- In this video, I'm gonna show you the simple math
behind how to generate a million dollars a year
in your business.
So whether your goal is to generate $1 million a year
or $10 million a year,
or even your first $100,000 a year,
this video is gonna break down the simple math
and system I use behind every single successful business
that I'm involved with, to quickly scale them up
and create profit-producing money-making machines.
Alright, let's get to it.
(upbeat music)
Hey there, my name is Adam Erhart, Marketing strategist
and welcome to the channel.
The number one place for entrepreneurs
to learn proven marketing strategies
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Alright, so let's dive in,
starting with probably the most important
and the most basic fundamental
to creating a million-dollar business
or a million-dollar-a-year generating
sort of revenue stream.
And that really comes down
to choosing the right business model
and making sure you
have the right million-dollar offer behind you.
You see one of the biggest misconceptions
that's involved with marketing and with business,
is that it's a million times harder
to sell something for a million dollars
than it is to sell something for $1.
When in reality, you're going to need to put in,
well maybe not the same amount of effort,
but still a considerable amount of effort,
whether you're selling something for $1 for $10 for $1,000.
Essentially, the amount of work
is going to be relatively similar,
it's just gonna look slightly different depending it is
on what you're selling.
I remember back when I used to be a business jet captain
and I was frequently involved in the sale and acquisition
of new business jets.
These things would frequently sell
for 30 million or $60 million.
And I remember clients showing up,
almost with cash in hand, ready to buy.
My job as the pilot was pretty simple.
I would just walk them through the plane,
explain a few things
and then really, they pretty much were ready to buy.
Contrast this with my early experience in sales,
when I used to work at a sportings goods store
and sold running shoes and things like that.
And I remember spending hours and hours with customers,
trying to find the perfect shoe for them
just to make $100 sale.
The point here is that in order to set yourself up
for success right from the start,
well, you really have to understand and appreciate,
kind of the differences in business models
and the differences in offers and pricing,
and all of the things available to you that you could sell,
so you make sure that you choose the right one for you.
Again, selling that business jet,
really wasn't that much harder
than selling the running shoes,
it's also a whole lot more fun.
So with that said, let's hop over to the whiteboard
and I'm gonna break down the structure of
kind of different offers that you can sell
in different price points,
in order to help you get to that coveted million dollars.
So let's head there now.
Alright, so here we are at the whiteboard
with a bunch of different offers, kinda laid out,
but all showing you the same thing,
which is how to get to that $1 million mark a year
in your business.
So obviously at the very top of the spectrum,
we've got $1 million,
which is selling one thing for a million dollars.
Now, this happens all the time when we're talking
about things like business jets and expensive boats
and things like that, kind of those things that we associate
with luxury and the super rich.
But the reality is,
is that lots of other stuff goes for a million dollars.
I mean, even houses around Vancouver and Los Angeles
and Toronto and New York,
these frequently go for $1 million.
So just to give some perspective,
that's one way to hit a million dollars.
Other option you have
is you can sell 10 things for $100,000.
Again,
let's think about something like maybe expensive cars,
or maybe less expensive houses, or anything like that.
But again, it's not gonna be that much harder
to sell 10 things at 100,000
than some of the areas down here.
So moving right along, you could sell 100 things at $10,000.
Think about high-end watches
or think about high-end consulting
or business-to-business packages, things like that.
Moving right along, we've got 1,000 things at $1,000.
This is really common in the online course space
or some basic digital marketing packages
or basic consulting or coaching packages.
So any of those could be sold.
And then lastly, you could sell 100,000 items at $100.
And I'm going to advise that this is much more challenging
because in order to sell 100,000 of anything,
you're really gonna need to make sure
that all of your marketing is completely dialed in.
Your funnel's on point, your ad's on point,
basically everything is working for you.
Which is why if you can,
try to graduate a little higher up the spectrum,
it'll just make things easier moving forward.
Okay, so now that you've seen all
of the different options available
and what you can charge and kind of different combinations,
and basically the math
behind how to generate that million dollars,
well, the next part is choosing the right one for you.
Now, obviously, just through this video,
I can't decide on the perfect program for you.
It could be one-on-one consulting,
it could be a group coaching program,
it could be an online course, whatever it is.
Let's say for simplicity sake that we decided
to go for a three-month group coaching program
for $10,000, just for nice easy math.
So once we have that, well the next step
is to reverse-engineer it all the way down
to the very first dollar,
so we can figure out how we're going to hit these numbers.
Essentially what this means,
is building out a marketing funnel.
