Dos and Don’ts for Digital Marketing Performance-Based Business Models
Digital marketing is all about performance, right? But do you know how to set up a performance-based business model that works for you and your clients? In this video, I share the do's and don'ts of performance-based business models so you can start making money today.
As more and more people trend towards performance-based models for their business, especially in digital marketing. I think there's a lot of mistakes people can make and a lot of opportunities that they miss.
So, in today's video, I'm going to talk about the do's and don'ts of how to structure your performance-based business offers.
Greetings everyone Rich Ux here from richandniche.com the number one place to learn digital marketing, the best high tech and scale in the world.
The unlock to life. Now I've been talking a lot about performance-based offers recently because of the trend in our very own market in India. In the last 10 years, there's been a boom of sort of digital marketing agencies.
And I've been a part of that. And what I see is a lot of agencies promising a lot that they can't deliver on because as more and more agencies get into the business or more freelancers come in, people want to have a better offer than the next person.
And so, they promised. And sometimes they even charge less and it really leads to poor results for the clients.
And I think a lot of clients have had bad agencies. I think a lot of clients have not gotten the results they want and look results are guaranteed.
And if your brand isn't up to snuff and if your brand is lacking clear messaging, and if your offer is weak, there's not a lot a marketer can do for you.
It's not always the marketers fall. It certainly isn't the marketers fall. In many cases, I've seen. Dozens of businesses over the years that just have not put in the effort to build brand guidelines. They've not put in the effort to work with copywriters.
How offers will change?
They have offers that aren't grand slam offers that they're commodities essentially. And so, it's hard to market. If you've got a hundred other competitors out there and you haven't done anything to differentiate yourself, so what's going to happen in the marketplace for digital marketers.
You're going to have to make your own great offers into the marketplace. And I think one of the best ways to do that is to tell your clients, listen, I only get paid when you get paid.
I only get paid when you grow. I only get paid when you get sales. When you get leads, when you get. Whatever it is you happen to agree on.
And I think that the performance-based model is just going to start to take hold. And I think that, offering retainers, offering packages that have no guarantee your results are just going to be less popular.
I think they still gonna work. I think you should still have them as an alternative. But I really think that you're going to close way more deals.
If you're capable of, offering a performance-based service, it's a risk-free right. And so, one of the advantages to doing so is you don't have to promise so much, right?
You don't have to say, I'm going to get you 50 new sales calls for $3,000 a month. You can say I'm going to take $300 every time I book a call.
Maybe you get three calls, maybe you get 20 calls. It's up to you to perform and find out what's capable. And I think that this is also going to help you disqualify a lot of businesses that, it's look, I'm probably not going to get results.
And it's going to help you focus on the clients where you do think you can get results where maybe they haven't tried your methodologies yet.
Maybe they. I spent enough time and resources there, and you're going to be able to bring a ton of value to them as a marketer. Maybe they haven't tried cold email outreach.
Maybe they haven't tried Google AdWords. Maybe they've never had a great lead man.
Remember, they, maybe they've never used a really great automated sales process. All of those are areas that you can specialize in and start offering people today as a performance-based digital marketer.
Do's and Don'ts
Now here's some do's and don'ts that you really want to make sure.
That you do. If you're going to do something like this, because if you're going to charge, $3,000 and you're going to try and do some lead generation, or you're going to set up some pages and do some copywriting or whatnot, it's pretty clear they pay you, you do a certain service, but if you're not sure how much you're going to get paid, if you're not sure how the deal is going to work out, you better make sure you structure.
Avoid profit share
So, the first thing I would do is make sure you're on a revenue share deal, not a profit share because profits come after advertising profits come after, paying out the employees, profits come after all the software costs and some businesses, they don't worry about profits. They worried about growth.
And so there may not be any. To share and the business. Isn't sad about that, but you'll be sad about that as a marketer, if you're on profit share.
So don't take. Don't take profit share, take a revenue, share, take money off the top. Take money off the top line revenue that you help generate. All right, so that's the first or don't revenue share, not profit share or equity.
