Think you need a business plan to have a successful website/web service? The statistics would actually indicate otherwise, as the most successful websites were from people who were able to ship a product out of the door for an audience to start using and then iterate upon.

“Winners Ship”

This is what I keep hearing like a broken record from people who know what it takes to make it work online. Are you worried about having all the features your clients might ever want? You are going about it completely wrong, what you should be doing is focusing on key features that work – and work really well. Beyond adding clutter and delaying your launch, feature bloat can actually detract from whatever primary pain point your service is supposed to alleviate.

Pick the top 3 or so features that are core to your service working and make sure that the value of each feature is incredibly clear so that a user has no doubts at all as to WHY your service exists in the first place. If a customer can’t quickly identify the value in your service then all is lost anyway.

Link > Plan

So if you axe the business plan and try to not over think your new service, how are you supposed to go out and try to acquire funding for your start-up? Y Combinator jokingly says that they value a company by “adding 500k in value for each engineer and subtracting 250k for each MBA” because investors today want to see progress on an idea, not just a bunch of words around how good an idea might be. So what do investors care about these days instead of just a business plan? A link to a (mostly) working product that has a little bit of traction in the marketplace. The cost barrier to entry for a new web service has been lowered to much that investors need to see this level of success before investing because they have the luxury of being more picky.

As entrepreneurs, we can often relate our business passions to that of our lives with a significant other. We put so much effort into things we like to try and see them succeed and grow into something truly amazing. Today I was listening to my iTunes when @MichaelBuble’s song came on ” Just Haven’t Met You Yet” and I couldn’t help but draw the similarities between an entrepreneurs quest to build something amazing and the human desire to find someone you love to spend your life with.

“I promise you kid, I give so much more than I get”

Starting a business isn’t easy at all – in fact I can say without a doubt that starting not one, but two businesses so far it has been the most challenging thing in my life. Every time you decide to put yourself on the line financially, emotionally, and mentally you run a huge risk of being hurt, battered and depending on the level of risk you might even feel broken by the end. But what entrepreneurs see is amazing OPPORTUNITY that makes the risk all worth it. If you aren’t this person out of your circle of friends, chances are that you know at least one or two who seem not only willing, but EAGER to do this kind of thing.

But what is incredibly important about entrepreneurs like us is that we are willing to take that risk. No risk, no reward.. this saying has always been true and always will be. I know that I wake up every morning and ask myself “Why am I doing this? Why am I putting all my chips on the table to try and do this?”. But every day I keep working at it because I know deep down I am far from satisfied with the status quo – I want to build something truly amazing.

The Good Stuff

What I was amazingly interested in however, was the contrast between the conversions of clicks to leads that stem from a very warm (and large) e-mail distribution list that has a) heard of Shoemoney before and b) has been communicated to by the list owner. Luckily enough, non other than Mr. Jonathan Volk of JonathanVolk.com decided to openly use a Bit.ly link with his e-mail push which meant we were able to peak into the results.

Bit.ly is a great way (mostly because of accessibility and free cost structure) to track the number of times your link is clicked, when that is, where its from (application) and what country. However, when doing a very public e-mail push, you are going to get called out on it from time to time.

Quick Background

So first things first, how did Jonathan Volk build up this e-mail list.. and how big exactly is that list? Jonathan Volk, Jeremy “Shoemoney” Schoemaker, Frank Kern, Andy Jenkins and a laundry list of others all operate in the affiliate marketing space to a certain degree. Because of that, they have a large audience that overlaps with each other and at the very least has a very similar set of actual needs. When Jonathan Volk wrote an eBook about effectively advertising with Facebook and other affiliate marketing promotional methods, he was able to leverage his existing relationship with people such as John Chow, Shoemoney to pump his eBook to a ready, willing and eager audience while providing value in exchange for a nifty e-mail address.

