figure out the math on that, whatever it is. But even here, maybe your gross profit is like a thousand dollars or gross margin, gross profit, same thing, right? For my purposes it is thousand bucks. All right, great. Okay. So the reason this is so important and the reason we looked at these examples is because understanding these basic numbers, right, really determines what action we're going to take next in our focus as a CMO or a marketer or as an offer owner or whatever it may be. So like let's go back to this example of the supplement offer A here, right? It's like we're in pretty good shape. We're probably acquiring customers on day zero, which is fantastic, right? So cool. But if you're in the other example, which I didn't put back here, example two. Well, shit, right? That's going to be a very different direction that you take. So basically your question is after you know, your numbers, what do you do next? And it really depends on your or the business's goals and objectives. Going back to those four main goals, we can bullet these, right? Okay. Maximize profits Revenue, new customers, lifestyle type of stuff. Because if you frankly, if it's going well and you got good lifestyle, then you're really in preservation mode. You're not, you'll test stuff every now and then. You're like, how can I increase my lifetime value a little bit? But you're really like, the lifestyle is typically like this. But instead of maximizing, it's sort of just like maintaining steady profits, growing steadily, things of that nature. Right, okay. But we're going to assume you want to go maximizing profits because that's the world I live in and operate in and love. So what can we do? Okay, well, you know, and let's actually, you know, go back to. It doesn't really matter what's funny, right? Even if you've got your $150 CPA or $300 CPA, right. These are things you would still do. We could lower the cpa. Well, how can we do that? Okay, you can do it at the ad level, right? You can find better ads. What does that mean? Ads have a higher click through rate and a lower cpm. So you're spending less money per visitor. Your website. And when you do that, you know, I'll show you this. In fact, let me, let me go and show you this one real quick before we go to the next one. So let's say your website converts at 2% to be just for whatever. Right. On cold traffic from Facebook. Okay. And let's say you get 1,000 visitors a day. And if your current ads, it costs, let's say, you know, I don't know, trying to think about realistic math here, what it would cost. I mean, let's say you're spending, I'll keep this simple. $3,000. Ad. Spend $3,000 with current ads. Okay. All right, cool. So thousand visitors a day, 2% conversion rate. It means, you know, 20 customers per day. So your AOV is $200, right. That means, you know, you're kind of grossing $4,000, but with your cogs, which are, you know, let's say, you know, I don't know, like basically 20. 20% for simplicity's sake, you know, 20%, 4,000 is like 800. Right? So 800, so maybe making. $2 a day. Okay, does that all make sense? Right? Thousand visitors a day. AD spends $3,000. You're getting 20 customers per day. So your AOV is $200, your average order value or that. Sorry, that's not. So basically thousand, where's the conversion? Sorry, there's conversion rate. That's where I messed up. I'm sorry. Sorry. So like, thousand visits a day. A day, 2% conversion rate. 20 customers per day. AD spends $3,000. Right. So like, that means. Yeah. And then your CPA is what, $3,000 divided by 20. 3,000 divided by 20. It's 150. Yeah, duh. Okay. All right, So like, neato. Okay, but when I talk about better ads, okay, so now let's say that you have a really, really fire ad that you know is going to have a higher. More people are going to click on this ad and you know, because it's relevant and dialed in, your cost to run the ads the same. So that instead of, you know, having. I'll do this in a new thing here, I'll make this clear here. Landing page. Landing. Okay, so, all right, let's say now if I better add. Now for the same ad spend you get, let's just double it for simplicity's sake. Again, this is just. These are just. I just want you to understand these concepts. Right now you get 2,000 visitors a day. Your ad spend still is $3,000. Well, now you're getting 40 customers per day. And what's got to do with your CPA? It's going to be cut in half, right? $75. Your AOV stays the same. But now you're making more money per day, right? Because now your gross is, you know, 200 times 40 is $8,000. Your COGS doubled to $1600. Right, just roughly here. So if you subtract your ad spend of $3000, COGS of $1600. So 4600 minus 8000, you're still making $3400 a day, right? Now it's a big difference that you're going to go from 1,000 visitors to 2,000 visitors with the same ad spend because of ads, it's not impossible. But even if you got, you know, 1200 visitors or 1500 visitors or whatever it is, you