Don't take equity in someone's business. Don't get involved at that level. You might want to get out after three months, you might not want to be tied to this business for years to come.
And so, equity, isn't something you really want either. You don't want any shares. You don't want any options right now, just, I would like to get a portion of the revenues that I help you create.
That brings me into number two, make sure that you can work with someone with a clear benchmark of.
What they currently earn, make sure you can talk to your client about what are they currently making, what are their current activities, what revenue comes from, what channels, if they're not going to be clear with you upfront, then that's not going to be the right client to do a performance-based model with, you don't want them fudging the numbers.
You really need to be able to take a look at like, how much did you make last quarter? How much did you make last month?
What's your average daily rate? What's your average cart value? What's your average customer worth? What you really need to get good at in this sort of a structured model is benchmarking, right?
Because I think what's important is that you are able to assess what you help them grow.
I don't think that a lot of business owners are going to want to share the revenue with you that they're already.
Let's say I'm a business and I'm already making $30,000 a month, about $300,000 a year. And you specialize in sort of one to four person businesses, maybe online experts, coaches, influencers, not a big business yet.
And you help them go from mid six figures to seven figures. And that's really what your niche is going to specialize in.
And the processes that are really good with that. If I'm going to hire a marker and I'm making $30,000 a month and you want 20% of my revenue.
I'm not going to want to give you 20% of the 30,000 that I've already worked for multiple years to generate that I already need that money to run the business as is so 20% of 30,000, what would that be? $6,000. That's not going to happen.
However, if you could take me from a 30,000 to $60,000 a month, I'd absolutely give you $6,000 a month or 20% of the new growth that we received.
So, the do, and don't hear is don't ask for existing revenues, ask for new revenues and be confident that you deserve 15 to 20%.
You can go as low as 10%. I wouldn't go as low, any lower than that because your, the one who's going to be responsible for that new growth, technically speaking, without you, maybe they can't grow without marketing. Maybe they can't grow.
And what are their alternative? They could pay someone $5,000 a month and hope to get results, but you're telling them you don't have to pay unless I get you results.
So, it's very exciting for me as a business owner to say, hey, this person might take us from 30 to 60,000 a month. And if they don't, we didn't lose anything.
But if they do, we'd be happy to pay them their 20% fee. And you have to reconcile the fact that.
They need to take a bit of a risk here in the sense that they're going to have to pay more than they would, if they're there was all the risk on them, since all the risk is on you, the marketer who says I'm not going to take a fee, unless I get you to this point, unless I actually bring you some sales, the risk is on you.
They have to pay more or for that, let's say that the risk was on that. And they were going to pay someone $3,000 a month. Who said, I can take you from 30 to 60 K and I charged 3000 a month. The risk is on the business that you aren't able to do that. And that they have to fire you after six months.
And now, $18,000 is gone. You didn't get to 60,000. And the risk was on the business. So instead of paying 10% with all the risk on them, the business is willing to pay 20% with no risk.
Do you see how that dynamic works? So that's why you should be encouraged to charge a higher percent even in.
That cuts into their profit margin, because there's going to be a lot of value for that company to get to 60K.
There's going to be a lot of other benefits for the business that they didn't have before. Yeah. Maybe they, maybe your 20% fee really cuts into that margin, but they're going to grow their customer.
They're going to have a bigger monthly recurring revenue, potentially. Maybe they can sell the business for more.
There's different reasons why getting to the next level could be valuable to a business owner. And I think that you shouldn't feel bad. It's if they say to you, oh, 20% is a lot, we're not going to have a lot of profit left over.
You can say would you rather just stay at 30 K and have the profits at 30 K and keep your business at this? Maybe we're not the right fit to work together.
Maybe you as a marketer have to get good at articulating. What is the value of taking your business to the next level? That should happen in the discovery call.
Why are we even talking about working with a marketer? Why is it important for you to work with a marketer now?
Why not just wait? Why not just stay where you are, let them articulate the pain that they're having from not growing? Maybe the problem isn't that they need more profits. Maybe they need more revenues so that they can invest in something else.
