- Hey there.
I'm Dan Martell, serial entrepreneur investor
and creator of SaaS Academy.
In this episode, I'm gonna share with you
the exact process to create a setup fee
or sometimes called an implementation fee
for your SaaS product.
So you can get paid by your customer to help them activate
and deploy your solution.
Be sure to stay to the end because I'm gonna tell you
how to download and get access to an exclusive resource,
is called The Setup Fee Designer,
which goes through all the characteristics, how to name it,
the different strategies for doing that.
It's super easy and I'll tell you more about that in a bit,
let's get into it.
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So if you have a software product
and you're selling for anything north of $97 a month,
kind of reoccurring revenue, then you have an opportunity
and maybe even on the low end, okay,
I've just never done it, to charge your customer
an upfront implementation fee.
That's what it's usually called or maybe a setup fee.
Essentially, it's some dollar amount that you can,
you know, convince your customers to pay
to help them deploy your solution,
which I know in this world,
a lot of you guys have these beliefs that like,
"but why would they pay for that?
"Shouldn't the product be simple?
"Doesn't that tell them that maybe it's complicated
"and they're not gonna get the results they're expecting?
"or maybe they should keep looking for somebody else."
But here's what I've discovered,
and you know, I've been doing this now for over 20 years.
Back in the day when I was helping my brother
buy an email marketing platform, I call it Confusionsoft
but it's Infusionsoft, they were charging $2,000
to just essentially get access to it.
You know, he did a sales call and then he called me
and he's like, "they wanna charge me $2,000
"to buy the software.
"Like they want to charge me to pay for the software."
And the reason why is because they knew
that the onboarding experience
was gonna take some configuration.
And it was really neat the way they set it up,
because they essentially had a partner network
of consultants that were like certified Infusionsoft experts
that would do the setup for free
with the possibility of selling their services
after the fact
and that's why they got customers to make that investment
and I love that strategy.
It's something that I've implemented
in most of my SaaS companies,
I've helped hundreds of my coaching clients
implement it into their business
and the reason why it's so powerful
is it literally can fund your growth if you set it up right.
I know that I have one of the companies in my portfolio,
we charge, I think it's $1,000 setup fee
and the sales rep gets 70% of that.
So that means that I don't have to pay sales commission,
they get it from the setup fee.
I still have $300 out of that set up fee
to go acquire the lead in the opportunity,
which we're able to do it for less than that,
so that way I have a positive sales cycle and flywheel going
because the setup fee pays for the sales reps activity,
it pays for the marketing teams acquisition,
and then everything else from a reoccurring revenue
hits the bottom line and it is so powerful, okay.
It could be a game changer for your business,
but if you do it wrong, then you're gonna stop...
You're not gonna get the sale.
If you set the wrong setup fee,
you're not gonna get the sale.
So I wanna walk you through five different strategies
to do it right so that you get customers buying every time
and the best part is they'll be excited to buy it from you
because you're gonna help them be more successful
and solve their biggest problems.
Let's get into it.
Number one is to name it.
You got to give it a cool name.
Don't just think, "I'm gonna call it a setup fee."
Clients don't wanna pay for a setup fee,
they wanna know that this thing is solving the problem,
right?
So with HubSpot for example, if you've ever bought HubSpot,
they call it a coaching fee, right?
They want to sell you coaching
to ensure you deploy their technology, their product.
And the reason why is 'cause most people buying
complicated configuration based solutions like a CRM,
financial applications, ERP Solutions, you name it,
their biggest fear is not,
does your product do what you say it's gonna do,
it's them not getting it deployed
and then their boss getting mad at them
because they didn't get success.
So you need to give it a name
that solves the biggest concern they have.
So you can call it...
You can call it an implementation fee,
you can call it a coaching fee,
you could call it an activation fee,
you could call it a data migration fee, whatever it is,
give the name to make it seem part of the process
for the customers to get the value.
Number two, price the value.
So oftentimes my clients specifically,
they don't understand the value they're creating,
not the cost.
Some of them are like,
"well, I know I can pay a team of people,
"you know, $100 to migrate our client's data, right?"
But that's not the value.
It's not what you can pay
'cause you've gone through the work to build a team
and maybe a more advantageous part of the world,
it's what's the value to the customer
and how do you present that value to a customer
'cause they can do it themselves, or you can charge for it,
a migration fee to get everything moved over
and the beauty of it is you gonna get it done way faster.
So you got to price the value you're creating,
not your cause.
It's not a cause plus scenario, it's what kind of value...
And the more people pay,
the more that they're gonna pay attention.
So sometimes you wanna test out 2,000 not just 1,000.
You might test out 1,500, you might even try 5,000,
but getting especially if your customers are bigger
because they won't even blink at that, right?
And then you get them committed to the solution,
then you could even charge them
my favourite thing is annual contracts,
side tangent, gonna leave that one there,
but it gives you the opportunity to really get commitment
from the customer because your pricing the value
not your cost.
