You're listening to the REI Marketing Nerds podcast, the leading resource for real estate investors who want to dominate their market online. Dan Barrett is the founder of Ad Words Nerds, a high tech digital agency focusing exclusively on helping real estate investors like you get more leads and deals online, outsmart your competition and live a freer, more awesome life. And now, your host, Dan Barrett.
Dan: Alright everybody, welcome back to the REI Marketing Nerds podcast. As always, this is Daniel Barrett here from AdWordsNerds.com. How are you? How are you? It is a very rainy, dreary day here in Connecticut. I don't know, you might be able to even hear the rain in the background, let me just, hold on a second. Can you hear that? [0:01:04.7]
Anyway, today we've got just an episode with me, hopefully my voice is a little less scratchy than it was last time. but of course I'm still sick because it's impossible for me to not be sick, that's just what I've learned. But you know, I was very lucky to be able to fly out this week to St Louis to do some teaching over at the REI Black Book offices, which is really fun, I got to meet the whole REI Black Book team, got to meet a whole bunch of awesome investors that are their clients and got to talk all about AdWords and PPC and all that fun stuff for about two days, so I had a really, really, really fun time. One of my favorite things about it was, of course I'm teaching in person. Some of you guys may not know this, but before I got started in the online marketing world I was a high school teacher. I was basically training to be a history teacher, did a whole bunch of teaching in front of a whole bunch of kids and had a lot of fun doing it. [0:02:06.2] I really missed being in front of the classroom, so that was really fun for me. But one of the things that's really interesting about that process is when you teach, and specifically when you teach in front of people you tend to crystallize and formalize a lot of ideas that are kind of banging around in your subconscious. This is because when you're teaching something to someone and you can actually see them, you can look at their eyes, you can see their face, you can read their body language, you get a real sense of when you're connecting with them, when they're really connecting with what you're saying, really understanding what you're saying and you also get a really good sense of when you start to lose people.
When you get that feedback you kind of understand like okay, well here the weak points in what I'm trying to teach and then you have this moment where you can try to reformulate what you're saying. Thunder, and lightening in the background sounds very nice. [0:03:01.6] I don't know if you can hear that, but hopefully it makes this a very atmosphere podcast. But really gives you this opportunity to reformulate in such a way that hopefully is going to connect with that student. Is a really. really cool process. I came away from that seminar with a whole bunch of ideas, whole bunch of new kind of ways of teaching and helping investors understand how they can get more leads and deals online. One of the things that really jumped out at me, and I thought was really, really interesting, and in fact later I took this to my team and we were passing this idea around and we really realized it has a lot of the validity, is that every investor that's going to be successful getting leads and buying deals, buying contracts at a profit with these online marketing channels, specifically pay per click marketing channels, every single one of those investors is going to go through a defined set of stages, and they're not really time based, it's not about how much time it takes. Usually some investors are going to do this quickly, some investors are going to do this slowly, but every investor that's successful is going to go through these stages and they're going to go through them in order. [0:04:07.3]
That by itself is pretty interesting, but the other thing that I realized is that when people try to switch up the order or they try to switch stages or they try to jump from one stage, let's say, to another one, that is where most problems come from. That's where most investors run into difficulties, that's where most investors overspend or underperform, and it occurs to me that like we understand this and I can teach this to you today, you can understand it, you can use this to gauge where you are in your online marketing journey and understand what you need to be working on and understand what you can safely leave for later. It's a really practical piece of information that can be immediately helpful to you right now today in helping you get more leads and deals online. [0:05:00.1] So hopefully that's enough of an intro where we can jump, just jump straight into it and we can get into the concepts of these stages and we could talk about stage one.