Maybe they need some more revenues so they can hire a teammate. Maybe they need some more revenue.
Like I said, to sell them. So let them articulate the benefit to taking action now. And not later, whenever we're doing a sales call with someone, we should always push back. We should always a little bit go for the, no, we should challenge them.
It's like, why not go with the alternative? Why work with me? Why not just do it yourself? Why not hire someone?
Why do you need me, let the client articulate that in the sales call and then remember, hey, yes, you're going to pay me 20% of new revenue, but that's going to help you alleviate that pain that you're having?
And hey, if I can. Okay. Maybe you're delayed a few months, but you didn't lose any money. So, I think you can start to see why the performance-based offers or garner be very alluring to business owners.
Attached to revenue
And I think that marketing is one of these unique industries, unique B2B services, where you can get attached to the top line revenue.
Look, if I'm an accountant, even if I'm just a web designer, can I really get attached to the revenue? Probably not.
If I do catering, if I clean the office, right? If these services B2B services, they can't be attached to revenue. Only the marketer can be attached to the revenue. So, I think we need to look at this as an opportunity, not as a pay cut.
A lot of people are like why do I want to potentially work for free? If you're good, you’re never working for free.
So, what should you be doing is you should be mastering a methodology that you know is going to generate sales, buying Facebook ads by LinkedIn ads, creating content and driving organic traffic into a lead funnel, SEO, whatever it is that drives traffic and gets converted?
You're going to need some formula, their email marketing. So many of you could jump into a company right now and say, I know I can take your email marketing from 5% of your revenue to 20% of your revenue.
And if you let me benchmark where you're at right now, I get in there. You see where I can get you.
I'm going to improve your copy, improve your workflows, improve the automation, improved personalization.
Add surveys, add quizzes, add interactivity, whatever it might be at a webinar you're going to generate sales very quickly. And those are going to be new sales against the benchmark. That's going to be your revenue show right then and there.
So that's the other do, and don't is benchmark work with clear companies who give you transparency in the finances and do take a portion of new revenue.
Don't try to take a portion of old revenues. What do you have now? You have a grand slam offer in the making, where people are going to see this as risk-free only upside, and you have the chance to make a lot more money.
Suddenly you're saying to yourself I don't want to work with companies who only make 30,000 a month.
I want to work with companies who make 300,000 a month. Making into the 3.5 million a year. Lots of businesses out there doing that and say, what if I can get 15% of the growth from 300,000 to 500,000?
What's that going to be? I don't know, like 30 K a month for you. And that's what you're working towards.
And if you open yourself up to what a performance-based model might have for you. You could have rapid growth in your career.
You could have rapid growth in your income. You could have a lot of case studies that you won't get, because if you go on a retainer or a package model, you're going to have a harder time closing it in 2020.
You're going to get worst clients. You're going to have less leads in your pipeline because you don't have a super powerful, separated offer.
You have a basic offer. You're going to assume being a commoditized offer. Everyone else is offering something similar and less. People are gonna want to talk to you because they have a lot of other marketers offering the exact same thing.
If you're in the inbox, offering a performance-based model. Risk-free. People are going to want to talk to you.
And so suddenly if more leads suddenly you can qualify harder, disqualify more people work with the absolute best cream of the crop of the leads that come in. That's going to lead you to better case studies.
That's going to lead you to more immediate revenue. So, I'm not saying you have to do this, and I'm not saying it's your only one.
I absolutely think you should have an hourly rate.
I absolutely think you should have some standardized packages that you feel really confident in maybe things that are more related to creative work that, you don't want to feel that's very results oriented that, hey, if I'm going to improve the content on your Instagram, if I'm going to help you create videos, I'm helping you build brand.
And it's very hard for us to measure. But it has value, but if I'm going to do something that's conversion oriented, email sales pages, sales letters copywriting, these things can have immediate impact.
On a business's top-line revenue. You can go after that. So maybe you open up conversations with people with your risk-free performance-based offer.
