What if you could know that for every $1500 invested in online ads, you’re pulling $10,000 back? But, a lot of investors don’t take the time to calculate and understand what it takes to get a positive ROI. So, they quit too soon. Let’s fix that.
Before we dive in, as you listen to this Strategy Sketch, you’ll need to use The Carrot ROI Calculator tool to help pencil in your own marketing budget.
I’ve got a quick story for you, but before I start if this is your very first strategy sketch with Carrot we have a lot of other ones on our YouTube channel. Check them out after you watch this one.
The story is of 2 different real estate investors…
One real estate investor’s had an amazing return on their marketing.
The other one struggled and lost all their money and ended up giving up.
I want to make sure that you identify where in this story you fit. Which one of these are you resonating with? Which one of these are you living right now?
The First Investor…
The first investor had a marketing budget and he knew his numbers really well. I’m going to be walking through exactly what the first investor did to make sure he got a great ROI on his marketing.
The Second Investor…
The second real estate investor also had a budget. He dove in, he started spending money, he started investing money, but he did not do these 4 steps I’m going to walk you through.
They both had the same amount of money to start, they both had the same amount of experience. One of them lost his butt on all of his marketing, the other ended up making tens of thousands of dollars.
Now, this is not a false story. I was on one of our Coaching Calls recently here at Carrot and these 2 investors were on the exact same call. One of them ended up blowing $1500 on pay-per-click marketing. The other one ended up making almost $9,000 in the first deal because he followed these 4 steps.
If you want to know the difference between really active and really profitable investors, these 4 things are going to be that.
Let’s go ahead and dive in.
Step 1: Your “APD” – What Is Your Average Profit Per Deal?
The first thing, how you get a great return on investment from your paid marketing? That’s what we’re talking about here is your paid marketing. A lot of this will translate over into the stuff where you’re just working kind of sweat equity for your marketing.
Could be you doing your own SEO, could be you out there doing your own door knocking or whatever the heck it is, but we’re talking about marketing that you actually take your money and invest it into the marketing. It could be direct mail, pay-per-click, SEO, you name it.
The first thing here is you’ve got to know your numbers, and I think a lot of people think that they know their numbers. They think, “I make about x amount per deal, I’ve got this much in my budget, and I’m just going to roll with that and we’ll see what happens.”
You probably don’t know your numbers as well as you should but I’m going to walk you through in this video how you should know your numbers in a quick 30-second work your way backward formula.
The numbers that you really need to know about your marketing: You need to know how much money you’re going to be making on each sale.
If you’re a real estate agent, you need to know what your average profit per listing is. If you’re a real estate investor, you need to know what your average profit per deal is.
If you’re not investing yet, go out there and investigate the market, talk to other investors in your market, and find out what their average profit per deal is. Write that down right now.
That’s going to be a key number for you.
Step 2: Your “LPD” and Website Conversion Rate – How Many Leads Before You Close A Deal On Average?
The next thing that you’re going to need to know is what your conversion rate is. You’re going to need to know basically how many leads it takes to turn into a deal for you. You’re going to need to know all those types of things. We’re going to walk you through them here in a second.
If you don’t know how many leads it takes for you to turn it into a deal, it’s going to be really hard to know your numbers and know how much you need to invest in your market.
We’re going to work backward on some numbers and we’re going to help you identify your exact marketing budget so you know exactly what you need to invest with no guessing, take all the emotion out of it so you can just really focus on doing what you need to do. Invest in your marketing very intentionally and not stopping before you need to.
Step 3: Don’t Stop Too Soon
Third is exactly what I’ve led into. Don’t stop too soon. This is one of the biggest mistakes we see, not just for real estate investors or agents, in business in general. Too many of us stop way before we actually should stop. We invest a little bit of money in this marketing type and it doesn’t pan out right away and we go, “Oh my gosh, that must not work.”
We throw up our arms and then we start something else and then we do that for a little bit. Then that doesn’t work like we thought it was. We throw up our arms and we move to something else again, and if you’re in that pattern right now.
If you’re in the pattern of going and investing a little bit, dabbling, pulling back because you didn’t get the results you wanted, then you shift focus and you do the same thing, you’re probably going to be in that pattern forever until you change your thought process.
If you’re in that pattern you’re going to be looking back in a year or two years or three years or even a month and going, “Oh my gosh, I ended up investing a lot of money, I lost a lot of money, I didn’t grow the business that I wanted to, I don’t have the freedom that I wanted, that I thought that I would have in my business,” and you’re going to blame it on everything but your marketing mindset.
Having the right marketing mindset can save you from that.
Step 4: Trust Your Numbers
The fourth thing is you got to trust your numbers. You cannot go off of emotion in marketing. Marketing is an emotionless entity. You get emotion completely out of marketing unless you’re making your marketing materials. That’s a whole different video, a whole different strategy sketch where and how you use emotion in your marketing materials to really connect with your prospects. You can use emotion there. We don’t want to use emotion in how you analyze whether your marketing’s working or not.
I read this book called Acres of Diamonds and this book basically is a very similar tale to the guys back in the gold rush in California, where there were many stories of these gold miners who would go in and they’d invest a ton of money in buying the equipment and people and digging and digging, and they get a little bit of gold but they did not hit the thread of gold that they thought they were going to hit.
There was this one particular story, I don’t remember the gentleman’s name, but basically this guy built this big gold mine and he dug and dug and one day ran out of money and said, “You know what? I’m just going to quit because this must not be the spot.”
