How to add a line of business

A client asked this, and rather than simply fire off an email, I told him I’d write a post.

Why? It’s not too complex, but the usual way is the “Nike school of business: just do it” method, which is a bit of rolling the dice. There’s a better way – the best of which is to have paid orders in hand before you outlay any serious capital or time.

Yes, I’m recommending you sell stuff before you own it.

Reduce your risk by testing the *offer* before you bother with full websites, supply chains, inventory, etc.

I’m a big fan of “Minimum Viable Offer”. Notice this is not even “Minimum Viable Product”.

So, my advice to this client is/was:

First: Setup 2-3 landing pages, as simple as possible and as quick as possible. Don’t buy anything for backend, even if you have to refer the business to a competitor (and get a referral fee, in some industries, if legal i.e. not a RESPA violation in real estate). At this point, you’re just testing the *offer*. Is it compelling? Will people buy it? How many, exactly, i.e. what %?

As entrepreneurs we fall in love with our own ideas. We are biased. This is good, but leads to inaccurate marketing data, and without real marketing numbers, your idea will never scale and turn into a true business. It’ll be a distraction to your core profit center.

Only AFTER you’ve created some real leads, ideally enough so that you have a pretty good idea of your your cost-per-closed-deal, only then would a true world-class entrepreneur scale up, invest the capital, and go all in.

In business there’s only one key number you need to get to as quick as possible: Your cost-per-closed-sale. This might look like:

$1,000 spent on ads, which yield 500 views, and 100 clicks (so you’re in for $10 per click). Of the clicks, only 1/2 were real, serious, legit people who didn’t bounce from the site (50 – so $20 per real human visitor). Of the 50 who actually were live humans on the site, 10% (5 total – so the cost of these is up to $200/ea!) registered / contacted you / became real leads, and from that pool, 1 didn’t qualify, and of the remaining 4, you closed 1/2 – so 2 deals turned into fully closed paid deals.

Your cost-per-closed-deal is $500. If you’re in Los Angeles real estate and your average commission is $17k, then who cares. Bring it. I’ll spend $500 to make $17,000 all day, every day.

But if you sell dog walking packages for $200, none of this makes sense.

Now imagine you fell in love with the idea before you did a marketing test and lost your retirement fund, hiring dog walkers, buying vans, spending $100,000 on marketing only to discover your cost-per-closed-deal was unacceptably high.

You didn’t. Because you’re smart, and work with Swift Marketing.

Note the above test can usually be done for about $100-$200, not $1k, so don’t get too stressed out, though you do need the offer page and basic lead-gen mechanics so you’re in for a few hour of time or few bucks to pay us or your crew.

Exceptions:

  • If selling this new service helps by “fishing upstream”, and it’s a lead-generator for your primary business, by all means do it. The risk is low, and payoff is high. Worst case you’ll create some new leads for your core business.
  • If selling this product/service helps users get more from your core – such as us. We sell software, but also sell agency services, and usually these overlap, and the installation / setup / consulting / agency work we do ensures the software gets set up correctly, is then valuable, and thus working, and then the client’s happy and keeps paying for the software.

Examples of Fishing Upstream:

  • Credit repair for mortgage lenders, car dealers. (The only reason someone cares about good credit is so they can borrow money)
  • A house painting company for real estate agents. Sure, people paint their houses with no intention of moving, but I’d guess the two are correlated someone and a decent percentage of people who spent the money to paint the exterior of a house are either planning to move, or just bought the house, in which case you lost the deal but are prepped for the next one. The smart sellers paint before selling. Alternate: JV with a lawn care / landscaping company and/or painting company for leads.

Goal: Get people at the earliest points of that decision before they have settled on a provider.

SEO Pro Tip: All SEO is one of…

  1. Problem aware: How to cure Acne // searching for the problem keywords
  2. Solution aware: Acne Cream Brands // honing in… here’s where brand choice gets decided!
  3. Brand aware: ProActiv+® prices // person is at a buying decision.. here’s where actual provider is chosen and credit card comes out…

Fishing Upstream Case study:

We had a client in load modification, debt settlement, and credit repair. They ran 250 signs for loan mod, and 250 for credit repair.

  • The 250 loan mod signs created 3 leads
  • The 250 credit repair signs created 17 leads, of which 11 turned into loan mods, and all 17 turned into credit repair deals.

Fishing upstream netted them more fish. The credit repair business was added to their core, and turned into a bigger profit center than their core, and tripled revenue overall.

Conclusions:

  • Keep your risk low, investment low until you know your numbers
  • Add lines of business that help your core business. Anything else is a distraction or hobby.