Loosing money on the first sale may be the smartest business decision you'll ever make!
Lots of small business owners fear making an upfront loss and this is often driven by cash flow worries, a general misunderstanding of marketing and other general worries, but the truth is it's an accelerant for rapid business growth!
When you're diving into your first social media campaigns, you need to know the numbers! But what "numbers" are we referring to. First up is your CPA (Cost Per Acquisition) how much it costs you to land a customer. Second is your LTV (Lifetime Value) how much that customer is worth to your business over time. These aren’t just nice to haves, they’re essential numbers every serious business owner or marketer should know inside out.
The front end, Back end and where the real money is!
The cash you make from that first sale through your ads? That’s called the “front end.” Everything your customer spends with you after that, i.e. the repeat buys and the upsells, that’s the “back end.” Put them together and you’ve got your Customer Lifetime Value (LTV), which is where the real profit lives.
Your goal with any front-end offer running on ads is simple: make enough from that first sale to cover your Customer Acquisition Cost (CPA). If you can break even or better, you’ve got a sustainable system you can run again and again. But the real profit kicks in on the back end, where every follow-up purchase has zero marketing cost attached. That’s where things really scale!
But here’s the twist: sometimes it actually makes sense to lose money on a campaign. It’s called “going negative,” and it’s a strategy big subscription brands use all the time. In fact, in the next part of this blog, I’ll show you exactly how we generated nearly £35,000 worth of opportunity for a driving instructor by going negative on just one ad campaign.
How we generated a driving instructor £34,500 of opportunity using this strategy...
One of our regular social media clients, a local driving instructor came to us wanting to rapidly ramp up customer acquisition, keep costs down, and still turn a strong profit. The advantage driving schools have is a huge gap between their low sale price and high Customer Lifetime Value. Not many businesses can sell a £35 product and have that same customer go on to spend £1,150 (His customer lifetime value)!
So we presented an idea for free trials via Meta Ads, this did two things...
- We rapidly received wide spread applications with a great lead flow and low acquisition cost.
- It turned his empty, unbooked hours into productive sessions by filling them with trial lessons.
In just one week, £150 in ad spend brought in 30 free trials. That’s right, £150 to generate an additional £35,000 worth of opportunity. This is the power of going negative and focusing on lifetime value rather than quick upfront cash. By trading empty unproductive unbooked hours for leads, instead of more cash, he kept costs tight and unlocked massive back end potential.
Ready to stop fearing upfront losses and start using them to fuel your growth?
Let’s chat about how you can apply this strategy to your business and turn every campaign into a long-term profit machine drop us a message or book a free strategy call today!
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