know, that's what we're talking about with why are the ad level and of course, what does that involve? A lot of testing, you know, could be targeting strategies. Facebook's algorithm is pretty good. If we're doing Facebook and most of these big platforms, you know, if you're doing email, it could be a new email creative that just gets, you know, more clicks and you're paying for drops, right? If you're paying $5,000 or $3,000 per email drop, and I'm buying a list for $3,000 and now with a really good creative, instead of gain a thousand clicks, I get 2,000 clicks. That's a very, that's actually a very realistic thing, right? I mean, the $3,000, you might pay more, but the idea being that you could double the amount of clicks you get. Realistically, you have to be a big email list to get that many clicks, but it's realistic enough. Okay. All right, cool. Okay, so you can also increase conversion. So how do you do that? Well, you can have, you know, better landing pages. This is where copywriting comes in really specifically. Right. If I have a new sales letter and it doubles conversions. Okay, great. You know, running a B tests. So things like the button color or page elements, things of that nature. Better customer journey. We're gonna talk about that more in a minute. You know, for example, maybe you've got a quiz funnel and the, you know, you ask people questions, they get to a landing page, they see the product they buy, and you realize that the quiz is screwing things up. And by changing the quiz, you can get way more people to the landing page. Way more people buy, you know, conversion rate goes up. Right. And just general conversion rate optimization stuff where you're, you're either through copy design, page elements testing, you're increasing conversions. A lot of people live in this space as a CMO or a CRO expert, and there's nothing wrong with that. It's a great space to be in, you know, one of many things. You could also find alternate traffic sources. Remember what our goal here we're talking about is lowering the cpa, Right? So what does that mean? Well, maybe, you know, your media buyers just kind of suck and their creatives suck and yada yada. So still the creatives. But it's like maybe, you know, the media buyers are crappy and you're working with an agency, you should find a new agency. Maybe you want to test other ad platforms and you find that you can get, you know, better conversions on YouTube than you did on Facebook. Right. If you're working with affiliates, maybe you're able to find a way to bring on new affiliates at a lower CPA. So you're paying affiliates 150, but you can pay new affiliates 120, and they're happy with it because your metrics are good enough. Well, hey, look at that. You've lowered your cpa. And there's also some fun stuff like abandoned carts and declines, branded keywords and organic and Amazon, which I'll talk about the abandons and declines a lot. Branded keywords would be. For example, you could run Google AdWords. So it's still kind of paid traffic. But say you're selling Miracle Brush and it's like a hairbrush, right? Then you should, you know, run Google AdWords. So when people search for Miracle Brush, they, you know, you come up first because there's a lot of buyer intent there. They want to try and see if you're legit. And you'll usually be able to get sales for like, $20 instead of $150 or $100 or $80. Right. Like. Or like, the cost will go down a lot on that. So that's one really thing that everyone should do. And actually I need to do it for my peptide company that I'm CMO and equity partner in, that I'm gonna talk about in a minute. And I email somebody, they get back to me, but I'm gonna email somebody else. I'm just remembering that right now. And then you have something organic, right? SEO, you're ranking for SEO. You've got a good web presence. So I'm not just saying that because of SEO. Like, is then people find you organically and buy, though that would lower your cpa, obviously. But also maybe, like, they go to search for you and again, they see a good web presence and they buy. Or they go to Amazon, they see and they buy. And, you know, your kind of cost for those customers is lower. So effectively your cost per acquisition goes down. Okay, that's just lowering the cpa. Okay, I know it's going to be a lot, like I said. So we take a pause. We've looked at the metrics, and now we're looking at, you know, what can we do to, like, maximize profits? So look at the goals as well. And we decide for maximizing profits. What can we do? Well, we can lower cpa. That's one goal. Right? Okay, so we can also lower the cogs. Okay. So, you know, if you're doing physical stuff, maybe it's a different fulfillment partner or manufacturer. If you go from paying $5 per bottle to $3 per bottle for a supplement, okay, that's $2. But if the average person's, you know, buying five bottles, that's $10. If you're doing, you know, a thousand sales a day