394 – A Subscription Business Case Study With Dan Faggella

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Dan Faggella

In this episode:

01:03 – A quick overview
02:30 – Why pursue recurring subscription?
04:04 – A passing trend?
06:22 – How to generate $70,000 a month
09:46 – James’ octopus theory
12:37 – Should you sell a subscription AND one-time products?
16:22 – Breaking down the marketing costs
17:01 – Why a freemium model might make sense
20:33 – When a membership isn’t founder-focused
22:13 – Putting a price tag on the business
25:27 – Where the traffic comes from
28:12 – In summary
28:58 – How to really be unique in your market
31:10 – Take a look at how this company does it so well

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Transcription:

James: James Schramko here, welcome to SuperFastBusiness.com. Today, we’re continuing on our quest to find out more about the subscription business model, because I’m so passionate about it. You’ve heard me talk to people with email subscriptions, you’ve heard me talk to authors of popular books like John Warrillow, whose fantastic book “The Automatic Customer” is a best seller. We’ve heard from Robbie Baxter and her book, “The Membership Economy”. Today, we’re digging deeper. We’re going to speak with Daniel Faggella. Welcome to the call.

Daniel: James, glad to be here.

James: Daniel, you’ve been doing really well with the subscription model. Why don’t you give us a little overview of what you’ve got cooking?

An overview of Dan’s business
Daniel: Yeah, sure, sure. I’m actually doing this in a couple of niches here James. So I started off in the Brazilian jiu-jitsu niche, which is kind of a sub-niche of martial arts. Basically, speaking of membership economy, I actually wrote that down because I haven’t read that, but instead of selling just individual martials arts programs such as, “Hey, here’s how to choke somebody,” or “Here’s how to escape from a bad position,” we put together an entire skill development oriented curricula, technique over technique and month over month for martial arts folks.

We started doing that quite a while ago and started realizing that more than half of our revenue and now up to 85% of our revenue is from these recurring programs and we expanded that into self defense building curriculums. Then I expanded out into fitness. Started doing that there. Unfortunately, I wish May’s books were done, but April’s books went pretty close to 74-Gs. Basically, with 85% of that being recurring. Essentially teaching curricula in a rolled out program.

James: How long have you been doing this Dan?

Daniel: A little bit over two years. So it’s been a little bit over two years. Although, to be honest I’m always juggling three businesses at a time. I wish I could tell you I was focusing on this one all the time. I used to run a physical martial arts gym that I sold about a year ago. So I was also buying square footage and putting up drywall and hiring instructors. So I mean full time in this business, a year, a year and a half.

James: Great. OK. So why did you pursue this recurring subscription model?

Why the recurring subscription model?
Daniel: Yeah. You know James, I’ve listened to your show. But then there’s a lot other kind of business folks and there were smart people early in my career, one of my first business coaches early on was a guy that actually had a membership site in the model train business.

James: Wow. What a niche.

Daniel: Yeah, tell me about it, right? Unfortunately, the niche is dying and he actually sold the site because he knew that but he got a fair price for it. So on my own end, I’d had some business coaches early on. They were like, “Man, if you can find something that’s recurring, do it.” Not to mention James, I don’t model Kennedy for everything. Some people idolize Dan Kennedy like he is the be-all, end-all.

I’m not taking anything away from Kennedy. I’m just saying I read Vanderbilt biographies and I think that there’s actually significantly more grand businessmen than Dan Kennedy. However, in the direct response world, I listen to what the heck he says. I mean gee, since I was 21 years old, listening to his tapes, find something that recurs. And I always signed up on his gold program getting his DVDs every month, and I was like, “Man, that’s a pretty sweet deal for him. I should do that for me.”

So for me James, I started off in the martial arts physical brick and mortar business. I started that business as an undergrad because I don’t like working for nobody, I like doing my own thing. That business doesn’t work unless you get people on subscription programs. So when I went online between Kennedy and between my existing business experience, I said, “It’s going to be a curriculum. It’s going to be recurring.”

