In the podcast:
00:58 – Working magic on failing businesses
02:39 – A real life case study
06:50 – From 6K to 60K email signups (yes 10X!)
09:23 – The formula for profit most business owners do not know
12:24 – Do THIS to increase conversions
16:11 – How to make payments more frequent
21:01 – The concept of 10×10
24:19 – An easy margin win
27:22 – Important takeaways
31:10 – Do this for a massive pay day
33:55 – In closing
Need a hand with your business? Find it HERE
James: James Schramko here, welcome back to SuperFastBusiness.com. This is Part 4 of a 6-part series that we are doing here with my co-host, Matthew Paulson. Welcome to the call.
Matthew: Thanks James, how are you?
James: Good. You enjoying this mini-series we’re doing?
Matthew: Yeah. We’ve talked about a lot of different topics, and we’ve got a couple more, and I’m looking forward to diving into how to turn around your failing website or a failing business.
James: Yeah, this is something that, I mean hopefully, people don’t have to do. But it does happen. And if you have this skill, you can apply it not just to your business, but to other people’s business, and you can make good money from it and it’s certainly something that I used to do as a job.
Paid to turn businesses around
My last actual job as a general manager was to go to Mercedes-Benz dealerships that needed a bit of a hand, and to do something magical with them. And I did it 3 times in a row, actually, where I took a small or struggling team and started from scratch. And it took several years, in this case, to make substantial impact.
Certainly the first one, with a small team, easier, 6 months or less, no trouble. Next one was a huge mission. We’re talking about a business that was approaching a hundred million dollars a year in revenue, so we’ve got big cogs to deal with there, and culture, and lots of people. And the last one, there was more than 70 staff members, it was a $50 million a year business. It was actually losing a million bucks a year or a little more when I started there, and after a few years it was making 7 figures in profit. So big turnaround on the bottom line.
Some people can’t believe that such a big business could make such a small margin, but it is a very difficult business, just because of the staff, the stock, the land required, and the constraints on business. And you have 7 competitors within 7 minutes’ drive selling the exact same product.
So, Matthew, what story would you like to start with for doubling revenue in a failing business?
Matthew: I don’t know if I can compete with that. I’ve never turned around a Mercedes-Benz dealership.
James: It’s not a competition, but I’m sure you’ll have a unique perspective on this, and we have to be relatable, because I don’t think any of our listeners have a large Mercedes-Benz dealership. Let’s talk about even the tiniest, weeniest little website or somewhere in between.
What Matthew did for US Golf TV
Matthew: All right. So there was a local publishing company, it’s called US Golf TV, they had been trying to do the whole infoproducts business, they had a website, they had a TV show,. They were making maybe $75,000 a year just from selling ads on their TV show and selling ads on the website. And they were doing a pretty poor job. I already had the skills to kind of know how to do all those things.
They weren’t even writing Google Adsense or anything like that, so it was pretty easy to take the monetization skills that I had from my existing business and just apply that to the business that was failing and just turn that around pretty quickly. They already had some traffic, we were able to grow the traffic, we were able to get more email opt-ins. We’ve got 50,000 email opt-ins in the last 12 months. We’re making 10 to 15 grand a month in Google Adsense now, and just by implementing all the best practices I knew from my other business.
I took a 20 percent stake in that company just for providing them that help, so I worked in the business for like a month. I turned everything around, and now I don’t do much other than go to a meeting every other month to kind of know what’s going on with the business and providing some advice. So that was a good deal for me. Not as big as when you’re turning around businesses, but in that space it worked out pretty well for me.
James: That was a lot of information in just a few minutes there, Matthew. You are a machine. A couple of questions here, if you’ll respond to these. When you said you took a stake in the business, remember in Part 3 of our 6-part series, when you’re selling your website, you had a reluctance for your buyer to send you payments. Do you ever find that when you take an equity deal in a company?
Matthew: No, because the only way the other owners get paid, there’s 3 in this business, is that if they get paid, I get paid, so if the guy that owns 70 percent of the business wants to take money out of the business, then I get a check too. So that doesn’t seem to be much of an issue in that business.
Matthew: And I think it’s just because of how we structured the deal.
James: And is the deal based on percentage of the business revenue, or is it on the profit?
Matthew: It’s equity, so I own just 20 percent of the whole business, so if there’s profit, I get 20 percent of the profit.
James: Nice, OK. So we talked about before you came along, they were struggling. And that struggle was probably impacting their ability to survive. You covered a few of the things that you did.
