V204 Your Funnel Will Lose Money Don’T Do This! Funnel Math

published on August 2, 2020

Now it's time for everyone's favorite subject math hey everyone while i'm sure math is not on the top of your wishlist for the day what i wanted to do is dive into some actual real live funnels

From other marketers and businesses to show you their pricing points how they do their upsells and down sells and most importantly figure out if your funnel and your pricing points are actually set up for success or

Failure given how much it costs to run advertising and by the end of this you're going to see how important controlling your ad costs are and why you see

So many freaking webinars offering two thousand dollar courses because you'll see that the funnel math gets super stupid easy when you just like quadruple your price so if you're trying to

Make money with a product that's less than 500 this is really going to be valuable and eye opening because you're gonna see how hard it is to actually build a business so we're not going to be

Talking about any stupid passive income crap here we're going to dive straight in and actually look at the real numbers on what it actually takes to be successful now the good news is jumping over to my screen here you're

Going to be able we're going to be using our sales funnel architect model i'll link up in the description if you're interested in grabbing a copy for yourself this is just one of the first tools that

We're actually publicly releasing and you won't have to do any addition subtraction or multiplication this is going we're just going to plug in some numbers and see how the model changes

I always like to make the joke that i don't like math but i like accounting because as soon as you put that dollar sign in front of it the the numbers actually start to matter as opposed to like long division and

Uh quadratic formulas who i don't i just i just don't care about them but as soon as you put that dollar sign it matters right so i'm going to quickly run through what this is and then we're actually going to go through

Each one of these different funnels and go through how much they're charging and then look at how much they might potentially make given their different conversion rates and of course return on ad spend

So before we get into that we're just going to quickly run through what a typical kind of funnel might look like or what you might be thinking about so over here on the left hand side of the screen

We have the core offer and then we have your order bump and a couple upsells so this is just how much are you charging for each one of these i'm going to assume you're doing an online course or service

Of course this can also work for a physical products business but i again i'm not an expert there so i'm just going to assume you're doing courses or a service so the maximum we could make if

They took every single offer we threw in front of them would be 648 bucks i'm going to assume our ad budget is 1500 a month and then we're actually going to start

Running down into what we think our costs are going to be and our conversion rates are going to be so in the best case scenario our cost per click is three dollars our worst case scenario our cost per

Click is five dollars and so that's how we do best and worst case so i'll just go down one column now so let's say we're running traffic we're paying three dollars per click and we are just

Crushing it with our landing page right we get a 65 opt-in rate which is pretty ridiculous but you'll see why i put it that high in a second and then our email ctr this is an advanced thing we put in if you're doing

A long email sequence this is how many people actually open your sales emails and click through to your sales message and that's assuming that you have a landing page and then you have your confirmation page

Isn't your sales page but we're just going to remove email marketing for simplicity's sake here so it's going to stay at 100 percent let me just leave that at 100 as well there we go and then what is our

Sales letter conversion rate this is going to be how many people go ahead and say you know what yeah i want to buy this product or service so we're going to say our sales letter conversion rate has a

10 is at 10 um and then abandonment it's pretty normal to have people click buy now and then get through start the checkout process and say actually better not right

So we're just gonna say on the worst case scenario five percent of the people who made the buying decision back out at the very last minute and then these are going to be our conversion rates for our order bumps and

Upsells you always comment below if i went through that too quickly i just want to make sure that we get to the fun part which is plugging in these numbers so assuming that we get a 65 opt-in rate

And we get a 10 conversion rate on our sales letter you see the best case scenario we'd be making about 658 per month so that's our net profit here so our revenue if we're

Adding up all of our upsells and cross sells or whatever else we're doing would be twenty one hundred dollars but of course we have to take out our ad budget and of course i'm assuming you're doing everything yourself right you're

Not paying an ads manager you're not paying anyone to to help you with building and managing your funnel and so what this does is it looks at this is the best case scenario net

Profit of 658 bucks and the worst case scenario is we'd lose 1400 right so if we're going down this chart if you look at our landing page and landing page

Conversion rates if our landing page conversion rate was thirty percent which is actually pretty good and our sales letter conversion rate was three percent which is also pretty good