James: Right. And you said something before that you’d actually heard some of my stuff from years back, way back when I had bad audio quality. And I was talking about subscription for quite some time now.

Daniel: Yes indeed.

James: Do you think that it’s a fad, or do you think that it’s just like the next thing that people really should be focused on and that it will be around for a long time?

Should people focus on recurring subscriptions?
Daniel: Youch. Well I mean it’s interesting, right? Grand picture Internet marketing perspective for you here. Well, one thing I’ll just make a note on, I haven’t read Membership Economy and I also haven’t read Automatic Customer, so it looks like I have some catching up to do here.

I frankly don’t see it as a fad and I think that the whole recurring thing is sort of a big deal. I guess back in the day James, if you’ve got enough people to jump on your ferry line or to buy your bars of soap, you had a business. These days, the Netflix is in, the Vimeo is in. The whole SaaS thing is a pretty big deal.

I think the reason that these SaaS companies grow, in addition to the fact that software expands really quickly, you don’t need to go manufacture more bars of soap, is the fact that it bills people every damn month. So the predictability of revenue and scalability of revenue, I don’t think we ever would have broken 40 grand, nevermind 70 grand consistent if we didn’t have recurring, and I do not see it as, “This is sweet for 2015.” I sort of see it as like, “Man, these SaaS guys got the freaking right deal.”

Looking at churn rate James, right? Looking at monthly actives. They are looking at metrics that are just higher level that a lot of these stupid PPC things that a lot of Internet marketers tend to focus on. I look up to the guys selling software, doing tens of millions or hundreds of millions, and try to model those metrics and I don’t see any of that stuff as a fad at all.

James: Yeah. I think some of the key points that as Robbie Kellman Baxter points out in her book, it’s really good for the customer to have recurring subscription. I’ve just emptied a few skip bins full of info products, a lot of them in the shrink wrap still because I prefer to go through the transcriptions rather than the DVDs. It really occurred to me how one-time products are not really great for consumption compared to things where a customer can get ongoing solutions.

Daniel: That’s true too. I think you can find a way, what you’re saying is you can provide more value with subscription if you do it right.

James: Well I think software is a good example. If you stop paying for the software, the business isn’t as good.

Daniel: Yeah, yeah, yeah. I can’t stop paying for Infusionsoft, they’d go broke.

James: Right. So I want to dig into what. What have you actually got there to generate 70-something thousand a month. What does it actually look like?

Building a lead source machine
Daniel: Sure, James. So my whole shtick, I came from a really small town where we did not have many human beings. So I started a martial arts gym at a small town. That’s kind of a stupid thing to do, James. Don’t ever do that. Not that you ever would, I’m just saying it’s a really bad business decision.

James: It’s not such a bad decision. If you read “Zero to One,” Peter Thiel talks about starting in a market that you can dominate but then scales massively. And it sounds like you’ve got that.

Daniel: Oh yeah. I mean well, but I started in a business that doesn’t scale, which is physical martial arts facilities, which was the non-scalable thing. This whole online thing is scaled up.

James: Well, I think you’re talking about channels not businesses. You’re still in the same business but you’re using a different channel.

Daniel: Sure yes, martial arts instruction. I suppose in some respect, you’re right James. Point noted, sir. Point noted. Anyway, in order to sell people on physical martial arts stuff, they have to be within an eight-mile radius or so. You get people from 12 miles, they’re going to show up for three classes and then cancel.

We got 8,000 people in my small town so I had to focus really neurotically James, on segmenting different types of leads, providing different types of follow up and driving those folks to the gym and to the phone to get them an appointment to get into the gym. And then there were appointment sequences. So it was a lot of very neurotic follow up per lead, type per lead, source per their goal, per their gender, and that’s how I automated and sold my first business, which was a martial arts gym, which luckily I got rid off a while ago when I moved up to MIT to work on emerging technology and do more exciting things.