right now, that's $10,000, $300,000 a month. So that would help you maximize profit. Right. That's $300,000 in found money. Same thing, fulfillment, but you're paying for shipping, all that. You know, you can also negotiate lower rates on shipping and products with your existing provider. You can lower Merchant processing fees. Most people don't ever think about that. But you know, maybe you pay 5% for every sale to the bank. So for every $100 you have to give the bank $5 and you can lower that to 2.5. Same thing adds up, right? Save $2.50 per transaction. As an example, you're doing a thousand transactions per day. That's $2,500 a day times 30. Right. You can kind of see that's what, 80, 90,000, right? Yeah, I think don't. Again, I'm not math saying I think right, but look, yeah, you save $90,000 a month, you know, over a million dollars a year or even just 80,000, whatever. But. And then, you know, if you're doing like info things like that, maybe you have different people doing fulfillment. If you've got coaches, maybe you can find another coach who's more cost effective. Things of that nature as well. Right. So all those things would help to maximize profitability also. Okay, next up is you can increase the aov. Okay, so if we think about our metrics again, in fact, let me go pull up my little supplement offer example. Example A was already pretty good and whatever that. Let's just do it. Okay, so right now if the AOV goes from 220, it's already pretty high AOV. But I'm just using this as an example anyway to like 250. Okay. So an extra $30, say your cost of fulfill goes up by like 6 bucks or something like that. Okay, fine, but still. So now 150 +56 is 206/250 is now $44, which is actually pretty significant. Right. So how do you increase aov? Well, you know, it could be, you know, the AOV money. Close. Right. And the copy is the thing I've taught. I'm sure you can find it online or people talking about it. Essentially you just tell the customers repeatedly like to buy more. Oh, you know, our biggest package is our, you know, most popular package. And you know, that's why it makes so much sense. So save the most money when you buy the big package. You know, buy that one. Right. If you don't have other, you know, you honestly, I should put this on here too. You could, you know, add more packages. I'll have to update the rest of the document with this. Right. Like so that you can get a bigger. So say if you, if you're only selling a one or a three bottle option, then adding a six bottle option to be able to take that will almost Immediately increase your average order value significantly, right? You can do an offer bump on the checkout. Like, hey, before you check out, you know, get this other supplement for only $20 today, and that someone cost you $3 and $17, right? Similarly, info, like, hey, you know, $20 info product. But hey, before you check out, get like my, you know, a thousand or, I don't know, my 100 best, you know, cheat codes for this thing for just $27 more. Click that. You basically just made $27 additional net profit every time somebody does it. But you do test those things because sometimes they can then mess up your upsells. You really want to test everything, right? A, B, testing is. Is king. Speaking of upsells, right? You have better upsells. If your upsell one, you know, converts at like 20 and you get that to 40, that's pretty massive, right? So now instead of two of every 10 people who see that upsell, taking it four of every 10 people take it could add another 15 to 25, you know, maybe more to your, frankly, much more to your bottom line, you know, and then pricing is another really big one too, right? Split test pricing. And people always want to go lower. But you also test charging more. I'll keep using physical products. Like you're selling a bundle of products for $19 for one product, $29 per product for three. 39 per product for. Sorry, I'm kind of doing reverse. Sorry. 39 for one, 29 for per for three or 19 per for, you know, six. Maybe you increase the one product price to $49 or $59. Maybe increase out all the prices to make it 49, 39, 29 or 59. 49, 29 or 39. Right. Testing price is a really big needle mover. You know, saying that a lot of people don't spend time thinking about or playing with, and it can really move the needle. I can give you two examples For a skincare offer I was involved with that did hundreds and hundreds of friendly sales a day. You know, we took the single bottle price from 59 to 79 and kept the other prices the same and increased. AOV and conversion stayed exactly the same. Flip side of that, we helped a guy run a blood sugar supplement on Facebook for several years. He's still running it, doing, you know, healthy, I guess. I don't know. He's doing, I think a million a month, maybe something like that. And it was like we were doing, I think, you know, 69, 59, 49, 69 for one bottle, 59 per bottle for three, $49 per bottle for