Stage one is basically when you are starting from scratch, you are setting up a campaign, you are setting up your account for the first time, you're launching something new. Now, any time that you launch something new you go through something I call the sanity check period. The sanity check period it's covering a couple different bases. One, it's like fist of all did you make any giant mistakes, did you forget to put in your credit card, did you target the entire United States instead your market, whatever, right. These are things that can be pretty quick to diagnose and fix, but it's also got a deeper component to it, which is that even if you set it up the way that you intended, did you make the right decisions in the first place. There are some baseline considerations that you need to meet in order to be sure that you're going to meet your goals with a given marketing campaign. It could be is the potential volume and traffic, the potential volume of traffic in the market, and this is not necessarily the volume you are getting in this moment, but you're just looking at the market and saying is there enough potential volume here available within this campaign or this channel or within this market to make this valuable to me. [0:06:20.7] Look, if your goal is to do 50 deals a month, launching a campaign in a market that only has 100 searches a month in it is probably not worth your time. I'm not saying it can't make you money, it probably can, but it's just not going to get you a whole lot of the way towards your goal. So your time and effort may be spent better spent on a different channel. So we've always got to go through this process of saying, look, like sanity check. Am I in the right place? And again, we're not even looking at our performance, I'm not saying am I doing a good job capturing this traffic or good job capturing this market or am I getting leads at the price that I need them, I'm not worried about any of that during this period. [0:07:06.7] I'm purely asking am I in the right place. Whether that's market or channel, am I working with the right people, should I be managing this myself or should someone else be managing it for me, should I bring someone on the team in to do this. This is an important question, and some of you are going to answer this question very quickly, and others, it's going to take more time. There are investors that we'll work with that really we spent the whole first 90 days just asking is this the right channel for you. Like I said, some people move through the stages very quickly, some people move through them much more deliberately and that's okay, but you still need to understand what channel or what stage that you're in. Because note that in this stage we are not necessarily really worried about optimizing every aspect of our performance and we are not worried about scaling up. [0:08:01.9] We're just trying to make sure we're in the right place. My friend Nick will often say it doesn't matter if you win a race you never wanted to be in in the first place. So rather than getting into the race and then immediately worrying about well how fast you're running in are you going to win, we need to think about well am I running the right race in the first place. So that's stage one, sanity check here.
Assuming that you do this and you decide yes I am in the right place, okay, I've checked my sanity, I have in fact seen this was the right decision for me, now we're going to jump into what I call the better than breakeven period, this is stage two. Alright? At stage two our entire goal is to create positive cash flow. It's to get you to a point. It's to get to a point where if I put a dollar in the machine I get at least a dollar and 10 cents out. Now the way that we think about this is we figure out how much can we spend to acquire a deal and justbreakeven. [0:09:03.9] So if you're a wholesaler and you're making $10,000 on average per deal, you can spend $10,000 to acquire those deals and you're not making any money but you're not losing any money. And obviously you don't want to run your business that way, but in the early stages we need to make sure we are at least at that point. So we figure out this number, the breakeven number. Let's say it's $10,000 for you. So now I know, okay, if I spent $10,000 to acquire a deal, I'm breaking even, so I'm not making money, but I'm not losing money. Okay, so then anything below a $10,000 cost per deal acquisition is better than breakeven. It is better than breaking even, therefore I am making some amount of money. Now I may not be making the ROI that I really want to get, I may not be making enough money to say, yes, this is going to be my primary marketing channel, and maybe it's not even going to be a marketing channel that you want to keep doing, but if you can get to better than breakeven, you know you are at least creating positive cash flow. [0:10:05.9]
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The positive cash flow early in the life cycle of your online marketing is so critical because it allows you to stay in the game, and in online marketing time is more valuable than money, by which I mean time is what allows us to run experiments and make things more efficient, make things more effective, lower your costs, increase your conversion rate, whatever it is. [0:11:07.7] Time is what allows us to do that. We cannot do that overnight, you have to spend time in order to do that. So if you gave me like, if you said, "Dan, look, I'm going to give you a choice. There's a client that has $10,000 and they're going to spend it all in month one." or, "I have a client that has $10,000 but they're going to spend $2000 a month for five months." I will take a 5 month client all day every day, because I'm way more certain that I can make that five month client money than I can make that $10,000 in one month money. Because again, I need time to do my work. If you are managing your online marketing you need time to improve it. So in order to buy us time we need cash flow, and in order to get cash flow we need to get better thanbreakeven. So stage two is all about am I at breakeven or better, if I'm not, I need to get there. [0:12:03.8] And there's a whole set of like specific interventions you can do, you know, if your impressions are low, your click through rate's low, your cost per click is high, your conversion rate's low. There are all specific things you do in those instances in order to move those numbers to where you need them to be in order to hit breakeven. That's the kind of stuff that we teach like in our Search, Click Convert boot camp course where we spend three days literally just talking about that. There's a lot you can do, but you have to understand that that's what you need to do. Because again, if you are not atbreakeven and you try to scale, what's going to happen? This is like the person who says like, "Well look, right now I'm losing a dollar on every sale, but you know what, I'm not worried because I'm going to make it up in volume." You can't make it up in volume if you lose money on every transaction. So if you are losing money and you try to scale, you can't grow your way out of that problem. You grow your way into a more serious problem. [0:13:02.7] So in stage two it is all about positive cash flow, it is all about the saying, "Am I better than breakeven?" Even if you know you don't want to stay there, even if that's not like really your long term goal, you need to be better than breakeven before you move from stage two to stage three.