Say, hey, I'd love to get in and rework your sales page. I'd love to get in and help you create a video sales letter.
I'd love to get into your email marketing and see if I can improve that for you. I also have these content packages.
And I also have a pretty high hourly rate. If you just need me for a small project, $250 an hour, suddenly you don't have to have a low hourly rate because it's the alternative to your other great packages.
It's if you need me short term, I have a very high hourly rate. If you want to partner up with me, it's basically risk-free.
And if you want me to do some brand building content-oriented work for you, that's when we get into the package.
I think this is a great thing to be thinking about. I don't think you have to rework your whole business tomorrow, but if you're struggling to get into the marketplace, what if you've reached out to 50 people this week and said, Hey, I'm willing to do your email marketing at a risk-free basis.
I just need to know what you're currently making an email. I need to see some analytics reports. I need to see some finance reports.
Let's benchmark it for 30 days before I even jump in with you. Give me access to the backend visit view only if that's what you feel comfortable with. Let's get a number that we agree on.
Okay. Last month you made $12,000 from email marketing. Let's see if I can get you to 18 next month, 24, the next month and 36 within four to six.
I'm going to take 20% of that growth. So, if we benchmark 12 and I get you to 36, I get 20% of that for the next year. After a year, you keep everything because you know why the work I do today, it's going to pay off for many months.
The work I do today, it's going to have effects on future traffic. That's something we should have mentioned, do ask for 20% of the next six to 12 months.
It's up to you. Maybe at the beginning, you ask for six, but if you do a powerful job on the email marketing on the sales letter, on the copywriting, how is that not going to be impactful eight to 12 months down the line there's customers who haven't experienced that yet.
And you have to ask yourself. Eight to 12 months from now, would the client want to take my work away? No, they'd still want to benefit from it now.
I don't think you should necessarily get the benefits for forever, but I do think there should be some sort of timeline agreed upon that. Even if I complete the work in three months.
I want 12 months’ worth of revenue share. I want nine months’ worth of revenue share from the day I complete the work. And I think that's absolutely fair.
And I think that you are then rewarded for going fast. You see when people are on packages and retainers, there just simply isn't the motivation to go fast.
It's why wouldn't we want to keep the client on more and more? And so no, one's rewarded for getting the job done real quick. And I think that in a business sense, speed has Val. So drifted a little way of the do's and don'ts there, but got into the deeper aspect of how I foresee performance-based models, taking over the market.
And I intend to use them in every aspect of my business as well.
The REAL benefit
I believe that it is the preferred way and really what it is.
It's not just the service it's that your offer becomes. And therefore, your client acquisition becomes easier because as the market gets more saturated with high quality agencies or even mid quality agencies and marketers, like how do you separate.
And having a great offer that gets people's attention. It lowers your advertising acquisition costs. It improves your cold email outreach, open rates and contact rates. You're going to book more appointments.
People are going to be more open-minded to have to hear what you have to offer. If it's risk-free people want to do business like that, people want to do business that has less.
Nobody wants to feel like, oh, I have to put out, 5K a month for 12 months, 60K. And there's no guarantee that this works. And I think that marketers have relied upon that idea that, hey, there's no guarantee that you get results. It's like how many marketers are hiding behind that? I'm sure I have in my own way, over the years as well.
And I think. If you want to be great in your business. And if you want to get to seven figure mark as a marketer, this is the path to go down. So, I think that was a good little discussion on performance-based models. I hope you guys give it some thoughts, why don't we have a conversation about it in the comments?
Why don't you let me know what you think about it and we'll figure it out? I think that this is something to be talked about many times for the next year and this isn't going to be the only time I talk about.
If you have some specific questions, I could do some follow-up videos and let's get you guys, having these really powerful grand slams winning offers.
All right. Give this video a if it gave you some insights, subscribe, if you want to hear more from me in the future. And like I said, leave me a comment. I will answer it as soon as I can, and maybe even make a video.
Alright guys, Rich Ux signing out. If you want more information about becoming a digital marketer freelancing, and maybe even a consultant, please visit richandniche.com
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