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Course Module: 1. AAU Agency/Module 3 - The Client Module 24
Lesson: 07. ROI Calculator
Duration: 07:35
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[00:00 -> 00:07] All right, so this is a calculator that I've used inside the business. I don't necessarily share this with clients too often
[00:07 -> 00:10] I look at it more as a tool to help us figure out
[00:11 -> 00:17] If a campaign is going to be profitable and maybe kind of get some idea of what we could do with it
[00:17 -> 00:21] Now there's a lot of different things that go along with the profitable campaign
[00:21 -> 00:23] It's like if a client, you know
[00:23 -> 00:26] If you put up a billboard for a client and they ask you well
[00:26 -> 00:30] You know how profitable is this going to be for us and you're going to say well
[00:30 -> 00:34] There's a lot of factors, you know how much traffic drives by there every day
[00:34 -> 00:38] What's the weather going to be like right because if it's snowing every day for a month?
[00:38 -> 00:41] The traffic is going to be minimal, you know
[00:41 -> 00:45] If there's a pandemic and people stop going into work the traffic is obviously going to be highly affected
[00:46 -> 00:51] So this is really just an idea for you. There's a couple of different calculators here
[00:51 -> 00:59] Do you can use you know anyone you want but like I said, I usually just use this internally so for the first calculator
[00:59 -> 01:03] You've got total monthly clicks. This is maybe what you want to get so, you know
[01:03 -> 01:06] Let's say you needed to get a hundred clicks of the campaign
[01:06 -> 01:09] you're not going to always know the average cost per click because
[01:10 -> 01:15] The it's just you're not going to know till you get into the campaign and chances are it's going to start out higher
[01:16 -> 01:19] Then it will be in 90 days, you know after you've dialed it in a bit
[01:19 -> 01:22] But let's just say the average cost per click is three dollars
[01:23 -> 01:32] Okay, so conversion rates now this is a conversion is what we consider a lead that would be either a web form lead or a phone call
[01:33 -> 01:35] some people will
[01:35 -> 01:38] measure conversions is you know sometimes when a
[01:39 -> 01:42] Person lands on a web page and they view three pages
[01:42 -> 01:48] I don't view that as a conversion because I didn't make any money or my clients didn't make any money or have the opportunity to
[01:48 -> 01:57] Right. I only measure conversions as a web form lead or a customer phone call where there's an opportunity for sale
[01:57 -> 02:00] So let's say the conversion rate is 10%
[02:00 -> 02:04] Okay, now average profit per conversion when I talk to a client
[02:04 -> 02:10] I'll say how much money do you make you know per per job that you do and they you know it will vary greatly
[02:10 -> 02:17] Sometimes it's you know a thousand dollars sometimes it's three thousand dollars, you know a pest control company might be 200
[02:17 -> 02:22] But let's say we're working with like a floor refinishing company and and so they're like well on average
[02:22 -> 02:26] We make six hundred dollars a job, but we have to pay supplies
[02:26 -> 02:33] We have to pay for gas to get to the jobs. We obviously have employee wages. So let's just say it's three hundred dollars
[02:34 -> 02:39] You can see the monthly cost of the ads is gonna be 300 bucks. There's gonna be ten conversions
[02:39 -> 02:41] projected profit of
[02:42 -> 02:47] $7,700 and an ROI of nine thousand nine hundred percent not bad, right?
[02:47 -> 02:53] But this is typically pretty you know a lot lower than normally it would be let's just say five dollars now
[02:53 -> 02:55] You can see how much the numbers change
[02:56 -> 03:00] But you can still see they're showing a pretty good projected profit because they're only spending
[03:02 -> 03:04] $500 a month on ads, right?