So for the business that we sell online now James, a subscription, it’s the same deal. So we have YouTube videos that have to do with all sorts of different topics. Some of them James are submission hold, some of them are escape techniques, some of them might be about beating bigger opponents. These folks that might watch that YouTube video will have a particular call to action related to kind of a content upgrade for that particular topic. They’re watching an escape video and all of a sudden, we’ve got an e-book that goes step-by-step through seven escapes that any grappler should learn, any white or blue belt grappler should learn, or something like that.

Or they’re watching a video about beating bigger guys and they can download my three best submissions for tapping out bigger, stronger opponents or something along those lines. So we take folks by lead source and/or by interest, and we’ll take them down kind of tailored initial funnels, all driving towards continuity. So what we’re really good at, I consider as a business all together, is funnels that are varied on the front end based on lead source.

But then also varied on the back end based on behavior that’ll last for 3 or 4 weeks straight offering a whole bunch of different various offers, really all driving towards continuity with different bonuses, and different benefits, and different variations of the continuity offer but really seeing what’s going to bite and what’s going to get them to give continuity a shot, and we do that with tailored front end sequences from a whole bunch of different lead sources and now it’s a bit of a machine.

James: Right. So I’ve heard of this before, I think Frank Kern called it the serializer method. I use segmenting of course. I look at it more as an octopus, where the membership is the head of the octopus and you have different tentacles going out into different categories and different marketing channels, pulling people back to the head. What does the head of the octopus look like in your business? What are you actually selling? How much do people pay? What do they get? I’m sure our listener would want to know this.

Dan’s offerings
Daniel: Yes, yes. So I started offering a really, really niche-y martial art. I use that as a justification to charge higher prices than other membership sites in the martial arts space. So I started off in Brazilian jiu-jitsu and my specialty James is kind of twofold. Number one, I didn’t really need this to start a membership site, but it was fortunate right? I could use it. You’ve got to use what you’ve got. So for me, I’m a smaller guy. I’m like 128 pounds, so you know, just a little bit smaller than yourself. And my whole thing is beating bigger opponents. So I’ve got a lot of technique videos and competition footage of me making larger people kind of yell and scream, and kind of cracking their joints and kind of hurting them and stuff like that.

People like those sort of things. So beating bigger opponents is a cool shtick to have. In addition to that James, I went to University of Pennsylvania for my Master’s Degree in Applied Positive Psychology and I focused my whole Ivy League master’s thesis on skill development and combat sport. Got to interview some of the finest researchers in skill development and goal setting, founders of goal setting theory, Locke and Latham, Olympic judo champions, and all this kind of stuff.

I essentially came to understand the science of skill. Oddly enough James, the business that I started is called The Science Of Skill. And so I used skill development curricula around drilling and around technique sequences to put together a series of monthly modules that takes folks through a curriculum around learning to beat bigger opponents. I could really belabor it here James. But essentially, every month they’re getting 2, maybe 2 ½ hours worth of video, specific to beating bigger opponents. They’re getting a particular kind of drilling regimen and set of individual technique drills to be able to follow through on and to be able to check off and kind of prune out. They’re also getting an article where I interview the best lightweight jiu-jitsu grapplers in the world.

So again, the whole thing here James is really niching down so that we can validate a higher price. So this is not just “We’re interviewing black belts.” No, no, no. This is very specific. We are interviewing the lightest weight black belts in the world who are also multi-time world champions, the best lightweight guys, the best giant killer jiu-jitsu artist on the face of the planet. Those are the guys. You’re getting to see specific article content, specific audio interviews from. So techniques, skill development curricula, and individual interviews, and article and audio format. All about beating bigger opponents.

And people pay 57 bucks a month and every month, they get an additional module of that content.

James: OK. So is it all digital delivered?

Daniel: Yes. A lot of the time in the front end James, we’ll send them something physical. Like when they get in on the program, we’ll send them a couple DVDs as like extra bonuses in terms of materials to be able to dive into. But the actual membership is entirely digital.