six. And we lowered it significantly to like I think 39. I want to say 39, 34, 29. And conversions like doubled or tripled even. And so even though the AOV was lower because we made such higher conversions, we were able to, you know, that's what enabled us to scale. Okay, so that's where splitting, you know, pricing, split test is really valuable. Okay. And then lastly we can increase the lifetime value. Now I'll talk more about this in a minute here. Actually, sorry to do this a few places but you know, like subscription, right? Get them on continuity where they get rebuilt every month. Make if you have them on subscription, you know, help them to stay on it for longer. Monetizing your email list, you know, you could, you could rent your email list out to affiliates or promote other people's funnels for a cpa. Every time you make a sale, you get money. You can do warm promotions to your list. Right. We do that with AI marketers and free I copy and my own list where we'll develop bundles like the one that you probably found this through. And you know, that enables us to bring in really high margin revenue that funds a lot of stuff we do. Right. Also phone sales tax, you can have a call center calling people and send them other packages, bundles, offers, promos, things like that. Okay, Now I know that's a lot of options. Again, we talked about increasing conversions, lowering cogs, increasing the AOV and increasing the ltv. Like I said, it's a lot of options. So let's look with a real world example. This is a for peptide company which is basically Ozempic and maglutide, things like that that I'm CMO and equity partner of these number. I mean basically the real, the real world on this is the cogs and also really gross for, you know, day zero for customers. Right. And we've been working to dial in the CPA and it's still all over the place. We have days where as of the time I'm recording this, the CPA is over 300. We have days where the CPA is like 113. Average is probably realistically closer to 200. But you know, let's say it's $300. Okay? So and there's higher cogs because it's like a medication. So acquiring customer, 300 bucks. 299 is what people get the medication for in the first month. Then it goes up to 399 after. But we'll talk about continuity after the Fact. Okay. It's expensive to fulfill $145. So what is my gross profit when I acquire that customer? $146. Right. Minus $146. And we got that gross profit because again, we basically just took the CPA plus COGS 445 minus 299 equals. Or sorry. Yeah, we get this back. And so basically, there's a negative difference of $146. Okay. And let's look at some more data going back to those things about conversions, things like that, right? So on a given day, prior to some of the optimizations that I've been doing, you'll see 964 people hit the landing page from Facebook ads. We have 10 conversions. That's a 1.04% conversion rate. Ad spend, 3,000. CPA 300. This is sort of a little bit hypothetical, but to make the math easy but not off, we've had days like that. Give me one sec. Okay, so what questions would I ask right away? And in fact, did I ask right? I want to know benchmarks. So is that conversion rate good? Is the CPA high, low, average? What's the benchmark? And how would I find that out? Well, I would ask people who are running traffic to this kind of offer, right? To friends who own this kind of offer or who are media buyers or in a mastermind. One of the big values of being the mastermind is you can go, hey, yo, guys, I'm running this. This is the aov. This is a cpa. Anyone else running this type of thing? What are you seeing? Right? If you're in a group, a discord, Whatever. Fine. But, like, that's one of the biggest values, is just having people who are legit who can answer that, right? Not like, oh, my friend's friend, but people, you know, Right? So in my case, I went to, like, some of the best media buyers in the world who I know, and I'm like, hey, you know, they're running this stuff too. Like, what metrics are you seeing? Oh, okay. Figuring out benchmarks, right? So, like, you know, in this case, I kind of know the conversion rate should be higher. And more importantly, I mean, I know the CPA should be lower. It should be around $100 on average. Okay, well, now I have a rough benchmark of what to optimize for. So how do we go about optimizing? Like, what are we gonna do? We want to optimize. I want to get the CPA down, and I want to get the conversion rate up. You know, how do I do that? Well, if you have Google Analytics, which is another one of those things that people, a lot of you probably don't look at, but it's actually very helpful. You know, you can see maybe where people are dropping off. There's also things like visual, you know, web optimizer, VWO or hot jar and heat maps, things that can show you where in a funnel somebody is dropping off and giving you data. That way you can optimize their. Wow, everyone's dropping