[03:04 -> 03:09] But let's say the only 10% is quite high especially out of the gate
[03:09 -> 03:11] We can you know you typically can get to that
[03:12 -> 03:14] After some time, but let's just say it's five percent
[03:15 -> 03:19] Well, they're still only spending five hundred dollars and now they're making a thousand alright
[03:19 -> 03:24] So they're doubling their money. So still not horrible, but you can play around with this and get some ideas
[03:25 -> 03:27] another one is
[03:27 -> 03:34] Different calculator is this one will show more how much you've made so let's go with that same floor refinishing business
[03:34 -> 03:38] Just for this calculator and the revenue. Let's just say over the last month
[03:39 -> 03:41] That they have made twenty thousand dollars
[03:42 -> 03:44] Maybe they have spent two thousand dollars on ads
[03:45 -> 03:49] So the return on ad spend is eighteen the cost of goods sold
[03:49 -> 03:54] Let's say, you know average profit perfect conversion. Let's just say
[03:55 -> 04:02] Let's say they've done like five thousand dollars. So cost of goods sold which would be you know wages and supplies and all that stuff
[04:03 -> 04:05] Actually, let's go with tanks would be about half
[04:06 -> 04:11] So the revenue is eight thousand any fixed costs in there, and maybe they had a thousand
[04:11 -> 04:14] They can see they had a net profit of seven thousand dollars. Okay
[04:15 -> 04:20] So this calculator definitely gets a little bit more complicated it gives you a little bit more information
[04:20 -> 04:24] But you can you get the idea only fill out the yellow forms
[04:25 -> 04:27] So we're going to use that same
[04:28 -> 04:33] Information with the floor refinishing business. So let's say they're monthly PPC budget is two thousand dollars
[04:33 -> 04:42] Their average product or service is about six hundred right six hundred dollars a call how much profit do they make they make about 50% profit on each job
[04:42 -> 04:46] Cost per click. Let's just say 450 and conversion rate. Let's just say
[04:47 -> 04:50] You know, let's say they have a decent conversion rate out of the gate
[04:50 -> 04:55] Let's say it's eight percent. This is if you're doing multiple ads so you can add a Facebook budget in here
[04:55 -> 04:59] Otherwise go down here now. There's a difference okay in leads
[05:00 -> 05:07] So when you're talking about a conversion percent here you are talking about converting eight percent of all clicks
[05:07 -> 05:09] Okay, so you can see approximately
[05:10 -> 05:15] 444 clicks a month you are looking at getting eight percent of those to turn into leads
[05:16 -> 05:21] Approximately 35 leads. Okay. What we are talking about here is
[05:22 -> 05:29] How many of those leads do you actually turn into customers because that's a whole different ballgame, right now?
[05:29 -> 05:35] Once again, when I talk to clients, I will say our job is obviously just to get you leads. It's your job to sell
[05:36 -> 05:40] And that's true, right? We want to get them the best leads possible, but they have to sell them
[05:40 -> 05:47] So on average, I've seen well, I've seen clients service businesses with
[05:48 -> 05:54] Conversion percentages all over the board, but what I usually will see is right around, you know, 50 to 60 percent
[05:54 -> 05:56] Maybe 40 to 60 percent
[05:57 -> 06:00] Depending on who's answering the phone, you know, if they're really good at sales
[06:01 -> 06:06] What kind of business they have also makes a big difference, you know, you know, pest control guys
[06:06 -> 06:09] Convert much higher than than roofers. So
[06:10 -> 06:15] You can see conversion percent of leads in the customers. I'd say on average put this at 50
[06:15 -> 06:19] I've seen this as low as 20. I've seen it as high as 80
[06:19 -> 06:22] So but let's just you know, let's just say 50 percent
[06:22 -> 06:27] Okay, so with all these numbers here, you can see they're going to get approximately 444 clicks 35 customers
[06:28 -> 06:31] If you convert 50 percent of those leads
[06:31 -> 06:35] Into clients you're looking at 17 new clients, right?
[06:35 -> 06:37] And if you do any better
[06:37 -> 06:41] Then obviously the numbers change drastically, all right, but let's just leave them at 50
[06:42 -> 06:46] um monthly revenue minus the advertising costs
[06:47 -> 06:49] minus the cost for services
[06:49 -> 06:51] And here's your net profit, okay?
[06:51 -> 06:55] And you can see it costs approximately 56 dollars to acquire a customer
[06:56 -> 07:00] And you can go through some of the other numbers here, you know, it's really broken down quite a bit
[07:00 -> 07:04] Uh, but it's just something to mess around with and and gives you an idea
[07:04 -> 07:08] Maybe of what you can do with a campaign once you get it up and running
[07:08 -> 07:11] So once again, I typically will use this just internally
[07:11 -> 07:16] I don't necessarily share these numbers with a client and the reason I don't is because
[07:16 -> 07:18] I don't know how accurate they're going to be
[07:18 -> 07:21] Unless I know exactly what the cost per click is going to be
[07:22 -> 07:24] Unless we know exactly what the conversion rates are going to be
[07:25 -> 07:29] This could go either way, right? We could be really off here or we could be very close
[07:30 -> 07:34] So this is just something that will help you inside your business. All right, see you in the next training

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--- FULL TRANSCRIPT ---
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All right, so this is a calculator that I've used inside the business. I don't necessarily share this with clients too often I look at it more as a tool to help us figure out If a campaign is going to be profitable and maybe kind of get some idea of what we could do with it Now there's a lot of different things that go along with the profitable campaign It's like if a client, you know If you put up a billboard for a client and they ask you well You know how profitable is this going to be for us and you're going to say well There's a lot of factors, you know how much traffic drives by there every day What's the weather going to be like right because if it's snowing every day for a month? The traffic is going to be minimal, you know If there's a pandemic and people stop going into work the traffic is obviously going to be highly affected So this is really just an idea for you. There's a couple of different calculators here Do you can use you know anyone you want