Jonathan decided to chime in on my Twitter conversation with John Chow to make sure it was stated that he pulled off this e-mail list for JUST the cost of 3 iPads as Chow has stated…

But there were certainly more promotional methods than just this for Volk, but tapping into lists such as Shoemoney, Kern, Chow and Jenkins was a good way to capture the low hanging fruit. I know for a fact that he also used some Sponsored Tweets to promote his book to the affiliate marketing space. (side note: I plan on covering Sponsored Tweets pretty in-depth very soon).

The 150x ROI

The rule of thumb in the list building business is that a targeted e-mail list provides about $10 of profit per year for each subscriber depending on how effectively they are marketed to. So to figure out the total value return of this list for Volk, lets do some simple math that rounds up on the cost of promotion and down on the number of subscribers.

Subscriber Value: $10

Subscribers: 10,000

Average Subscriber Validity: 3 years

Lifetime Value of Subscriber: $300,000

Cost of acquisition: (3 ipads at $500 ea. ) = $1,500 + (sponsored tweets0 = ~$500 : $2,000

With these quick and dirty numbers, Volk can expect to get up to a 150x return on his $2,000. Not a bad return at all if I may say so myself!! So what about this particular launch that we have click and conversion numbers from?

Warm & Communicative vs. Cold & Direct

Volks list produced 1,629 clicks over a roughly 1 week period and two mailings out of list that is known to be at least 10k.

Click through ratio? (clicks/emails) = 16.29% or lower for an “active” list

Number of leads generated? 824.

Conversion Ratio? (leads/clicks) = 50.58% HOLY SHIT THIS IS GOOD

Cost per conversion (cost per lead/conversions) = $2.43 per lead, but has a much longer lifetime value

What were my results with my leads generated through advertisements?

I generated 588 clicks over roughly the same period of time as Volk, relying primarily on SponsoredTweets for Traffic with a total cost of $25.86

Click through ratio? This is hard to tell because I just used Bit.ly and we don’t know view/click data

Number of leads generated? 23

Conversion Ratio? (leads/clicks) = 3.9% MASSIVE DIFFERENCE

Cost per conversion (cost per lead/conversions) = $1.12

Summary

What is amazing about the difference in lists compared advertising for lead generation is the conversion of leads into your relevant product, service or affiliate offer. If you have a list that you have build of good will with in the community you are going to see a MASSIVELY better response rate from your audience and a much larger return.

In regards to me having a much lower cost per conversion for this particular push, it is important to note that while Volks cost if confined to this case study alone would be more than double what I paid, he will have the opportunity to repeatedly market to this audience for a return that is many, many times larger than what I may generate through this study.

Building a List

How can you build a list and start cashing in the huge return that people like Volk are reaping the benefits of? Here is a check list of things to remember when pursuing this opportunity.

1. You absolutely MUST provide value to your market (doesn’t matter if it is Dog tricks or Car Cleaning) in exchange for their opt-in e-mail.

2. You need to establish connections with as many people related to your targeted industry as possible. This is going to give you a much wider audience and essentially allow you to cherry pick the most active and highest paying users from your competitors list for years of marketing success.

3. GET YOUR LIST STARTED TODAY. Getting it started as soon as you possibly can allows you to compound your results and start seeing the power of list building, lifetime returns and a “list ATM” that so many affiliate marketers are used to at this stage in the game. If you are looking for a high quality service provider to use, Aweber comes highly recommended and gives you the first 30 days for ONLY ONE DOLLAR.

Click here to get the massive Aweber deal and start building your client base today.

]]> http://thecollegestartup.com/2010/07/24/warm-leads-vs-cold-leads-case-study/feed/ 3 http://thecollegestartup.com/2010/06/29/filling-holes-vs-innovating/ http://thecollegestartup.com/2010/06/29/filling-holes-vs-innovating/#comments Tue, 29 Jun 2010 07:08:48 +0000 Travis Ketchum http://thecollegestartup.com/2010/06/29/filling-holes-vs-innovating/ Twitter has been telling developers for months to stop “filling holes” in their product and start innovating. Pretty big words coming from a company who is now reaping the benefits of 3rd party development efforts and plagued by downtime.