James: So what were a few things that you did when you got there?
Matthew: Well, the first thing I had to understand about that business, it’s a digital publishing company in the golf space, and it was run by golfers, not Internet business people. So they made a lot of the mistakes that you would expect. They kind of understood the broad strokes of how an information products business should work. They knew that you had to get email addresses, they knew that you had to have a product to sell, and they knew to sell it over email, they just were doing all those things not quite right. So just by going kind of step by step by step through that entire funnel, we were able to really create a business out of that.
So it started, you know, on a website, OK, where are we getting traffic? Oh I see these types of articles are doing well, let’s just do a whole bunch more of those. And traffic, when it because of that we got the site into Google News, Bing news, to get some additional traffic. Then we put some opt-in forms on the website, an entry popup, that tends to work well. We put some other opt-in forms on that to get emails, we put Adsense on the site to generate ad revenue, we did their email campaigns and Infusionsoft, to be more effective.
And we created a new product as well to monetize the existing email list that they had, too. So it was a lot of different things throughout their entire sales funnel, but it was just a matter of checking out every step of their sales funnel, saying, OK, what are we doing now, what can we do better, and making those improvements, just over the course for a couple of months.
James: Right. And it’s also sometimes handy to have a what should we stop doing aspect to it as well.
Matthew: Absolutely. There is.
James: We have a start-stop-continue methodology.
Matthew: I agree.
James: The continue’s important as well. Sometimes we do something that’s really effective, but we forget to do it. And that’s one of the main things that I used to find when I was retraining people in the car dealership, is we’d set up a good process, and then you’d have to go and check on it to make sure that it’s continuing, because these things tend to stop with human inertia unless they’re really habit.
The results of Matthew’s efforts
So what happened with this business after those changes?
Matthew: We started these changes about 12 months ago. They had 6,000 emails when I signed on, and now we have about 60,000, so just implementing the best practices that I talk about, with an entry popup and you know, having good copy and that kind of stuff has enabled us to build a big mailing list in a short amount of time. We have that new revenue stream from Google Adsense, that’s $10,000 to $15,000 a month.
We’re selling a lot more products to our mailing list, we’re doing affiliate sense, ad sales through email, and we’ve just become a much better business. We’ve actually made $70,000 to $80,000, and this year we’ll end at between $200,000 and $250,000. And after that initial couple of months, I haven’t really put a whole lot of work into the business, it’s maybe 2 or 3, 4 hours a month, and I get a few grand every month just by doing those 3 hours. It was a lot of upfront work, but down the line it’s not a lot of work.
James: Sometimes the marketer gets a little bit of heat, because we do have a lot of knowledge, and we apply it early, and then over time the other partners seem to forget how all this happened in the first place. Hang on, Matthew’s doing nothing. We’re sending him all this money. We’re sending him 20 percent of our profit, and he doesn’t do anything. How do you handle that?
Matthew: I kind of told them upfront how it was going to work. I said, hey, I’m going to work like crazy on this business for a month, and then I’m not going to do a whole lot. I’ll be there when you need help, but I’m not going to be operationally involved in this business at a heavy level after the first couple of months.
They had an IT guy, they had a tech guy, they could write good enough marketing copy where I didn’t need to be doing that stuff, so I could just tell the guy what to do and he would do it afterwards. I made it clear in the written agreement that we had, which, it was an expectation upfront that I was going to do a lot of work right away, and not a lot of work down the line.
James: Right. Again, so a lot like when you’re selling a business, in the last episode, it’s a matter of having very clear agreements and expectations in place.
So we talked about what happened. What would you say would be a prescription for someone to have a look at for their own business? And I have a few ideas on this, too.
Matthew: If your business was failing, and you needed to turn it around?
James: Well, let’s not even say it’s failing. Let’s just say you want to double revenue. Your business is OK, but you suspect that you could do more, just like all of the people that I work with in their business. What sort of things do you think they might look at doing?
Matthew: That’s a good question. I think you might have some ideas. I think you should go first.
The profit formula
James: All right. Well, this really is my sweet spot. You bring so much value in all the other things that I’m not good with, like selling a business and building a huge email list. Let’s start at ground zero and talk about the profit formula, because once we understand that, it really helps us find areas to improve. And that’s simply: leads times conversions equals customers.
So this is what we often hear about as, most conversations in the Internet marketing space revolve around these 2 aspects. They’re always talking about prospects. Where do I get customers? What traffic sources? And then they’re talking about conversions. What opt-ins do you use, what split test do you use? And we even talked about that in Part 1. So that’s a valid conversation.