What a marketing funnel is,
if you've not heard of one before,
is really just the process or the customer journey
or the steps that a customer has to go through,
all the way from having no idea who you are,
to learning about you, to knowing, liking and trusting you,
ultimately to purchasing
and becoming that lifelong and loyal customer.
Now when it comes to marketing funnels,
there's a pretty much infinite amount of funnels available
and an infinite amount of different combinations,
including content funnels and video funnels
and basic sales funnels
and funnels with upsells and downsells
and all sorts of stuff.
So it can get a little complicated a little quickly.
However, to generate a million dollars a year,
you can actually do this with a really simple funnel.
So for simplicity's sake,
let's keep ours to just three steps.
We'll say an ad on the very front-end,
we'll send them to a landing page or an opt-in page,
where you can collect their name and email,
give them something of value,
and then we'll lead them to a sales call,
which is ultimately where you're going
to make the final conversion piece.
And you can sell them
into that three-month group coaching program for $10,000.
Now at this stage, I could walk you through all the numbers
and just try to describe them,
but I think it's gonna be a lot easier
if we head back over to the whiteboard,
and I map out the math behind it,
so you can see how this all works
and how it might apply to your business and your offer.
So let's head back.
Alright, so here we are back at the whiteboard.
And what you can see on the board right now,
well, it might look a little bit confusing,
all sorts of different numbers,
all sorts of different metrics.
So let me break those down for you to make it crystal clear.
Now the examples that are on the board right now,
well they're just that, they're examples.
So when you go through this in your business,
and I highly suggest that you do map out a customer journey,
you do map out a funnel,
obviously, the numbers are going to change.
But with all that said, let's take a look.
So the first thing that you're gonna realize
are the three steps of the funnel
that we talked about just a second ago.
We've got the ad, we're sending to a landing page.
And then from the landing page,
we're directing them to a sales call.
That final piece over here,
that's when they actually become customers.
And we put that on the board
just so that we can sort of attribute the amount
or the dollar amount, the cost that we had to spend
in order to acquire that customer.
So for simplicity's sake,
let's say that we're gonna run an ad
and we're gonna get 500 clicks on the ad.
Well, once we've got 500 clicks,
we have to take a look at the conversion rate.
And the conversion rate is what the number of clicks,
how many of those turned into actual leads.
'Cause the reality is,
it's not everybody who clicks on your ad,
or watches your video or goes through your webinar,
or has a conversation or anything like that,
well not 100% of them convert.
Which is why a funnel typically looks like a funnel,
starts big at the top and it gets more narrow at the bottom.
So if we've got 500 people,
and we'll assume a 25% conversion rate,
which is pretty decent, pretty standard
for a traditional landing page,
where we're gonna offer something of value
in exchange for the customer's name and email.
Well, with that said, that's gonna give us 125 leads.
So now we're at this stage,
on our landing page with 125 leads.
Next, on that landing page,
we're gonna offer the next step in the funnel,
which is going to be to a sales call.
Now from there,
let's assume only 5% of people take us up on the sales call,
which works out to 6.25 sales calls,
so let's just say six for easy math.
So this is going to leave us with six sales calls.
And from there, this is when you have the opportunity
to pitch your service,
to engage and interact and provide value,
essentially do your sales call.
Obviously, not everybody on the sales call
is going to convert.
So let's assume that we've got a 20% conversion rate
from sales call into actual customer.
Well, this is gonna leave us with 1.25 customers.
Again, for easy math, let's say just one customer.
So that's all great.
That's all nice and simple,
and really just a basic funnel broken down with the math.
Now I appreciate,
if this is the first time you're ever running
an exercise like this,
you may need to rewatch this part of the video a few times
to really let it sink in.
But this is pretty much the exact same process I use
with every business that I have
and with every single one of my clients
and my students' businesses.
We map it out, we break it down piece by piece,
figuring out the total number of people we're going to need,
the total number of conversions we're going to need,
and then ultimately, the cost associated with each step,
which is really where the money is made.
So let's take a look at that now.
So taking a look at the costs on the bottom,
you can see that we're gonna average roughly,
let's say $3 cost per click, which is CPC, cost per click.
So if we spend $3 cost per click, and 500 clicks,
well, obviously, we're gonna be spending $1,500
on the front-end.
So 1,500 dollars in ads gets us 500 clicks.
With this conversion rate of 25%,
that's going to get us 125 leads
and those leads are going to be $12 per lead.
Now of these leads,
5% of them are gonna turn into sales calls.
You can see we're now spending $240 a sales call.