There is an interesting difference between filling holes and innovation is often the application of the product or service. For instance, the very public issues with the iPhone 4 (which I now own) are ‘magically’ solved by the Apple produced bumper case. The fact that the product solves an issue that shouldn’t even be there in the first place rubs me the wrong way.

Build, Build, Build
In contrast though, there are some real opportunities in similar market categories. For instance I have a burning desire to buy a case for the iPhone 4 that is equipped with a threaded hole compatible with tripod stands.

I also know that I can’t be the only one who has this need because the picture quality on the new handset is equal to a flip cam and mid-level point and shoot camera. So why is there no product on the market? Time & Demand.

Time after a product launch is logical, and eventually goes away. But what about demand? I mentioned that there must be some level of demand for this based on quality, audience and usage. However gauging actual demand for a product is a daunting task and products that don’t fill holes cone with an added level of risk.

So is your product or service filling holes or innovating? If it’s filling holes, how can you more clearly define your value proposition?

By the I wrote this entire post on my new iPhone

As entrepreneurs we are often blinded by the enthusiasm behind our ideas, our passions and our drive to make it all come together. This thought process is made even less logical when you have tasted success in the past, but now must face the reality of a shifting market, a down economy and a business that is bleeding cash. I recently had a prospective client come to me who was in dire straights; her business had once been pretty profitable but is now dumping money left and right. This prospective client came to me because she had no web presence at all and her retail store has been losing money for over a year.

Her biggest question was “How do we capture users through the internet to grow my business?”. The sad answer to this was that in her particular category the margins were low (in dollars, but but high in percentage) and depended on high volume to make sense financially. As I looked through Google search volume in her appropriate keyword set it became apparent that the reason her retail store was dying off wasn’t just do to this area, but in fact the entire market has shifted away from her category. The only real way she would have had a chance right now is if she had been a first mover to shift towards the web and become an authority for her sector. Unfortunately now though, her sector is saturated, dying and EXTREMELY competitive; the numbers just simply don’t make sense anymore.

Her passion is admirable, and her work ethic is on par with what is needed to run a profitable business; however fire and hunger are simply not enough to make an unworthy market sector work. So as entrepreneurs, what have you done to create a separation from your idea to make the most logical and reasonable decisions about staying in business or not? The best entrepreneurs are the ones who have failed the most, but also known when to cut their loses and move on to a new idea.

So what about the times when you just need an extra cash injection to beat your competitors to market, secure a new technology or push through new patents to give your business some protection moving forward? Unless you have a rock star team that has a proven success record, you likely aren’t going to be pitching to Venture Capitalists, instead you will find yourself face to face with Angel investment groups.

Let’s understand the difference between a Venture Capitalist (VC) and an Angel Investment. These are general references, obviously each case can vary, and please seek the advice of a lawyer before making any large decisions regarding your business and funding.

VC’s

Venture Capitalists are usually the most aggressive investors in the industry. Your company often times needs to have noteworthy revenues that are consistent, and a valuation of several million dollars before you get their attention. They usually look for:

• Investments of at least $100k or more
• Want 51% control of your company minimum
• 10x return on their investment within 5 years.

Angels

Angel Investors are much more common in the technology world. These investors typically really believe in the business idea and while they often invest less per business than a VC they make more frequent investments for a diverse portfolio. The type of landscape that Angels look for include:

• $5k – $75k investment range
• 3x-5x return on their investment over the course of ~ 3 years
• Less control of your company (20-30%), they want a say but not control

As a likely technology based start-up company to be reading this post, you probably have a pretty low overhead and are seeking Angel investment over VC capital. As you approach these investors make sure that you tailor your pitch to their appropriate interests. This is very important because these investors see thousands of pitches, so get to the point and assess interest levels.

1. Be clear about how much money you are asking for
2. What you expect the average return to be for the investor
3. Time to payout (Are we talking 2 years? 5 years? 10 years?)
4. Start with low control (20%) but make sure the numbers are reasonable

What should you specifically avoid in your pitch?

