If you invest $100 into ads and you get $1,000 back, isn’t that like investing in the stock market?
How many investors get a 1,000% return on investment in the stock market?
The difference is, we are investing in customers, not stocks, not gold, not Real Estate.
And I would argue that investing in customers has the highest ROI overall.
I used to be in Real Estate.
I used to own investment properties.
The returns are good because you get cash flow, tax advantages & equity… not to mention leverage with the banks.
When you factor all that in, Real Estate investing beats stock investing, on average.
But what’s interesting is that I met a wealth consultant and he showed me that on average, across all industries, including every type of investment alternative, business is the best.
With stocks, you get no leverage…. you put $100,000 in and play with $100,000.
With Real Estate, you get around 5x leverage…. you put $100,000 in and play with $500,000 because the bank will lend you $400,000 when it’s secured by Real Estate.
With business, you get unlimited leverage. If you put $100,000 in & play smartly, you can turn that into millions.
Ask the Sharks.
How many stories do you hear on Shark Tank where they started with a couple thousand dollars?
On the other hand, business is the riskiest.
Only 5% of businesses succeed, I hear.
But I think that’s a fallacy.
I think that if you calculate the % of entrepreneurs that end up succeeding it’s much higher.
Because entrepreneurs are driven by a mission, more than money. That is why we are so relentless. We refuse to quit. We find ways over obstacles that amaze our friends.
In my journey I have discovered a shortcut.
Even a secret.
For every 100 marketers that I see talking about Facebook ads, not even 1 talks about what I am about to share with you.
How many people have you heard talking about customer investing?
Why would you invest in Real Estate, stocks, gold, etc. when you can invest in customers?
First, the ROI is higher.
Second, you aren’t going to give up on your mission anyways…. meaning, you are going to spend the money on your business anyways, so why dilute the financial leverage you have into things you don’t understand?
Third, and most importantly, relationships.
In order to succeed at customer investing, you have to study customers. You have to know what they want & what they need. You have to know what they think about. You have to know what they spend money on.
And in order to know those things, you have to build relationships. They aren’t going to tell you their secret desires if they don’t trust you. Which implies that you have to build trust. And what do people who trust each other do? They listen to each other. They debate with each other. They keep an open mind & an open heart with each other.
This means that you have influence. This means that a good percentage of them will trust you enough to follow your advice when you say “this product is going to help you”.
So imagine this…
You have $100,000 and you could invest it any way you want.
Your research says that you can earn 10% ROI in the stock market. This can be a very good thing because over time, you can turn it into millions, with the power of compound interest.
Another option you are considering is Real Estate. Your research says that you can earn 15% ROI. This can be even better than stocks because the ROI is better, but the downside is that you have to get involved in managing tenants, toilets & termites.
The other contender is business. You could buy a business. You could start a new business. Or one crazy idea that you got from a guy named Nick is that you could invest in customers. You find someone that already has a business & you can tell by their social media, Google reviews & Amazon reviews that the market loves them. So you could work out a deal with the company where they pay you a commission for bringing them new customers.
Now your risk is limited to marketing expenses. You have to pay for Google & Facebook ads, plus any technology & training to learn marketing. Plus, Nick suggested you spend a year learning the craft of marketing & running simple & inexpensive marketing experiments, before you go all in. So you have to be patient, just like you do with stocks or Real Estate… but instead of 10 or 30 years, we are talking about 2 or 3 years.
So you weigh your options and you choose the marketing opportunity. It seems like the lowest risk, highest reward opportunity on the table.
You spend 10k in the first 6 months with no return.
You spend another 10k in the next 6 months and you get 10k back.
So 12 months in & you are still 10k in the hole, but your confidence is soaring because you have 1 campaign that is performing well and you realize you can scale it up, because you still have 90k left & you haven’t run a single ad on Google yet.
So you borrow time from other places, double down on this single campaign & 3 months later, you are proud to announce to your loved ones that you got your 10k back and made an additional 20k.
Now you are 15 months in & you have $120,000 in your bank.
That’s better than stocks or Real Estate.
And now you have a handle on marketing.