off on this page, right? Especially in a multi step funnel. In our case, they click a page, click a link on the landing page, go into a questionnaire, they have to answer a bunch of medical intake questions because it's like a medication, HIPAA compliant, yada yada drop off. So. Right. And that's, you know, spoiler, what I decided to focus on first. And we have that going live tomorrow and we'll see. I'm optimistic. But you never know because it's like, well, you could, you could also just test new front end copy. I'll go do that. They just sort of throw a new copy at it, hope the conversion rate goes up and then they go, wow, it went up. And that's like the extent of their split testing. You could do CRO stuff, right? Buttons, page elements, messaging, move around testimonials, page design, you know, people do all that stuff too. You know, there's no wrong answer. What you should just remember, right? What are we, what are we really trying to do? Like why they have to increase conversions, but really a higher conversion rate can mean a lower cpa, which can mean more scale, more profit, right? Keep in mind why we're doing this. So it's not, it's like, yes, increasing conversions, but really conversions going up so that CPA goes down, right? There's a relationship there. Okay, so in the peptide funnel, looking at my competitors pages, I'm like their journey, the flow has a lot less friction than ours. Friction is a huge thing for me. So friction is like points of confusion, things that are difficult, roadblocks that will stop our customer from going into our funnel and out the other side of customer. Or I should say our prospect from going in and coming out of customer. So my thesis has been simply like, all right, let me simplify our flow, which we can call like a quiz. I can probably double conversion rates. That's a big, big thing, doubling conversion rates. But especially when a funnel is not very optimized, it's doable. That's the good news. If your metrics are actually decent and the funnel is optimized. You've got a lot of opportunity there. Okay, so like, well, if I'm right, my new metrics would look like this instead. Right? Still the same amount of visitors to the landing page, but instead of 10 conversions, you'd have 20 conversions. The conversion rate would double, the ad spend would stay the same, but the CPA would be cut in half from $300 to $150. That's a massive difference. Okay, does that make sense? Because again, now for 3,000 ad spend, you got 20 conversions. That's what figures out the CPA. Right. Conversion rate is sort of just a metric to mark that that has happened. But really what you're. I'm really mostly interested in is the CPA going down. Because when the CPA is down, if I'm making money, I can keep scaling, right? Or if I'm intentionally okay. Of losing money, I can also keep scaling. But that's like, that's like the goal, like I want to be if I'm profitable. Right. And it's consistent also, by the way. Right? Then for me, for this funnel, I'm like, if it's consistently at 150 as an example, like, all right, then I know I can go to affiliates and give them 150cpa and it's a reasonable chance that it will convert, you know, well enough for them that they are going to be happy and keep sending traffic to it, especially if they have a high volume of traffic. Right. If we go back to our initial numbers here. So right now, instead of costing me $300 to acquire a customer, cost me 150. The AOV doesn't change. The cost of fulfill doesn't change. But Instead of losing $146 and making $5, that might not seem like life changing money, but actually with all the rebuilds and stuff, which I'll talk about in a little bit, it would still be great. But regardless, it's a huge win. And you can, you know, you can, like I mentioned, find opportunities to double your conversions through testing. Although also if you can't do that, then a bunch of little incremental tests and wins can also add up to a doubling of conversions too. So, you know, both strategies make sense. If there's a fairly unoptimized funnel and you can find home runs, it's worth doing that. Right? Okay, so let's assume this, this test works. I actually really do think it's gonna work. I'll update in a few days, probably before you Ever see this video, I'll know if it worked or not. And you can ask me and I can be like yay or nay, try to ask me. Poker. I really wanna talk about this funnel publicly. I'm talking about in this recording, but I don't want to go too, you know, so I can stop there and I could scale because of the rebuilds which we'll talk about in a minute. But you know, there's just so much more low hanging fruit. So let's say that by testing some different variants of the landing page, but I mean the copy the design format elements, I can increase the conversion rate up to 2.5%. Okay. And that's really not at all unrealistic. It's pretty doable to get that kind of win. All right, well now my numbers