James: On the front end, do they buy the front end product with a recurring subscription built in? Or is it separate?

Daniel: Yes. They’ll build it with the recurring subscription built in and/or sometimes it’ll be offered as an upsell. So they’ll be able to buy a one-off product and then they’ll say, “Hey, you can get this other DVD too. In addition to that, you’ll get a 14-day access to our complete online library of such and such, includes all these things, including this, this, this, this, this, this, this and this. And you have for 14 days before you get billed for blank.” And some people just take the upsell. Most of the time, it is right there in the main sales page but we do the upsell deal as well.

James: And is the 14 days activated when they purchase or is it optional to activate?

Daniel: It’s activated when they purchase. So again, we have plenty of sales pages James, where there’s no 14-day trial and they just buy a product.

James: So they get a single product. Is that single product inside the membership or the subscription?

Daniel: No. So anything that we would sell for like 17 bucks or 27 bucks or 47 bucks is a flat sale. And we do make flat sales James. I prefer to sell subscription for blatantly obvious, horrendously obvious reasons that I won’t even sort of believe.

James: John Warrillow called it being half-pregnant, when you sell individual products and also a subscription.

Daniel: Yeah. I mean there’s also merchant account reasons for that. I don’t know, I don’t want to scare anybody but anyway, you don’t want to only have recurring because like bad things can happen sometimes.

James: Tell me about that. I’m curious because 90-something percent of my business is recurring.

The danger of multiple niches
Daniel: Yeah, sure, sure. When you go into multiple niches with recurring programs, like if one of your merchants has the wrong merchant descriptor, or it doesn’t display the entire phone number in the actual merchant thing or it doesn’t display the entire URL, or it doesn’t show up in a certain like a citizen’s bank or Bank of America or something, and then people can’t really tell what company it is or they can’t really get a hold of you by phone, then you have chargeback and refund issues. And when you’re trying to manage the merchant descriptors in three niches at once, sometimes that stuff can get really hairy.

We could have learned that the easy way and I’ve just sort of found somebody that did a ton of this and say like, “Whoa! Merchant descriptors are super important, kids.”

James: Well, that’s why we talk about it here. I mean in my case, I sell pretty much everything off the SuperFastBusiness website, so it’s much easier for people to identify. In your case, you could simply have a banner company that’s co-branded with absolutely every product you sell.

Daniel: Yeah, yeah. Again we’re in three different spaces selling this stuff.

James: Can’t they all be from science technology?

Daniel: Science Of Skill, yes. Science Of Skill is the core LLC. These are just different business units working the same business model. However, back in the old days James, we did not have designated merchants per business unit. So people in the self defense base, it would say our jiu-jitsu URL on there, and it may or may not have had the full phone number. And then they’re confused because they’re getting self defense stuff that’s kind of what they wanted but they’re seeing a bill from a jiu-jitsu. They’ve never done jiu-jitsu. They just want to learn self defense. So they’re confused now as to what they’re getting.

So there are issues with going pure subscription especially if you go into multiple niches and you don’t understand what you’re doing with merchants. So that was an issue that we had run into there is that you think it’s self evident that these things work themselves out, they really don’t. Like if you’re doing subscription, you’ve got to have a great URL, you’ve got to have 24/7 phone service ideally, that’s what we have. Especially if you’re juggling multiple niches, you’ve got to make sure those merchant IDs, tell the person, “Hey, this is the darn thing you bought.” Because if it’s not the same URL, they’re going to get confused and they don’t like it, and you’re going to find yourself in some trouble with your merchant account.

James: With your revenue figures, do you have a large portion of that in costs for marketing?