And then we're getting a between a five and three percent conversion rate on our upsells and order bumps we would still be losing 1400 a month if you can hear the alarms i do apologize i don't know what's going

On but we're just gonna keep going and then the center column kind of averages it so i just wanted to kind of quickly go through this example before we dive into the real case studies to show you

That when you are running paid traffic it's very very hard to make money with a low price point offer so for example if we just took this and we went to 197

Right we just go to 197 all of a sudden we aren't losing as much money but our average is actually going to start making us some money and of course if we do 197 our

Conversion rates are gonna go down let's say our landing page stays the same but maybe our sales letter conversion rate goes to five percent right so all of a sudden we can cut our conversion rate in half now yes we've

More than 3x the price but we can cut our conversion rate in half and still be okay still making money on average and in the best case scenario and obviously if we go down to three percent and well you're not now

We're starting to lose something so with that let's go ahead and just jump right into our first funnel that we're going to deconstruct and this is going to be frank kearns getting consultants fast

Funnel so he has this free book offer i'm gonna do all free book offers just because i think those are really good in terms of understanding how low ticket offers work as opposed to

Trying to sell that two thousand dollar course which we will get to so we have our sales page and then we have one upsell we have upsell number one and upsell number two and then we also

Have upsell number three and then we have the actual checkout it starts at five dollars and sixty cents i think these are great funnels to kind of deconstruct to show you how you can actually be

Profitable with lower ticket offers and of course this swipe file goes through his entire entire sales page which isn't really important for our purposes right so i'm going to jump cut ahead to where

I've got all these numbers inside of this sheet and just like that we have all of our

Numbers plugged in here so i went ahead and changed the conversion rate for the sales letter back to 10 so you can see if we were offering some sort of really low ticket offer or if you're familiar with the

Digital marketers style their trip wire offer if you will at five dollars and sixty cents two upsells at a hundred dollars and one upsell at 300 all three situations are losing money

Right so let's start playing with these conversion rates to see what we would need to change in order for this funnel to actually be profitable so the first thing of course we could do is

Look at our cost per click let's say we are just magicians right and we're somehow able to get our cost per click down to one dollar now even with all of these all of these numbers

We could be paying one dollar cost per click which is really really hard to do right out of the gate but let's say we're just paying one dollar cost per click we'd still be losing 83 dollars a

Month with this funnel plan so we'd have to go look someplace else and say well maybe our sales letter somehow magically is able to convert at 15 all of a sudden we're making a grand

Total of 675 in the best case scenario right best case scenario so even if we change our percentage here worst case to 10 we're still losing just over just under 1500

A month now if this kind of looks sad and depressing it should because this is how hard being successful running funnels actually is because when you start to do the math

You realize that all those shiny sales letters and all those software's telling you you're gonna make thousands of dollars just make your fancy funnel and it's gonna be all great is it it's a pipe dream right this is

Really really hard especially when you have a price point this low which is again is why you'll see why you see a lot of course creators with higher price points because just

Trying to sell a book and then having a couple of upsells it's really hard to make your money back so let's say for example let's go back to oh you know what upsell i did all of that and i forgot to add

The uh the upsells so let's say upsell is five percent and upsell is five percent all of a sudden now this funnel is actually starting to make some real money on the high end

So i totally forgot to plug those in but also this shows the importance of upsell so number one it's really hard when you have low price point products and then number two you're pretty much banking on the fact

That the upsells are somehow going to cover your advertising costs so in the best case scenario we're saying it's going to cost us a dollar per click so we're going to get 1500 people to our

Landing page 975 of them will opt in and of those 975 leads that we get 146 of them are going to actually purchase our product or service so that's a 15 conversion rate that is

Ridiculously high it's not reasonable for any of us to think that we're going to get a 15 conversion rate especially out of the gate right now obviously what which funnel is this is i'm already forgetting consulting

Fast so frank kern so obviously frank curran he's been doing this for over 20 years now so he could probably get rates like this if not higher right but when we're starting out

And we're trying this it's probably not reasonable to think that we're going to get 15 conversion rates 65 percent opt-in rates so i just want to show you this because you really need to be realistic with how

Much you can expect to actually make with your funnels so let's go ahead rapid fire the next one we have is from tony robbins money master the game his actual max transaction value came out the most at