basically go from 20 to 24 conversions. I go from a. Or you know, my conversion rate's up to two or, sorry, yeah, conversion rates now 2.50%. So we had there same ad spend but the CPA, you know, just another four sales there goes down to 125. We knocked another $25 off. Right. So now my numbers are CPA here. These two didn't change. Making now making $20 per profit. Now if you say you're doing a thousand fronts a day, right back to that we handed the Math earlier on 120k gross profit, profit per day, 600k a month gross profit. Right. And even if you're just doing 100 sales a day, 2k per day, 60k a month, like for me that wouldn't be exciting, you know, but for lots of people I understand that would. Okay, cool. So I think realistically of other, you know, optimizations, split tests of landing pages formats. We are testing some really cool variants. You know, we can get to like 3% conversion rate, but let's just keep it at 2.5% percent. I want to show you what else I could be doing. One of the biggest low hanging fruits is going to be like abandoned carts and declines, right. You know, in the case of the peptide company, like we're getting around 300 abandoned carts daily and it's pretty standard for a call center if they call those abandoned cards to convert like 20% of them into customers. But let's just say it's 10% to keep the math simple. And let's say we're paying our costs that are $125 per conversion on an abandoned cart, which is accurate as what we're paying them right now. Okay. And let's say that we also text an email out. Like, here's a sequence of, you know, they abandoned cart, right? They're in the process. They don't check out. We email them, hey, you didn't check out, come back, complete your purchase, text. Hey, you didn't, you know, complete your purchase, come back, check out. So say we can get, you know, 5% of those abandons to complete the purchase. So total 15% of the people, which is, I think, realistic and frankly, a little below what the benchmarks would even be. Well, cool. So now on the call center side, 30 more sales per day, right? 300 abandons and our CPA is $125 per sale. So that's, you know, 3750 in kind of ad spend. In this case, it's not ads, but it's like spend to the call center. And we're getting 15 sales from our abandoned cart. Texting emails with no CPA. So now what the numbers look like. Okay, well, that's pretty massive. We go from 24 to 69 conversions. Our conversion rate kind of are effective. This is all effective because you're working in the call center. This is where call centers are so valuable, right? I sold my call center, but we're now reusing them. And I'm kind of like, crap, I'm making a ton of money after I sell them. But that's okay. I'll make a lot too. But your kind of cost now is like ad spend plus cost center commissions. But even with that, the CPA is now down to $97.82. It started at $300 as a private call. And this is really only three things that we've changed, right? We look at the real world. Real world examples. We went from negative $146 per customer to positive $56.18. That's a lot better to go back to the whole thousand sales a day thing. Now we're looking at gross profit per day of 56,180 and gross profit per month of 1,685,400. Or if you want to say 100 sales per day, then, you know, $5,618 per day and, you know, $168,540 per month, which is still pretty good, especially, you know, depending on where you're at in your journey and what you're looking for or the company is whatever, right? And remember, all we really did was like three things. We just improved the customer journey, which was kind of a CRO type of thing. We found A better landing page and we started marketing, you know, or remarketing to our abandoned carts. Three a call center text. Right. So this is where there's so much leverage and power in these things and people should talk about them more. Yeah, okay. And again, think about all the other stuff we could do. What we didn't do is we didn't go find better ads yet. So for our peptide thing, we, I messaged the person running Facebook traffic for us and was like, hey yo, like here's some ideas for ads. Let's take testing these new ads out. I think we can lower cpm. So we are doing that. Right. We were testing a bunch of different landing pages in the near future. Really excited for that. We will expand onto other ad platforms. We will probably, you know, we'll work with affiliates. I want the metrics really good before I go to affiliates. You know, we said we got to get AdWords going and I just want to do more kind of organic SEO stuff. Cogs. Short term we can't really lower them, but longer term we could and that could increase our profit margin as well. Aov. Yeah, we could do that. We could offer people who have bought, you know, an upsell right away or something or with through the call center supplements, an anti nausea thing because that's a side effect of some glutide things of that nature. We could