Marketing costs
Daniel: Yeah, yeah. Well, let’s think here. We actually don’t run any paid right now. So a lot of our marketing is actually just sort of working kind of the affiliate game to some degree. Again, this is one of three businesses I’m running right now. If I had the time, I imagine I would learn to be a Facebook champion of the universe but I’ve got a bunch of clients to manage and kind of the email side of things, people that want to build out funnels that make money, and then I’ve got to build those out and blah blah blah.

James: Dan, you need to join SilverCircle. If you only did this business model and you knew your metrics really well and it scales so well, I can’t help but think if you don’t need that front end product for self liquidating offers, and you know your customer lifetime value, it makes a lot of sense to have a freemium model where you have great free stuff so you can reach a lot more people and then straight to subscription, which is my model.

Daniel: Well, scienceofskill.com is a blog, and that’s where we do a lot of the YouTube videos and the blog itself just like the YouTube videos, they’ll get a free article, it’ll have five different videos and the article at the bottom, they can opt in for additional free videos, then they go into a funnel that drives them towards the escape offer and yada yada. This is a business I’m going to sell though James. The Science Of Skill thing is something I’m going to sell, then I’ll move into Silicon Valley in November, I’m going to be building a large media site and a brain machine interface and virtual reality space. I’m not really an information marketer interestingly enough. I’m going to be leaving this world soon and nobody will really hear of me in the space anymore.

James: Probably answers the question why you would share these secrets. (laughs)

Daniel: (laughs) Yeah, I guess, partially right? It’s like I’m going to be selling this thing and I’ll be out of here. I plan on having a venture fund to be very frank with you. In very, very far out technology that would bore everybody on this call. But yeah, in terms of where our marketing goes just to answer your question, and I’m sure I could learn oodles from where you’re up to there James, and I think I have to some degree, a lot of it is to affiliates.

So we know our CLV, so we know that over the course of 90 days, somebody will pay blank if they sign up for a subscription, then we could pay out actually a lot on the front end. So affiliates can promote our offer and we can pay them astronomically more than somebody that’s just selling a $47 DVD, and they got to pay for shipping.

We have a way bigger customer lifetime value. So we eat some upfront cost James. Sometimes we’ll cut a $13,000 affiliate check to a guy, but we know that 90 days in, we’re going to make all that back plus more, and then every single month after that, it’s all cream. And then that’s all cream that rolls in every month, and so we can afford to cut those fatter affiliate checks off the bat. So we do a decent amount with SEO, and with folks just coming in organic, but then we also do a pretty good deal with JV because when we can get some big pushes and we have enough in the bank to cut some fat checks out the front end because our CLV is high. So these guys love the numbers that they see, and we can get them to promote once a quarter, these guys have big email lists and that sort of fills up the kitty there.

James: Right. So you’ve outsourced marketing.

Daniel: Yeah. To some degree, to some degree.

James: I see affiliates as a marketing cost. I don’t do the affiliate thing anymore. But I think in your market it’s so broad and there’s a lot of people with your customers. So it would be kind of fun to approach them and offer them a large check. Do you pay them recurring or one time?

Daniel: No, one time. So I just don’t like giving people a cut at a recurring just because it’s like 12 months later it’s really gruesome…

James: It’s overpaying them, I think.

Daniel: Yeah, I think so too. I mean instead, what I like to do is I like to say, “Man, even if all your people drop out next month, you’re still going to get 40 bucks for every single $7 sale that you sell on the front end.” Really, really hard for people to hate that. I mean a lot of people like that a lot, and so they’ll just love the fact that you’re eating it to the face in terms of expense. And that all the risk is on you. But at the end of the day, I know my numbers. I know the quality of my product. I know how long people hang out, and 12 months from now, I’d like to be the only person that is sort of getting those recurring payments that go into my bank account. I did not pay on recurring, we just pay a lot on the front end compared to most affiliates and we just keep up a good rotation there in addition to our search and social stuff.

Networking options
James: So members are getting videos, and regime techniques, and an article for $57 a month. Do they get any ability to network with each other or comment?