So stage one is sanity check, stage two is better than breakeven, stage three is optimization and expansion. And stage three is a little bit different because once you get to stage three, you essentially stay there. You're going to stay there unless you underperform and you have to go back to stage two, but otherwise you're going to basically go between these two options, optimization and expansion. You're going to go back and forth between these two over the lifetime of your business. Because you're only ever either doing one of these things, you are either optimizing, by which I mean you are trying to lower your costs and make your account more efficient, or you are trying to expand by raising the number of leads that you receive. [0:14:11.9] Now these two things don't always happen separately, but a lot of times the things that you're doing to say optimize the account will actually negatively affect your expansion, and the things that you do to expand your account actually make it less efficient, and therefore negatively affect your optimization. So while it's not always one or the other, they're kind of on opposite ends of the spectrum, you have to understand what your goal is in this moment. So let's say I get to better than breakeven, okay, so I go from stage one, sanity check, through stage two, I get my numbers, they're better than breakeven. So now I'm making money but I'm not making a ton of money. Now I'm in stage three, I'm probably going to go into optimization. Okay, so optimization has a set series of tasks that you're going through in order to lower costs, make yourself more efficient. [0:15:03.8] Maybe you're cutting out the keywords you don't need, maybe you are maximizing your bids in certain instances, maybe you are really zeroing in on which zip codes in your market are the most profitable. Whatever it is, generally you're cutting away the fat. I like to think of this is kind of like the bulk and cut cycle that bodybuilders go through. When you're trying to make yourself more efficient, you try to lose body fat. All you're eating is like boiled chicken breast and green beans, that's it. You're losing fat, you're losing fat and you see the ab muscles start to pop out. I will say just so you know, this is a podcast so you can't see me, I'm not saying this from my personal experience, so I don't have abs and veins popping out everywhere, but you can see this in bodybuilders. Before they go to compete they get as efficient, as lean as possible. That's optimization that drops your costs so you got to do that. [0:16:00.4]
But if you drop your cost, drop your cost, drop your cost, what ends up happening is actually a lot of times your lead volume will go down, so then you've got to expand. But when you get into the expansion part of the cycle, you're doing different things. You're adding key words, you're increasing your budget, you are increasing your target market, you may be adding additional marketing channels. Now you've got more leads coming in, but a lot of times those leads aren't just as efficient as everything else, so then you go back to optimization, so you can start to see this is how the cycle works. You bulk and then you cut, you bulk and then you cut. Well then likewise you optimize and then you expand, you optimize and then you expand. Every investor that's going to be successful getting leads online is going to go through these three stages. They're going to start off asking, "Am I in the right place?" Then they're going to go into the stage two and they're going to ask, "Am I better than breakeven?" And then they're going to go to stage three and they're going to cycle through these questions, "Is it time to optimize to make myself more efficient or is it time to expand to raise my volume?" [0:17:08.4] If you do this and you do them in the right order you will be far more successful than someone that tries to jump the stages, because I'll tell you, nothing is less successful then when you try to grow something that isn't working particularly well, or if you try to expand something in a market you're not even sure you really want to be in. So remember the stages and go through them in order, understand where you are in the process and focus on the tasks that are appropriate to that stage and you will have far more success than the people who are trying to jump the line.
As always guys, I hope this episode is helpful, I have a lot of fun doing this podcast. Hey, if you're listening to this, do me a favor, go wherever you get your podcast, whether it's Stitcher, iTunes or whatever, if you could leave us a review or subscribe that helps other people find the podcast and I really appreciate it, and as always come join our Facebook group, it's totally free, it's the REI Marketing Nerds Facebook group, you can get there at AdWordsNerds.com/group, AdWordsNerds.com/group, that will forward you straight to the Facebook group, we'd love to see you, I post in there multiple, multiple times a week so a lot of free content in there, and I'd love to hear from you so let me know what you think of the show. I will see you guys next week. Thanks, and as always, this is Daniel Barrett signing off.
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