1. Don’t use a “top down approach”. EVERYONE says they only need 1% of the market to be rich, use a tangible metric like “if we have 3,000 users X $5 margin per user, we will have $15,000 of gross margin”.
2. What is the competitive landscape? You have competition regardless of how “innovative” your product or service is, it may just not be direct. What could customers be buying instead of what you offer? Note it and take it seriously.
3. How moving parts are their to your business? The KISS mentality is what investors want to see. Each new component that your business involves is another chance for a less than optimal outcome, and an overall decrease in your chances for success.

As if Twitter wasn’t a hard enough sell for the majority (which I still argue it hasn’t successfully accomplished yet) but now these developers are actually hoping that users will be willing to take the time and effort to launch at least one of their apps to announce their presence at their favorite restaurant or pub. But where are all the users? The best performing location app currently only has 1.5 million active users… Twitter? 75 to 100 Million at best, but Facebook has a staggering 400 Million active users with their largest growth in mobile and has pushed them into the #1 visited site in the United States, even surpassing the Google Network. It also is not secret that Facebook is planning on pushing their own location based services that do use new and interesting ideas, and not just feature cloning obsessions like they have had with Twitter for the past two years.

QR Codes: Little barcodes more or less that hold bite sized information that scanners can easily recognize. It has been rumored that QR codes will likely play a large role in Facebooks location strategy and could solve one of the major loopholes that current location applications have which is that they are easily gamed by “checking in” to a ton of places you haven’t actually visited. By integrating QR codes business could not only run specialized promotions but could more easily track the progress and success of their online promotions to drive real, tangible revenues to their brick and mortar establishment. Facebook is now cashflow positive with their powerful self-serve advertising platform and will be getting hungry to show business the value that their profiling data can create when coupled with real world “gaming” that drives revenue.

So the real question that you would have to ask if you were an investor, are applications like Foursquare and Gowalla really with the millions that have already been poured into their technology? Granted they have pushed innovation within social media and opened up a can of worms that could be extremely popular when correctly combined with business side promotional efforts, but with the big blue Gorilla in the room (Facebook) where is the end game? How would you see yourself exiting this scenario in a profitable way? Obviously social media icons such as Gary Vaynerchuk and Kevin Rose are very bullish on the idea of location based applications, and both have been angel investors (Kevin somehow was able to invest in both Foursqaure AND Gowalla, not quite sure how that works).

What do you think as a consumer? Are you willing to use a secondary application just for checking into physical locations? Do you even care at all about doing this unless it offers some kind of virtual coupon, discount etc that is instantly redeemable? Or would you instead rather see all of these types of innovations rolled into one monolithic service from Facebook where most of your real world connections are hosted anyway, with the opportunity to push certain events into your public Twitter stream?

It is the goal of every investor… to find the next big thing and invest appropriately with the hope of large returns in the near to distant future. It is then appropriate to ask oneself, “What is the next big thing, and what do I need to know in order to capitalize on it?” Whether it was the ‘.com.’ boom in the early 1990′s, the belief in 401k’s and corporate pension plans for retirement, or the growing real estate bubble it is easy to see that popular market trends will eventually collapse.

As people lose their jobs and retirement capital from irresponsible stock brokers, and lose their confidence in the current establishment it can be a wise choice to go against the grain. What I mean by that is a new era in business investment which does not fit the status quo of decades past. The world has entered into a state of “Network Marketing” on a much larger scale than in previous years.

When people hear these words however many run for the hills and blacklist the ones who try to pitch their Network Marketing product. It has become second nature for many of us, but it is foolish to believe that the entire market is plagued with poor products, especially ones with lucrative compensation plans for those who want to build a business. In fact, with many of the financial conventions we have grown up we find that many have failed us, or we were too foolish to see reality and as a result many of us lost our shirts.. Now is the time to try something new, especially if you are trying to establish an effective cash-flow business. So where should you be looking? Try Mona Vie!