Daniel: No, and I’ll tell you why. This is because I’m selling this business James, right? So this cannot be based on me. So it was my curriculum material, now we have a lot of other martial arts and fitness experts who we pay to film programs, or we just do a JV thing to film programs and I don’t even create content anymore. But the fact of the matter is James, I built this thing to sell. I sold my first martial arts business, when this business, Science Of Skill, was only at about 17 grand a month, and I sold the martial arts business so that I could move up to MIT and I could take classes at the Sloan business school, and I could start to prep myself for getting into the venture world and spend all my time in a media lab or hang as much of time as I could with the really hardcore emerging tech stuff and the smart business guys.

So I started it just to move up there, and then just to graduate from it. So it has been a sacrificial lamb from day one. I’ve never planned on being an information marketer for life. Not that there’s anything wrong with it. It’s just that it’s not my thing. So I built it to sell. So for me James, I knew that there could not be an access to Dan aspect because I can’t sell that. If that means I have a lower CLV James, I eat that because I get to exit. That’s just my deal.

James: Right. I can’t see why you couldn’t have a community with all these information and have paid moderators. But that’s the side point. How long do people stay on the program?

How long do people stay?
Daniel: It’ll depend per program. Three months-ish, probably average, but you’ve got that one in 50, and one in 25 guys that’ll stay for a year and a half. On average though, a quarter. A quarter or so.

How much is the business’s worth?
James: How much do you think you could sell the business for?

Daniel: Right now? Man, this is great. We’re going right into numbers, huh James?

James: I’ve got to ask the questions that the listeners are thinking.

Daniel: Yeah, no let’s do it man. Let’s do it. I mean I’ll send you my QuickBooks. I don’t give a sh**.

James: You might find a buyer.

Daniel: Yeah no, go figure man. The good thing about this thing is James, if you came over my house and slit my throat tonight, we’d still make 58 grand next month. You know what I mean. That’s the main aspect of this business that I think a buyer would like is the fact that…

James: It’s predictable revenue.

Daniel: Yeah. It’s freakin’ money. You know what I mean. Like I don’t care what niche you’re in. If the money comes in when you’re drunk under your couch or something, which I don’t do by the way, there’s value for that.

James: If I’ve had 5 years of six-figure months of revenue, these days six figure in profit without a dip in 5 years, while all these other maniacs are doing big launches every year and doing affiliates, spending like 30 hours a week on Facebook, putting sales pages. I don’t get it, but it’s their thing.

Daniel: Yeah, that’s it. Exactly, exactly. I never understood it. We rotate a ton of front end continuity offers to the internal list to different sub-segments.

We’re really big on segmentation and automation. That’s my whole shtick. We’ve done launches but they’ve been launches that were basically a ruse to fill up membership program.

James: Launches are good for promotion but they’re not a business model. So let’s get back to this business valuation, even a methodology would be good.

Daniel: You got it. So right now James, if we go back 12 months from May. So let’s say May is over, we go back 12 months, and we get a reasonable multiple of two and a half or three acts of net, which is normally how a business around this size is going to get value. Right, this is a small business, so give me some time James. I plan on being opulently wealthy to be a hundred percent frank with you. But I’m a young dude and I didn’t have the goal of opulent wealth until a little bit later on, so give me some time.

But this business will likely be a $500,000 to $600,000 exit by the time we get out of it. Some of that may be in performance, which is a little bit unfortunate but that’s probably going to be the shake. So we can plan on maybe getting a quarter upfront and a certain amount on finance and then probably a certain amount in performance and maybe do somewhere in half a million to $600,000 range for kind of a total valuation of the business based on a two and a half to three acts of net based on our current run rate.

You gave me another 6 months, you’re probably doing better. But my game plan is to sell because we built a nice automated machine and I got some big plans out West Coast.

Dan’s team
James: Good job. When you say we, who’s that?

Daniel: When I’m referring to the “we” of Science Of Skill?

James: Yeah.