but like I said, I usually just use this internally so for the first calculator You've got total monthly clicks. This is maybe what you want to get so, you know Let's say you needed to get a hundred clicks of the campaign you're not going to always know the average cost per click because The it's just you're not going to know till you get into the campaign and chances are it's going to start out higher Then it will be in 90 days, you know after you've dialed it in a bit But let's just say the average cost per click is three dollars Okay, so conversion rates now this is a conversion is what we consider a lead that would be either a web form lead or a phone call some people will measure conversions is you know sometimes when a Person lands on a web page and they view three pages I don't view that as a conversion because I didn't make any money or my clients didn't make any money or have the opportunity to Right. I only measure conversions as a web form lead or a customer phone call where there's an opportunity for sale So let's say the conversion rate is 10% Okay, now average profit per conversion when I talk to a client I'll say how much money do you make you know per per job that you do and they you know it will vary greatly Sometimes it's you know a thousand dollars sometimes it's three thousand dollars, you know a pest control company might be 200 But let's say we're working with like a floor refinishing company and and so they're like well on average We make six hundred dollars a job, but we have to pay supplies We have to pay for gas to get to the jobs. We obviously have employee wages. So let's just say it's three hundred dollars You can see the monthly cost of the ads is gonna be 300 bucks. There's gonna be ten conversions projected profit of $7,700 and an ROI of nine thousand nine hundred percent not bad, right? But this is typically pretty you know a lot lower than normally it would be let's just say five dollars now You can see how much the numbers change But you can still see they're showing a pretty good projected profit because they're only spending $500 a month on ads, right? But let's say the only 10% is quite high especially out of the gate We can you know you typically can get to that After some time, but let's just say it's five percent Well, they're still only spending five hundred dollars and now they're making a thousand alright So they're doubling their money. So still not horrible, but you can play around with this and get some ideas another one is Different calculator is this one will show more how much you've made so let's go with that same floor refinishing business Just for this calculator and the revenue. Let's just say over the last month That they have made twenty thousand dollars Maybe they have spent two thousand dollars on ads So the return on ad spend is eighteen the cost of goods sold Let's say, you know average profit perfect conversion. Let's just say Let's say they've done like five thousand dollars. So cost of goods sold which would be you know wages and supplies and all that stuff Actually, let's go with tanks would be about half So the revenue is eight thousand any fixed costs in there, and maybe they had a thousand They can see they had a net profit of seven thousand dollars. Okay So this calculator definitely gets a little bit more complicated it gives you a little bit more information But you can you get the idea only fill out the yellow forms So we're going to use that same Information with the floor refinishing business. So let's say they're monthly PPC budget is two thousand dollars Their average product or service is about six hundred right six hundred dollars a call how much profit do they make they make about 50% profit on each job Cost per click. Let's just say 450 and conversion rate. Let's just say You know, let's say they have a decent conversion rate out of the gate Let's say it's eight percent. This is if you're doing multiple ads so you can add a Facebook budget in here Otherwise go down here now. There's a difference okay in leads So when you're talking about a conversion percent here you are talking about converting eight percent of all clicks Okay, so you can see approximately 444 clicks a month you are looking at getting eight percent of those to turn into leads Approximately 35 leads. Okay. What we are talking about here is How many of those leads do you actually turn into customers because that's a whole different ballgame, right now? Once again, when I talk to clients, I will say our job is obviously just to get you leads. It's your job to sell And that's true, right? We want to get them the best leads possible, but they have to sell them So on average, I've seen well, I've seen clients service businesses with Conversion percentages all over the board, but what I usually will see is right around, you know, 50 to 60 percent Maybe 40 to 60 percent Depending on who's answering the phone, you know, if they're really good at sales What kind of business they have also makes a big difference, you know, you know, pest control guys Convert much higher than than roofers. So You can see conversion percent of leads in the customers. I'd say on average put this at 50 I've seen this as low as 20. I've seen it as high as 80 So but let's just you know, let's just say 50 percent Okay, so with all these numbers here, you can see they're going to get approximately 444 clicks 35 customers If you convert 50 percent of those leads Into clients you're looking at 17 new clients, right? And if you do any better Then obviously the numbers change drastically, all right, but let's just leave them at 50 um monthly revenue minus the advertising costs minus the cost for services And here's your net profit, okay? And you can see it costs approximately 56 dollars to acquire a customer And you can go through some of the other numbers here, you know, it's really broken down quite a bit Uh, but it's just something to mess around with and and gives you an idea Maybe of what you can do with a campaign once you get it up and running So once again, I typically will use this just internally I don't necessarily share these numbers with a client and the reason I don't is because I don't know how accurate they're going to be Unless I know exactly what the cost per click is going to be Unless we know exactly what the conversion rates are going to be This could go either way, right? We could be really off here or we could be very close So this is just something that will help you inside your business. All right, see you in the next training