After reviewing the top earning companies among Fortune 500 companies ‘Mona Vie’ earned #3 in total revenue according to the ‘Inc. 500′ report for 2009. On January 1, 2010 they hit their 5th year anniversary and the success they have had is absolutely incredible. It is so incredible that Mona Vie reached over $1 Billion in sales faster than Microsoft and Starbucks during their infancy. In comparison to other Multi-Level Marketing Companies (MLM’s) Mona Vie is rocketing to the top with sustained growth leaving the rest in a cloud of dust. The ‘Inc. 500′ has even recognized them as #1 in the Food and Beverage category placing them at the forefront of the now emerging ‘Health and Wellness’ phase of worldwide business.

Many financial experts such as Robert Kiyosaki, the author of “Rich Dad, Poor Dad” and top economist Paul Zane Pilzer have urged people to put Network Marketing into their portfolio’s, especially in the Health and Wellness industry. Why?…because this is the next big wave to hit the public and those who jump on it now will have a better chance at finding success.

When it comes to Mona Vie’s corporate team they have been lucky at putting the right people in the right places such as Randy Schroeder and Henry Marsh. The founder and CEO Dallin Larsen was awarded the Ernst and Young Award in the emerging companies of 2009 category which is another incredible achievement for Mona Vie since no other MLM has ever been nominated. Along with a solid product and a great compensation plan the corporate social responsibility that Mona Vie has to the world is substantial to many other companies. Their dedication to the people of Brazil goes much further than just building the economy there. Mona Vie’s “M.O.R.E.” project has helped hundreds of children get off the streets in order to receive not only food and shelter, but an education that will help them for life.

With this is can be expected that Mona Vie will continue to grow for many years to come. At the moment it is spreading like wild fire throughout many parts of the world as they expand. Japan, Israel, Poland, Australia, Great Britain, and a number of other countries have now been added allowing for exponential growth to occur in the next few years. Our advice… to make sure you research the importance of not only Mona Vie, but the emergence of Network Marketing as a whole for years to come.

Do you want money? Duh, yes. How about the chance to win a brand new Tesla? Who could say no?

The idea of big prize giveaways are an age old practice that Las Vegas has been using for decades. {Anybody remember the National Lampoon where they win the Dodge Viper?} Jason Calacanis, the founder of Mahalo among other things has recently put snagged the Twitter handle @auto for automotive related posts. So how do you drive (no pun intended) a ton of followers to a new handle, and make sure they stick around for the long shot? Here is the Jason system:

1. Have established success at building business
2. Have enough money you can buy two Teslas (at put on order)
3. Make people TRUST you, and that you are not a fly by night scammer
4. Get some of the more influential people on Twitter to retweet the contest
5. Voila! Instant follower growth, and likely won’t even have to give away the car!

Jason has built up his personal brand with loads of credibility, in todays social networking credibility most certainly holds the highest value. This point is driven home when you consider that according to Twitter (via @neilpatel) there are over 15k “Social Media Experts”, and in reality they don’t know anymore about the space that your boss who also thinks they are an expert

So what exactly is his catch, and what is the most likely result?

To win the Tesla, you must first become a follower of the @auto account (the car would only be given away to one of the followers). Secondly, @auto has to become the #1 followed account on Twitter beating out @aplusk which would currently require in the neighborhood of 4 Million followers.

The likely result?

It is doubtful that @auto is going to become the number one followed account on Twitter even with titans like @kevinrose retweeting the challenge along with blog support. However, what @jason is likely going to end up with is a heavily followed account of over 1 million users… for essentially free. I believe that he would honestly give away the serial #85 Tesla S that he has pre-ordered because 4 million followers is worth that much, even @shoemoney with 85k followers was able to bring in close to $15,000 in one month due to clicks on advertisements to other peoples content. As any good marketer knows though, if someone else is willing to pay that much for clicks from your feed you are the ultimate sucker because the clicks are worth more than what they are paying.