Daniel: OK. I only have one full-time guy but he’s been with me since the beginning. He’s actually a tight friend of mine. Not a partner in the business but certainly involved in a lot of kind of the day to day marketing. His name is Tim. Tim and I are sort of the executors in some respects. Then we got our part time folks and things like that. Really lean team. Again luckily, marketing automation’s our deal so a decent amount of it doesn’t require humans but in terms of the core squad here, it’s just me and Tim. It’s not like an eight person team over here.

James: I think that’s the main point. I wanted to get an idea of scale.

Daniel: Yeah, yeah. Just two guys and then a couple of part timers.

Driving traffic
James: Do you drive traffic to your sales page or to an opt-in as your primary method?

Daniel: Generally James, that depends. So for social and search, we go to opt-in because nobody really likes to go straight to a sales page from Facebook. That’s how you get like a lot of those bad comments and you don’t look so good. So going to opt-in from search and social is normally the way that we skin the cat, but for affiliate traffic, most of them are most comfortable driving straight to sale.

So in an affiliate like a trusted person that’s a subscriber listens to saying, “You need to buy this from this guy” is a different ball game and they have their own motivations compared to a guy that just Googled “how to escape from under a bigger opponent,” and they just kind of want to learn a little bit more. And then it’s my job to give them 2 or 3 weeks of kickb**t content. I teach them great stuff and let them make the decision to sign up. So search and social is to our automated funnels. And then the affiliates, are usually most comfortable just going straight to sale.

Opt-in rates
James: What sort of opt in rates would you see?

Daniel: This is sort of strange and somewhat arbitrary but on the aggregate, on the aggregate, maybe 25-ish percent, If you go to Science Of Skill and you click on the banners…

James: And what about sales conversions?

Daniel: Sales conversions based on those front end guys so somebody opts in?

James: Some of the reasonable caliber affiliate, good warm traffic, medium traffic.

Daniel: Yeah, yeah, I can give you broader numbers. It’s sort of tough to say per affiliate. Being in three niches now has actually sort of garbled a lot of individualized…

James: Just give me a homogenized number. Is it 1% or 2%?

Daniel: Yeah, yeah. The one that’s actually better than that. So in jiu-jitsu, reasonable search traffic for example. Not even like affiliates, “Oh my god, Fagella’s the greatest, opt in here.” Just kind of bumble along search traffic in our jiu-jitsu or core jiu-jitsu funnel would over the course of 90 days, we would get somewhere in the 3% to 4% of those guys to convert to a front end continuity offer. This is just kind of search traffic.

Warm affiliates, maybe would have done a little bit better but in terms of calculating long term, I’m only giving you the stats I feel like I actually know. I’m not going to be like, well for affiliates, I pull something out of my b**t. For general aggregate blog opt in to sign up for BJJ, Brazilian jiu-jitsu, 3% to 4% of these guys on the aggregate. But that’s over 90 days. It’s not like the old buy within day one.

But James, we’ve got some pretty decent automation at the back end and then we do a lot of slicing and dicing based on tags and lead source and things like that. So we get them, we get them. We might be more around 2% within the first month for example. But if you give us 90 days, 3% to 4% of those guys from cold search will oftentimes end up in a membership.

James: All right Dan, you’ve been super generous. We’re going to wind up soon. The main themes that are coming through are if you’re an expert, you should consider a subscription model. You really want to have a focus on specialization, making sure that you can stand out in the market because you can charge a better premium. Lots of leverage. So offering things that are leveraged to deliver from a small team using automation. Oodles of segmentation. Try that different categorized approach leading to a similar core to keep things simple. Have clear labelling for your merchant tags.

Dan: Oh, goodness gracious, yeah.

James: And have the right structure. We’ve also had some great discussions around whether you have upfront products or not, different types of traffic sources, paid affiliates, blogging, SEO.

I think to finish up, why don’t we just cover, what do you think are the main lessons you’ve learned for your whole experience with this recurring income business that might help someone avoid a mistake or two?