600 just over 600 dollars so if we look at his funnels this one's built with this one's built with click funnels i think the next couple are next two are you'll see that his original book offer

Is like it's like 795 here we go so 795 tripwire offer classic classic tripwire funnel and then he's going to go in and have a actual 300 product as the first upsell the

Second upsell is another 300 product and then that's oh that's it he only has he only has two upsells so 300 and 300 plus 795 you know 600 right so if we go ahead and

Take these numbers and plug them into our model all of a sudden because our upsells cost more and assuming we're going to have the same conversion rates which is

Unreasonable but let's just assume all of a sudden you spend fifteen hundred dollars and you're making five thousand eight hundred ninety seven dollars a month back now i'm going to go back to a

Reasonable cost per click which is going to be three dollars for a targeted lead right if you're paying three dollars per click whether you're doing google ads or facebook ads that is that's that's

Pretty good as a beginner just starting out now yes you've seen videos especially here on youtube of oh i get like 50 cent clicks right they don't tell you how many months

Of this they went through how many red months they went through before they finally had the green month where they were making just 663 dollars back right everyone likes to talk about

How many sales they have the revenue but no one likes to talk about how much it costs to actually get that and so if we come back over here let's just say because this is a higher price point and there's three

Payments you're probably gonna have i don't know five percent of people actually wanting to purchase that and then upsell three there is none so we'll just go ahead and put it at zero

So you would have to have a fifteen percent conversion rate on the sales letter then you'd have to have a five percent conversion rate on both upsell offers in order to get to 70

In profit for for the uh for for the month and of course if we take this back down to 10 you'll see that all of them start losing money so i hope that this is this is helpful

If it's not please go ahead and comment below and just say hey you know what this uh this going through all these different funnels not really helpful just too depressing

Right so this is what we're looking at in terms of trying to make a low price point work with funnels right so now let's go ahead and say let's

For example purposes say we're going to be selling a flagship some sort of flagship course 300 to 500 right so let's go 297 so we're gonna have a 297 dollar course everything

Turns green right okay hold on and then our first upsell is gonna be 197 and then our second upsell let's say it's some crazy echelon package or something and it's

It's uh 500 right and then upsell three let's say it's um let's say it's 90 it's 100 a month continuity average average would be three months so

Let's say that's another 300 on average someone's gonna stay in for 300 for for three months so we are go we are going to assume that we get a one percent conversion

Rate on our upsell number one uh 500 maybe a point maybe a 05 005 sorry the formatting here is not all that helpful sometimes and then the upsell number one let's say we get we we keep it at we

Keep it at five percent right and i'm gonna delete that for the worst one and we'll say point zero two five percent for the worst case okay fine find google sheets round up

Round up see if i care i don't right and even though our upsells are higher you can see that at three hundred dollars and a conversion rate at 10 we are green across the board and this is

Why it's just so much easier if your price point is higher now can we expect to have are we going to say that when a price is eight dollars and we get fifteen percent is that

Fifteen percent going to stay if we jump all the way up to three hundred probably not right so if we take this down to say let's say two percent here the worst case scenario

Best case scenario i'm gonna go back to five percent even if we're only getting a five percent conversion rate on our sales letter that's 16 orders out of the original 500 clicks we're making 3 200 a month

So should you look at creating funnels where the price points are higher and your conversion rates are lower yes absolutely because it's so much more work to try and get the volume to make up for

The lower front end price point product i do apologize for all the cuts sometimes i have to i have to think here so that's just an example of why you want to go 297 now let's go ahead and change it to the

Webinar price point because you've watched a webinar and at the very end it always comes out to 2000 well not always but a lot of the time it comes out to two thousand dollars for some reason right

And then let's go ahead and change these for uh example purposes we'll go ahead and leave the the front part alone but are you gonna get five percent when you're charging two thousand dollars no probably not

Maybe maybe one percent let's let's let's go crazy and say one percent and then worst case scenario you are getting 002 0025 percent here and of course it's changing it to 003

And we have no sales excuse me and we have no upsells because we're charging for a 2 000 product although if you've gone through the funnels you know that the 2000 is just the beginning they they