Once you’ve got a customer, then other factors come into play. What’s the dollar amount of the purchase? How frequently do they purchase? And what’s the margin, what percentage margin do we have? If you multiply those things, then that’s going to give you the profit.
And as we talked about in the previous episode, when we’re selling a business, profit is a great number to base a sale of a business from. Profit is better than a loss, so if we have a failing business, we want to quickly turn it into profit. So manipulating some of these things, where you’re going to get a big change, and one of the real secrets to this is to focus on the smaller numbers first.
The smaller numbers are conversions and frequency. So if I had to rescue a business, these are where I’d be diving into first. Because we could add more leads, yes, we could increase the sales price a little bit, we could even double it. Or we could halve it. Or we could cut costs. But you can only ever cut a hundred percent of the costs. We can have infinite upside.
Let’s have a look at conversions, for example. If we’re converting 1 or 2 percent, which is pretty standard for a website, if we can take that to 2 or 5 percent, then that could actually give us 200 percent or 400 percent or 500 percent increase on our profit. Like 5 times. So in the case we talked about very early, the dealership, if you have a $50 million a year business that losing a million bucks a year, and you change some very small things around conversions, that could end up with a million dollars’ profit in the bank. It’s only a $2 million shift. That is not a lot in percentage terms, but it’s a lot of cash. You don’t need a lot more customers.
Matthew: What are some of the easy wins that you often find when you’re doing this kind of work, like what are mistakes that people make in terms of conversion optimization, and what are things that you look for first when you’re looking at a business that needs to improve their conversions?
James: Yes, so what you do is you list all of these things across the top of a whiteboard: leads, conversions, dollar amount, frequency, margin. And then under them you list the top things you can think of that might impact that. So for conversions, it’s often going to be the sales process.
How the sales process impacts conversions
So if you’re selling high-ticket coaching, the thing that’s going to impact conversions a lot is to build up trust and profit, to do things like podcasts, funnily enough, which also bring in traffic. But they really ramp up conversions, because you’re only dealing with warm or hot leads now. And then it’s the sales script that someone’s going through. It’s that 5- or 6-minute conversation that when you speak to someone and with the right positioning and the right questions, and a good understanding of what selling is, you can increase your conversions.
And my strength in most of my career was based around selling. So having a good understanding of what a sale actually is, and having the right words to use can make a huge difference to conversions. A bad salesperson might sell 1 in 10, a good salesperson might sell 1 in 2, or even more than that in some cases. Most students will get like an 80 percent conversion ratio from a phone or Skype call with a prospect, if they’re doing their conversions well.
Matthew: So when you were training around these dealerships, was it a lot of just training salespeople to use the right language and do the right things to sell a customer, or what were you doing to…?
James: Exactly. in one case, my second last place, I inherited a team of 6 or 7 “salespeople,” and within 6 months I had one of those left and I hired all new ones, and I ended up with a team of 21 salespeople, of which there was one from the original crew. I just start from scratch. But the secret was, I didn’t hire salespeople. I hired service people.
I hired people from hotels, I hired airline pilots. I hired the guy who came to the front door looking for a job, enthusiastic and keen. And what I did was I created the industry standard benchmark of sales recruitment, induction and training. I wrote good sales advertisements to get the right candidates, I had great telephone interview techniques, I had interview checklists, I had final interview checklists, I had induction training that went for 2 weeks covering theory and practical, and I had role play based, I had certified competency based training program that would see someone meet with success far quicker than your average car industry star. Which is usually, “Hi Matthew, there’s your desk, don’t make a d***head out of yourself.” (We just found the grabber for the front part of this episode, by the way.)
So that’s basically what my training was when I started in the car industry. They didn’t even show me where my key was to get the car on the first day to drive home, and when I went for the key board, I got the last key on the board, which was the crappiest car, and it didn’t even have petrol. And it was pitch black, I didn’t know how to turn the lights on, and I had to go to a fuel station on the way home and figure out where the petrol cap was. That was my induction.
I had such an amazing system for people that we churned out all the top salespeople. My salespeople, just like I had before them, were winning the sales competitions. They were dominating. And now, 10, 15 years later, a lot of my sales hires, who were not salespeople when I hired them, are now running the dealership. So this system was strong.
If you want to increase conversions, you create good sales paths and good scripting. And if you want to take it to an online sense, that means your messaging has got to be clear, it means your email communication has to be strategic, Part 1 of this 6-part episode really covered some of the must dos for that part.