Lessons learned
Daniel: Yeah, sure James. I’ll give you two that are just big. I won’t list like 10 little ones. I’ll give you two that I think are just really rock solid that absolutely anybody should dive into. You want to get into subscription. So we’ve done this in three niches. We’ve got guys in another half a dozen niches who we teach how to do this stuff. It’s somewhat formulaic when you nail it. You know James, I’ve mentioned our specific niching in the Brazilian jiu-jitsu world, that was beating bigger opponents, yada yada yada.

You can’t just pick an arbitrary value proposition in your niche and say, “I’m unique now, I’m going to build a membership site.” You really do have to know the market. So anybody who’s out there, who’s an expert as you had mentioned, who wants to kind of be unique in the marketplace, find your list, find a bigger audience, get a hold of enough folks and enough traffic to garner some real deal response and get some survey stuff out there. Throw out some products and then call the buyers. Put up some poles on the bigger fan pages in your niche and things like that. And get a sense for if anybody gives a crud about the particular value profit that you’re really leaning towards.

What does this market ultimately care about? What kind of language do they use? What are the bigger problems that they’re struggling with? And if you can’t tie what you think makes you unique to that, then you’re in trouble. So yes, you need to be unique in your market. But self defense, we have an angle fitness, we have an angle jiu-jitsu, we built our membership content and our sales pages based on what the niche said, they really wanted and what they really wanted to learn. So make yourself unique but really dial into your markets that when you go out there swinging, you know you’re swinging at a big, big, big, big piñata. You know that there’s candy in there. You can’t just say I’m unique. Time to throw this out there. So that’s one.

Number two James, is have automated systems to bring people in front of multiple continuity offers. A lot of people have a continuity sales page and that’s all they have, James. So they have one membership sales page. I’m not saying that makes them bad people. But what I’m saying is, if you’re familiar with Sports Illustrated who makes a lot more money than any infomarketers that I know, Sports Illustrated, yeah you could go to sportsillustrated.com, you can just sign up for a freaking subscription and get the paper to your door and get the thing on your tablet, or once a year, you can buy a calendar of naked women.

And then it will come with 3 months of it. Or you can buy a cap, a baseball or a football cap with your team that will come with a free month of it. Or when your team wins the Super Bowl, you can get a big plaque of your team. That will cost a hundred bucks and then that will come with a whole year of the subscription. But then the subscription will kick in 12 months from now.

So they have a lot of different front end offers to get people in on Sports Illustrated to get people to try Sports Illustrated and they know their CLV, and so they get people in the door in different ways. So if you’re going to sell subscription, don’t say, “Well, I have one membership page. It converts at this rate. I guess this is all I got.” No. Give away something different on the front end. If you have men and women and you know that women like something different, give them a whole bunch of different cool stuff and create a different sales page for them.

So create multiple ways for people to take that first step through your door. I use Sports Illustrator as a great example because they make more money than any membership site folks that I personally have ever shaken hands with. And you know, they’ve got a lot of ways to take step one. But like you said James, it’s the octopus. All roads lead to Rome. It’s all driving people to the same membership. So take them through automation that gives the multiple ways to take that first step to give it a shot. Give it a try and get as many monthly actives as you can that way.

James: That’s great advice. If you look at OwnTheRacecourse training that I provide, every single blog post has content upgrades and it’s specialized by topic and they all lead back to the central core offer and it’s working a treat for our business. Beautiful. Dan, you have been very generous. Really opened up the books on your business model. It’s super kind of you. You can be found at clvboost.com. We wish you the greatest amount of success with your next venture when you go into the augmented reality world and I’m sure we’ll hear about you in the future, probably see you in a Forbes business additional something.

Daniel: We’ll see, my good man. There’s only one way to find out but I appreciate the good luck James. I think I might need a little bit. So thanks so much for having me here, brother. I appreciate it.

James: Our pleasure.

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