This is gonna start to look a little bit expensive,
thinking wow, I'm gonna spend $240 just for a sales call,
but if we do the math, you'll see that this funnel,
at least the way that it's presented here,
is actually incredibly profitable and incredibly lucrative.
So from that, are $240 sales calls.
We've got six of them.
One of them converts into customer,
so a 20% conversion rate on the sales call.
And you can see that we're now acquiring one customer
from our $1,500 ad spend, which means,
our cost of acquisition for a customer,
or customer acquisition cost or CAC is $1,500.
Now why is that exciting?
Well, essentially what this means
is that the way that this funnel is optimized,
means we're able to put in $1,500
and we're able to acquire a $10,000 customer back out.
And after all, before we hopped over here,
we discussed that the example offer we're going for here
is a $10,000 three-month group-coaching program.
So, knowing that we're going
to make $10,000 for every $1,500 we put in,
how often are you going to do this?
I'd like to think as much as you possibly can, right?
Alright, let's head back to the computer.
Pretty exciting, hey.
I mean, after all, if you're able to spend $1,500
and you're able to acquire a $10,000 customer,
you pretty much have an automated money-making machine.
And then all you have to do is,
well take a look back and figure out,
well how many of these $10,000 packages
are you gonna need to sell to hit your million dollars
or to your $10 million, or even your first $100,000.
And the math gets pretty simple.
Now obviously, there's nuances here,
the devils in the details
and you're going to need a really good offer,
you're gonna need good targeting,
you're gonna need good marketing and ads and funnels
and all of that stuff.
But assuming that you can work on those pieces,
and again, totally doable,
especially if you watch some of the other videos I have
on the channel on these exact same topics.
Well, you'll realize really quickly
that hitting that seven-figure mark is totally attainable.
Now with all that said,
there are a couple things that you do need to be aware of
to make sure that you're on the right path.
Specifically two different metrics known as CAC and CLV.
So we'll cover those in just a second.
But the reality is,
is that the funnel that was just presented there,
well, not all funnels are created equal.
That one happened to work out great,
but not all of them are going to,
which is why you really need to be aware
of these two metrics, CAC, CLV,
which stands for customer acquisition cost
and customer lifetime value.
So let's talk about why those are so important.
First, let's talk about CLV, customer lifetime value,
also known as LCV, lifetime customer value,
or LTV, lifetime value.
Basically, they all mean the same thing,
which is how much is a customer worth to your business
over their entire lifetime.
Now the reason this metric
is so incredibly important to know
is because it's going to dictate
how much money you can spend on the front-end
in order to acquire a customer.
For example, if a customer
is only worth $1,000 to your business,
well then this funnel wouldn't work at all,
because we had to spend $1,500 or 1,500
in order to acquire $1,000 customer.
Meaning, if you start acquiring customers,
you're gonna be losing $500 with every customer you get,
which is obviously an absolutely terrible funnel.
But again,
it explains the importance of really being strategic
and mapping out each stage of your funnel,
just to make sure that doesn't happen.
The next metric that you need to know
is CAC, customer acquisition cost.
Again what this number is,
is how much do you have to spend
in order to acquire a new customer.
Now, through the funnel that we just looked at,
the CAC was $1,500.
That's how much we spent on the front-end,
and we were able to generate one customer.
Again, not all funnels, not all channels are created equal.
Some of them are gonna do better for your business.
Maybe your business is gonna be better suited
for YouTube organic strategy, or maybe a podcast strategy,
or maybe Facebook ads, or maybe organic Instagram.
Again, there's a ton of variables
and I've got a lot of videos on the channel again,
that will walk you through
how to pick the right one for you,
but you need to understand and appreciate
that not all channels are gonna deliver the same results
for your business.
Anyway, where this gets really exciting,
and where it gets really valuable for you
is something I call the magic metric,
which again is really simple math like all of this stuff is.
And that's simply when your customer lifetime value
is worth more than your cost to acquire a customer.
Essentially, this is when you have
that money-making magic machine where you put in $1
and you get $2 out.
You put in $1 and you get five or 10,
sometimes even 20 back out.
And that is how you grow consistently
and scalably and profitably,
to that seven figure, multi-seven figure,
eight figure and beyond level.
So now that you know the system and the math behind
how to create and generate a million dollars a year
in your business,
the next thing is really dialing in and crafting your offer,
as well as some other important marketing principles.
Which is why the next thing you're gonna wanna do
is check out the video I have linked up right here.
So make sure to check that out now
and I'll see you in the next episode.
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