Always come up with something else right anyway not judging how how they do things right so if we look at our best case scenario all of a sudden we can have a one percent conversion

Rate we're keeping everything else the same out of 500 people we only need three to make four grand and we didn't need any upsells and we have a lot less customer support and headaches

To deal with and so this is why this is the math behind why you see so many courses and so many products priced around that fifteen hundred to two thousand

Dollar mark because they know that they are going to get such a astronomically lower conversion rate but even if it's just what is this

Half a percent of a conversion rate so i'm doing that off the top of my head they're still making fifteen hundred dollars back on their fifteen hundred dollar investment by the way they have

Four to four to five hundred leads to follow up with and sell other products or services in the future so if this has been helpful go ahead and hit that like button i'll go ahead

For the champions out there and go through these next two so i'm going to go through millionaire morning relatively quickly so this one is from lewis howes and so it's another book right

So he's charging 799 for his book as opposed to 795 and if we go to his upsell page here you'll see that he has there it is seven oh 790 oh there's an order bump for 997 and

His product is 799 gosh i can't remember all of these it's not my job okay here we go and then his um upsell is his monthly inner circle that

Seems to be a hundred dollars a month so i'm going to assume that he keeps on average three or on average the average person stays in for three months so we'll go ahead and

Change our model here to 799 and then our order bump was 997 and then we're going to have our upsell number one offer at 99 and assume that we have an average of three months so on average he's going to

Make 297 so his max is 314 dollars so obviously everything has immediately turned red right because we're at a one percent conversion rate and we need to

Actually add our order bump so let's say on the order bump we're go let's go crazy 50 let's go crazy with this one we get 50 right and then our sales letter converts at let's

Go really crazy 20 for some reason right so we convert it 20 our order bump converts at 50 and let's half it at 10 for our upsell offer and then i'll go ahead and

Delete these for now so we'll see best case scenario we're getting 65 opt-in rates on our landing page our sales page is converting at twenty percent from cold traffic it only costs

A three dollars to get a click and then fifty percent of the people take the order bump and ten percent of the people go ahead and take up sell number one and stay in for three

Months we spend 1500 and we wind up making just over eleven hundred dollars now is this life-changing 10k money well not like this but here's here's the kicker when you are able to get

Something like when you're able to get a situation like high now i'm assuming you can see average and low and you can see what it would actually look like in reality let's just go pi in the sky

Right let's go ahead and say we spend 10 grand a month two three there we go counting right all of a sudden we're making 8k and so this is where scaling funnels actually starts to

Become really profitable but it doesn't really matter how much you spend if your funnel metrics are always going to be red you can see here that you can't spend your way into success if it's not

Working at 1500 or 3000 a month it sure is heck not going to work at 10 20 or 30 but once you have that this is where you start seeing in those marketing sales letters and marketing

Sales ads where they say you know we made 18 000 or making 20k a month well yeah you're making 20k a month if you spend 25 right 123 i don't know if you have

An extra 25 lying around to to make 46 now that's a great return on investment you spend 25 and you and you get 21 back right and it's covering all of the 46s covering all of your expenses

Which is awesome but you can still see that it doesn't matter how much we're spinning because in the worst case scenario i don't know what's i don't know what's going on here um the worst oh

That's why we need to go five percent right i'm doing all this talking and i'm i'm and i'm uh leaving things at zero and but doesn't matter how much money we spend

We're still losing money so we'll go ahead and go through this last one here this is going to be from the funnel hacker himself russell brunson so this is his originalcom secrets book

As a disclaimer actually did purchase this book and i thought it was really really good i don't remember when the book came out but it was years ago and it was just when i think i was i was still a financial consultant when i when

I purchased this so he has this book it's 795 um tony robbins model pretty much just copies his he has a little upsell he has a order bump for 37 that's different than when i uh

Than when i first when i first purchased it and then if we go down here you'll see that his first upsell is gonna be 47 bucks yeah so his first upsell is 47 and then his second upsell okay yes

He really he really piles it on like he he really wants you to make make you feel silly if you don't take the 47 right okay and then his second upsell here is going to be one payment of 297

For his traffic secrets i think he actually came out with a traffic secrets book so you probably just buy that book instead of spending 300 but um you didn't hear that from me