So at the end of year 2, your bank account is at $200,000.
So you quit everything else you were working on, go full time, and year 3 is a hockey stick.
To me, customer investing is a no brainer.
And I am not alone.
One of the household names that I HAVE heard talk about this is Marcus Lemonis from the TV show, The Profit.
He said in one of the episodes that he doesn’t diversify his portfolio into stocks, gold, etc because he diversifies his portfolio into businesses.
It’s what he understands.
He made Camping World a billion dollar business… so why would he take his decades of wisdom in business and then put money into stocks or something else that he doesn’t understand?
He would just lose it. So he invests in businesses.
The only difference is customer investing is more granular. You don’t necessarily need to own the business to make the investment… and the investment is less risky & has about the same amount of upside because you can get involved with more businesses if you are only handling the marketing & not the whole business.
So what exactly IS customer investing?
It’s tracking how much it costs to acquire a new customer & deciding how much you are willing to spend to acquire a new customer.
The typical business owner looks at Facebook & Google ads like an expense. They think “if i spend $50, i want to get $100 back”.
If that business owner has more marketing experience, they realize that this doesn’t last long. Competition comes in, the bids get higher & the market innovates new & better products which drives the value of their product down. So what was making them $50 is now breaking even and they are facing bankruptcy.
So he/she figures out that the only way to make it work, long term, with online advertising is to sell more stuff to existing customers. They build a funnel designed to break even so that they can put a ton of customers into their database. Then, they follow up with their customers, make sure they are having a good experience & offer additional products & services.
The money is made over time, not on day 1.
This works really well because the advertising expense was paid for the same day they became a customer. In other words, if your product sells for $100, your advertising expense is $100.
Everytime you acquire a new customer, you get $100 in revenue to reimburse your ad spend, which can/should be used to spend on more ads to acquire another customer. It’s a perpetual machine that delivers unlimited customers for free.
But that is still not customer investing.
Customer investing is what Jeff Bezos did to build Amazon.
He borrowed billions of dollars & sold products at a loss, just to make his customers happy, at scale.
He invested in the acquisition of customers.
He was willing to spend more money than his competition to acquire a single customer.
He built a mega database & because of his relationship & his commitment to make his customers happy, they bought from him again & again & again.
Over time, each customer was profitable, on average.
But the real leverage point is that he had a bigger database than anyone else he was competing with AND he had more products & services to offer them.
Because he was willing to invest in customers.
He was willing to spend more money to acquire each customer than his competitors.
And now he is the most wealthy man in the world.
I am not saying that you need to get that aggressive, but do you.
That is the beauty.
You can keep this very small & easy to manage and still make a good living… or you can go nuts like Jeff Bezos.
It depends on your risk tolerance.
If you have energy, money & time on your side, maybe you would be willing to spend $1 today knowing that it will take you 6 months to get it back.
The more you are willing to spend to acquire a customer, the more customers you will get.
Willing to spend $50 in advertising to get a $100 sale
Facebook’s inventory can provide 10 customers at $50
Willing to spend $100 in advertising to get a $100 sale
Facebook’s inventory can provide 100 customers at $100
Willing to spend $150 in advertising to get a $100 sale
Facebook’s inventory can provide 1,000 customers at $150
That’s how it really works.
Facebook & Google use an auction system to determine how much you spend per customer.
If your bid is $150, they can send you customers from every segment of the market because nobody is willing to spend as much as you, and you are the winning bidder for most auctions.
If your bid is $100, they can send you customers from a few of the segments of the market.
If your bid is $50, there may only be 1 segment of the market that is a fit. Only the low hanging fruit will go your way. But the low hanging fruit is the smallest segment of the market.
Whoever is willing to spend the most, gets access to the most segments of the market.
The way to make this work is to WOW them so they buy more stuff.
And if you don’t have more stuff, ask them what they would buy and then partner with other businesses.
Financially speaking, a business’ most valuable asset is their database.
You are not only investing in cash flow, but you are also investing in equity.
And last time I checked businesses are allowed to write off their expenses.
So take that Real Estate!!!