So be sure like if you have...
Sometimes it requires custom development
and some people just like charge the engineering time
that you're paying your consultants or your developers,
that's not the way to do it.
Most people if they hire, you know, a developer,
they don't even know if they're good.
You've got people that know your stack, know your APIs,
know your frameworks,
understand the customer segments you serve
and can deploy this with a guarantee,
then 250 an hour for custom stuff is probably a better bet,
at least 150 an hour.
But you don't wanna charge 35
'cause that's what you pay your engineers.
So the price to value is a key point.
Number three is the offer map.
So the way I think about it is you wanna go from like,
where are they at your customers today?
Where do you want them to get, okay.
Ideally first value,
you wanna get them to some kind of core value
and then what you do is you map out all the steps
that would require them to do that.
You know, I have a friend, Nathan Barry,
who's got ConvertKit, which is an email marketing platform,
and one of the things they did in the early days
is they would migrate their customers
over to their platform.
Why?
Well, if I've connected all these forms on my website
and my marketing funnels to an existing product
and you're asking me...
Like I believe that you have a better solution,
but I know the effort involved to migrating
is all this extra stuff, I mean, that's a big ask,
so you wanna start thinking about like,
"okay, can I charge..."
You know, let's do a package which is the data migration
and then the configuration customization.
Maybe you offer...
You have designers on staff that understand
your templating language and you could provide an offer
that gets them to copy their brands
and customise all their templates.
Maybe there's some training or best practises you can offer
to make sure that their team gets trained.
See, that's another thing
is if it's a product that's gonna be deployed
to a department and you have the opportunity to sell them
on some training, then why wouldn't you?
Because at the end of the day, SaaS shouldn't stand for,
you know, software as a service,
it should stand for success as a service
and you want to design an offer that gets them
to guaranteed success.
Number four is trade urgency.
The biggest thing that I've discovered
that gets people excited about investing in,
see the word I use investing in, your implementation fee,
your setup fee, whatever you wanna call it, is the idea
that they're gonna be able to get an outcome faster.
So you wanna trade urgency, okay?
And maybe you actually have like limited supply
of how many clients you can help
and that's a thing that your enrollment specialists
or your salespeople or whatever you call them,
product specialists can communicate and say,
"hey, you know over the next quarter,
"we only have two more slots to get people
"into our data migration, you know, process.
"So if you wanna do that,
"you know, this is what it's gonna look like."
So you trade urgency to get your solution deployed faster,
because if they're bought into the outcome,
they're bought into the solution,
then you wanna make sure you can push that along,
trade urgency.
Number five is test it, okay.
Some of you guys are listening to this going like,
"there's no way my clients would pay that, there's no way.
"What if our conversions go from 30% down to 2%?
"I can't afford to do that."
Test it, literally create an offer.
Have one of your sales rep watch this and listen to this
and design an offer and price it.
Start on the bottom if you want
and test it with the next five calls.
Not all your calls, maybe a small percent,
maybe 5%, 10% of your calls
to see if they can get people to enrol.
And the reality of it is,
is maybe, you know, we're used to get 10 enrollments,
you only get nine or eight,
but the ROI of that implementation fee, that setup fee,
is going to fund the commissions,
it's gonna fund your growth and it's gonna allow you,
if you're bootstrapped to keep being bootstrapped
a lot longer, if you're funded to show better unit economics
for your investors and to build a better business.
So test it, try it out and just say when you're on the call,
it's like, "hey, the investment is $2,000
"for our coaching fee and then, you know, 350 a month
"for the first 12 months."
And like just say it natural.
"Why do you guys charge a coaching fee?"
Here's my favourite answer.
"I don't know, it's always been that way."
That's the best answer to give to somebody
that asks you if you're dealing with that objection,
but just go out and test it.
So quick recap,
the five characteristics of an implementation fee,
we got to do was we got to name it.
Number two, we got a price to value.
Number three, we got to create an offer map.
Number four, we wanna trade urgency, essentially speed.
And number five, we wanna test it, get it out there today.
You can literally get this deployed today.
As I mentioned at the beginning of this episode,
I wanna share with you an exclusive resource,
it's my setup fee designer.
It's the specific framework that I use
with my coaching clients to outline
not only the creative names that I've given,
there's a bunch of examples,
all the different types of services that you can offer
as part of the fee
and then also how to go out there and test it,
identify a sales rep and make it real.
Don't sit on it, click the link below,
download my setup fee designer templates
so you can get things going today.
Click the link below, it's your copy as a gift to you
and as per usual, I wanna encourage you
if you liked this video please click the subscribe button,
click the like button and leave a comment.
Let me know what was the number one takeaway
that you got from this video?
And I wanna challenge you always to build a bigger life
and build a bigger business, both of those in tandem.
I'll see you next Monday.
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