I’ve decided I should actually put some work into paid ads and trying to acquire clients that way.
In talks with a business owner whose business I wanted to acquire, I learned that he had been using paid ads on an obscure directory site and was paying $60/lead.
He was then profiting like $80/month on each of the clients he got.
Even if only 10% of those leads signed-on, this would still be a great deal. Considering the going rate for a business like this is 1x annual recurring revenue.
So in his case, each client should be worth around $1200 to him.
And I need to start looking at it that way.
Obviously these aren’t as good as acquiring a company, because every client will require onboarding, and there will be lots of sales work I’ll have to do. So I can’t pay that much.
But if I’m trying to sign them up for services which will yield $80/profit per month, I’d argue I should be willing to pay at least… $800 per new client. That’s still far less than I was willing to pay for his company.
That’s a lot of money to be able to throw around. And they’ll still pay themselves off quickly.
If I could pay $800/lead and get… Say 5 new clients each month, I’d obviously be spending a lot on it but I’d be adding $400/month of extra profit, every single month in the future. And I’d be adding to this number each month.
After just one year, I’d have another $4800 of profit coming in each month, or $57,600/year. That sounds pretty good to me.
Granted, I will have spent $48,000 that year in advertising, but it would be worth it. Because these clients would keep paying for years.
It’s also worth noting that I would literally be cash-flow positive even in year one. It would be a lot of work taking everyone on, but absolutely worth it.
With this in mind, I need to get aggressive and try a ton of things. I need to try ads in various directories, Google, Google Maps, and wherever else I can find.
I will have to do research to figure out what keywords to use. I’ll need to track things so I can figure out which keywords are the most successful and which ones are a waste.
Regardless: I just need to do it all. The specifics remain to be seen. But I need to put some serious money into this because it will still be profitable.
One advantage I have over most is that my overhead is basically zero, so I don’t need to be as profitable as the bigger shops. I can afford to spend a lot more on each lead because my margins are still high. Once you have a large staff, an office, and a bunch of other pricey things, it gets difficult to maintain.
I’m feeling excited, though, because I’ve never really taken paid ads seriously and I’m only just now realizing how incredibly helpful they could be.
I’m hoping to kick this off within the next few weeks and I’ll report back with results.