even split test. We can, we, we have price elasticity. We could test going lower or higher with this as well. And of course there's increasing the lifetime value. So let's talk about lifetime value. Right? What is lifetime value of your customer was the average additional expected lifetime gross profit of the customer. So let's go back to that peptide company. Right. These are the metrics you just saw. But what I know is from competitors, you know, their LTV is around $2,000. And I know that the, you know, the margin on that for US it's about 50%. You know, it's like a little bit back of napkin for this, but it's pretty damn good. So, you know, basically we can make an extra thousand dollars every time we acquire a customer, which is pretty wild. Right? And it's good to know. So this was like that LTV was over six months. That's how long do we have the data. So it's not true ltv, but at least I know maybe it's longer. Right. But for six months that's kind of what I'm looking at. So what does that mean? Well, 1000 divided by 6 means I'm getting an extra $166 per month for each of those customers for the next six months. So this is where the math gets wild. And this is where people love rebuilds and continuity. Subscriptions, right? Let's say we're doing 1,000 sales a day. Because that's my goal, my short term goal, 30,000 customers a month. You have gross profit. Gross profit margin, right. Cool. Now you get to month two. Same thing, right? Hey, look at that. It's good profit, but it's better than that because of those rebuilds we do. Okay. 30,000 people from the first month, $166 per month. That's $4,980,000 in additional gross profit in month two. Switch that to 100 sales a day. Okay. $498,000 additional profit in month two. Right. Switch it to 10 sales a day. Oh, okay. $49,800 additional. Now, again, this has to do something that has a high rebo. Take rate and it's a high average order value, things like that, Right. This is why sasses are so valuable, because you get people on subscription. The margins are extremely high. All that. That's why sasses will pay a lot of money to acquire a customer. But. And we'll talk about that below as well. That's why Agora would and maybe still does acquire customers and go negative for like months at a time. Right. If you're wondering why is the gross profit so much higher with rebuilds? Because there's no ad costs in the additional months. And I can play that out over one more month. Right now you've got 60,000 people. You got people, you know, in month three and a month two, you know, so now your net profit after three months is that. Which is pretty insane. That's how, you know, one way to quickly get to being a nine figure business. That's what I'm trying to do. And I hope I do it. Frankly, you know, I'm. You never know. I could record this and things go to. It doesn't work out. But I feel pretty optimistic. I'm really working hard on this thing right now because of the upside and being, you know, a significant equity partner in it. Okay. And yeah, like I said, those numbers are insane, but they're not out of the question. And it's like I said, if you're doing 100 sales a day, then in month three, you're only netting 1,164,000. Like, oh, no. Right. And like I said, this is why people love subscription business. And of course, there's other things we can be doing as well. You can increase the stick rate. How many people, you know, do renew for another month or stay on their medication or you know, if you're doing a newsletter, how many people stay on your newsletter? The email list, monetization, right? We can take all of our buyers and we can sell them supplements by creating warm traffic offers. We could sell them affiliate stuff, right? We could say, you know, hey, customers, go check out V shred and sell them V shreds programs like, you know, you want to lose weight and get off of zempic, you know, do that, right? Yeah, we could call them, sell them packages of fitness coaching, health coaching, all these things we can do, right. And so it's kind of endless and it's all really fun. So I guess yeah, I'll get to finalness in a second. But you know, I hope this is starting to change the way you look at funnel economics and really running a business in general and you understand this sort of dirty but important funnel math because it really is to me it's so important to know these numbers and to understand how this works. I think I didn't know it until I was really running my own offer or offers and then really, even then it was sort of like money in the bank. More money in the bank at the end of the month than at the start of the month. Like great. And I realized like this is not the way to do it, right. There's so much, there's levers and there's specific metrics and you optimize to these metrics and these numbers and you know, it can make you rich or it can make the business rich and you promote it and then you go start your own offer and company