What ended up happening was he ended up moving away, another miner came in and said, “You know what, this looks like it has promise. Let me dig a little bit further.” Within weeks this guy hit this massive payload of gold, 2-3 feet below where the other miner stopped, and the moral to the story there is you need to follow your numbers, not the emotion.
If that first miner knew that gold was in there, he needed to make sure he knew how much budget he had, make sure he knew exactly what the ROI could be on the other end, and not stop until he hit those metrics.
It ended up costing him millions and millions of dollars.
How To Map Out Your Numbers
What we’re going to do is we’re going to walk through a real example here, we’re going to map out your numbers, and we’re going to take it so your marketing turns from the red negative to the green positive. This point right here, this is what we call the inflection point in your marketing.
Almost every time, you’re always going to have this ramp-up period. You’re going to have a period where it’s not giving you much of an ROI. With pay-per-click marketing, it’s going to take some time to get that optimized so your ROI, your return on investment, is where you want it to be.
With search engine optimization, you’re going to be investing a lot of time and money if you’re hiring someone else to do it for 3, 4, 5, 6, 7, 8 months before you hit the inflection point and your rankings go up in Google and you start to get those leads and deals.
We have to be long term focused. We cannot be short-term focused on our marketing, and we need to really be shooting for that inflection point, your break-even point, then from there, your profits start to really skyrocket.
What we’re going to do is we’re going to work some numbers here. We’re going to work backward. And, we’re going to make sure you don’t stop too soon because now you’re going to know your numbers. That will help you so you trust your numbers and get emotion out of it.
Working The Numbers…
Let’s start. If you’re a real estate investor let’s just work with wholesalers. What is your average profit per deal? Let’s assume that your average profit per deal is $10,000 in your market. So, we know that if you do a deal, you make $10,000. Now let’s work backward. How many leads does it usually take for you to close that one deal?
The average for Carrot members, for online leads that are generated through our platform, is about 10-15 leads per deal right now.
If you’re doing direct mail it’s about 20-40 leads per deal. If you’re doing pay-per-click it’s probably 15-30 leads per deal. We’re just going to run with 15 leads per deal for this example.
Working backward, we know that we need to get 15 leads so we can get $10,000.
If you’re doing pay-per-click marketing and you already have a campaign going and optimized, how much is it costing you to get a visitor to your website and how is your website converting?
If you’re in a really hot market like a south Florida or LA or Portland, Oregon, websites, in general, are going to be converting lower than websites in a moderate market. If you’re in Birmingham or Louisville or something like that, your website for motivated sellers is going to convert higher than a hot market.
So, don’t look at your friend in Kansas if you’re in LA and go, “Oh my gosh, my buddy’s getting a 10% conversion rate on his seller site, I’m only getting 3. What’s going on?” It’s probably your market, not your website if your website is set up the way that we teach.
Now let’s work with a conversion rate. We’re going to do a 10% conversion rate. It takes 15 leads to close a deal, and then you’ve got your $10,000 profit. To get 15 leads, we’re going to need to get 150 visitors to our website. Your only goal now is how do I get 150 qualified people to my website? 150 people equal $10,000 to me.
Let’s say you’re doing Google pay-per-click or something like that and you’re getting 150 visitors, costing you $2 a click. On average that’s going to be $300. Once again in this hypothetical situation, you need to having a marketing budget of at minimum $300. If you’re in a market where it’s going to be a lot more than $2 a click, say it’s $10-15 a click like a lot of markets are, you need to start adding those numbers up.
Let’s say it’s $10 a click. Now that’s a $1,500 budget. $1,500 in order to get 15 leads, in order to get your $10,000 profit. Now the numbers are really starting to make sense, so those of you who are giving up after you put in $500 in your pay-per-click marketing, you need to be stretching all the way to your max budget. Give yourself a chance to let your numbers work for you.
I think everyone watching this video will easily trade $1,500 for $10,000. If you won’t … please examine yourself because you need to be working the numbers like this.
You cannot be going, “Okay, I want to invest $300 to get $20,000.” You need to be really thinking about those numbers in a big way because if you’re not, your competition is. If you’re in a market where you’re only willing to invest $400 to get a $10,000 deal but your competition is willing to invest $3,000, you’re going to get crushed every time in pay-per-click, every time in Craigslist, every time in SEO, every time in direct mail.
You’re always going to get crushed because your competition knows their numbers. They’re going to take it up to their max budget, and they still know if they’re going to be able to profit.
That is how you scale up your marketing. Know your numbers, remove emotion from it.
1. Find out your average profit per deal first.
2. Find out how many leads it takes you to close a deal,
3. figure out your conversion rate on your website- which we can help you. If you’re an InvestorCarrot member we’ll help you with that. Just let us know and we’ll spin up a split test on your site to find out your conversion rate.
4. Figure out how much it’s going to cost you to get those visitors to your site. Whether it’s through SEO or direct mail or pay-per-click. Figure out what that’s going to cost you to get your 150 visitors to the site using these numbers.
Ramp Up Your Paid Marketing ROI
Get out a piece of paper, figure out those numbers for yourself, get those calculations going, and get your return on investment ramped up for your business. Remove emotion from your marketing, go with your numbers, and work backward down the line.
Sooner than you know it, you’re going to turn from dabbling to crushing it. And, it’s just going to keep on skyrocketing and going up.
Thank you guys and gals for watching this strategy sketch. Make sure to check out other strategy sketches on our YouTube channel. Go over there, we have lots of great strategy sketches where we answer questions that you guys send in each and every week. Thank you guys and gals, we’ll talk soon.
2 responses to “4 Step Marketing Budget Formula: Find The Magic Number You NEED To Invest To Close A Deal”
awesome video trevor!
This is really good stuff