Right okay and we're scrolling i should probably stop scrolling because there's oh and then he this is and then he offers it in a split payment if you decide not to

Purchase it and go straight into actually the training here so let's go ahead and type in his i'll go and skip ahead to when i've done that one hour later and fixing a little math error on the google

Doc here now we are good to go so we have our core offer which is the book at 795 we have our order bump which is the funnels then we have some extra stuff some more extra stuff

For grand total of 380 bucks absolute max so coming down to our cpc estimations i'll leave these all the same now for the sales letter we'll just leave it astronomical and we'll leave the order bump

Astronomical right so in a crazy crazy world where people just go crazy for this book because it's so freaking good you'll spend 25 000 a month and you will make

About 24 000 back so let's go ahead and bring it back down to 1500 because that's where us normal folk would start out if not 750 right so you spend 1500 and at the end of the day your revenue

Would be 28 just under 3 000 and you would make 1300 bucks in the best case scenario now realistically when you're just starting if you have a

Funnel that's all set up like this actually obviously these price points are really good and it's something to model but let's say in our best in our best case scenario just getting started your cost

Per click and your conversion rates are much more likely to be this column it's much more likely to cost you upwards of five dollars per click to get a good targeted

Lead so in this situation i'm going to change the high column to what i think you could probably get out of the gate so out of the gate following just if you're following youtube tutorials you're probably going to get

350 to 4 bucks right so i'm going to say 375 on average and this is going to include just figuring things oh 375 wow so i should have done this earlier forgot

To do that oh wow so let's just say 375 right so we go from 1300 down to seven just by changing just by the cost per click changing slightly it's actually crazy

How much the cost per click can influence the entire funnel so if we go up to let's say six dollars a click something crazy like that if you're doing google ads you can you can pay upwards of fifty

Dollars a click right but you know we're not lawyers and dentists so we'll leave that alone right so looking at it here you get 375 per click and your conversion rate you're just

Absolutely crushing it would be actually 30 and if you're trying to figure things out you're probably still around let's say 20 and already 395 375 per click and a 30 conversion rate on your landing

Page and the funnel is losing money this is hard this is hard this is really really hard because with every single one of these funnels we have been

Very very i'd say overly optimistic with rates and you can go look up the averages in your niche or industry right but saying oh i'm going to get a 30 conversion rate on my landing page right

Out of the gate that's pretty that's that's that's pretty non-conservative i'm forgetting that's pretty non-conservative conservative right that's that's really looking at

The world through rosy colored glasses and then saying hey my sales letter is going to convert it 20 right out of the gate okay wow you're super optimistic 50 of the people are gonna take the

Order bump okay and then upsell number one and two is going to going to be 10 and 5 that is that's just so so optimistic and it's good to be optimistic

But in this particular instance i think this right here is why so many people who actually put in the work and make the seven dollar offer the 37 offer like it takes so much work

To make those those upsells right and then to have all of those that months of work and months of work and spend 1500 to 3 000 let's say you're crazy like you you have a

You have a nest egg and you spend five grand you know you're still losing 1 300 bucks and it's going to happen you have to be made up some other way some other place and so obviously when we when we

Talked about earlier going to creating creating funnels where things start at a higher price point is is just a necessary business decision in this environment and considering how much things

Actually cost so thank you so much for watching i sincerely hope you got some value out of this video and you had a little bit of fun of just changing around the numbers and seeing how these funnels can lose money and

Make money by just little simple tweaks and that's all what conversion optimization is right you look at this you go okay it's in the red so first thing we've got to do is is bring

Is bring this down right and then the next thing we've got to do is okay figure out how do we get the the landing page up and then all of a sudden you're making a little bit of money and you just little incremental changes

But in the beginning it's gonna be all red it's gonna it's gonna start off red and it's gonna take a while to get to the green so if you're interested in picking up a copy of this tool for yourself it is

A paid solution go ahead and check out the link in the description if you're interested otherwise just keep rewinding this video and check out how different different funnels perform

Under different variable conversion and click-through rates obviously i'm starting to ramble so i'll go ahead and edit end it here hit that like button comment below to let me know you made it till

The end and as always keep building the business you love you

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