or you become a partner because you're doing such a good job in that business or whatever it is, right? Or you're just as a freelancer, just be like a consultant who can come in and know this shit and like work with companies and charge them a lot of money to, to, to find the levers and pull them and tweak them. It's extremely valuable, right? So here's like just a quick example from like a while back was like a bad day for the Peptide company, right? We had six sales, should say from, not form from Facebook for you know, $1,970 in ad spend. So $328 CPA. But the call center started up that day, right. And we're paying $125 commission, right? So if you add the math up on that, basically between $1,000 to the call center. Put that in parentheses so it's easier. And the ad spend, 29, 70, 93. But now we have 14 sales. That takes the CPA from 328 down to 212. Right. We had a couple of sales come in for the man and stuff that we're setting up. Yeah, we offer a coupon code, but one person came in that didn't use the coupon code. So, okay, same ad spend here as here, but now 17 sales. And our CPA was 174, 76. We also had five rebuilds come in. Again, this is like the first month of doing that, or I guess the second month. But, you know, starting rebuilds come in. So we got about 220 net profit on those rebuilds, on average. The reason I said 166 before is because not everybody's going to rebuild. So I'm averaging that out. It's a high stick rate, but not 100% stick rate. So 1,100 net profit on the rebuilds. And so when you look at it that way, right. Okay, 174 are, you know, break even is essentially 1 54. So say we lost $20 per on 17 sales, right? So again, just lazy because my brain's fried. So we basically lost 340 acquiring customers, but we actually for the day netted 1100 minus, you know, 340, which again, I'm too tired to do math. $760. We made profit, right? And now when those 17 new people rebuild next month. Right. And then 100 people rebuild per day next month, this is where that math gets really exciting and fun and why I'm. I'm really pumped about doing this stuff. And so it also comes back to that question, right? How much are you willing to spend to acquire a customer? And it's not can you spend, but willing to spend. And they're kind of both. But sometimes you can spend more than you want to because you are, you know, optimizing for profit. But you might be willing to spend more than other people because you don't care about going negative. Right. In theory, I think I have it down here. Yeah. Like, it's like, in theory, knowing what I know about the rebuilds and LTV and stuff like that, it's like, I could, in theory, like, I don't give a Damn that my CPA is $300 or $500. Let's just go. But you really would want a foundation of rebuilds coming in first to have the money, and then you really have your numbers out, you'll get a CPA or somebody at a CFO type level. You can hire a fractional one. You have to go hire a CFO for a bunch of money to help you understand what the modeling looks like on that. But if you do that, you know, then you might be like, damn, I don't care. I can acquire. I want to actually spend more. Right? And I put that in here. Yeah, I mentioned it here, right? Like in theory, we should be willing to go negative, a lot of money to acquire customers, right? And I mentioned Agora does this famously. You just need upfront money to play that game, though, or enough reboots coming in to do it. But the pro of going negative is that, you know, you can acquire more customers, you can dominate your market. So in this case, you know, you're going to end up paying a higher CPA instead of trying to lower your cpa, but you're gonna be happy about it. But the difference there is I would still be trying to optimize for cpa. I would still try to lower it, but I would accept, you know, especially as I go broader, my CPA is going to go up or if I go from especially a lot of niches. And if it's not a really like, you know, if it's not a niche where everybody. It's not a massive market or tam. Right. Total addressable market, which we all know now because of her mosey. Sorry, my family's about to be honest. It's perfect, right? Then just CPA is going to go up in general, I'm still trying to keep that CPA down. I'm fighting it because I'm trying to manage for profitability, but also ltv. And this also happens when you go broader, right? You go from, you know, a Facebook ad to a billboard, then you're going to spend more money acquiring customers. But if you've got enough money coming in, lifetime value, all of that, you can do it. So that's actually it. It's perfect because Laura and my daughter just got home. Perfect timing. I hope this was really valuable and really made a lot of sense to you. I hope it gives you a really good new way of thinking about funnel economics. Obviously, you'll have access to this document as well. My dog's freaking out, so I'm going. Thank you all and bye.