✅How To 2.5x the Profit Per Member ✅ Ep 139

In a deep dive into the power of pricing strategies, the speaker, enthused by Patrick Campbell's data-driven insights from his work at Price Intelligently and ProfitWell, reveals that pricing is the strongest profit lever for businesses, especially SaaS and service-based models like gyms. Analyzing data from over 11,000 companies, the speaker explains that a small increase in pricing can significantly boost profitability compared to customer acquisition or churn reduction. They illustrate how gyms can nearly triple profits by adding value through upsells like one-on-one coaching without incurring substantial costs. The speaker emphasizes the importance of providing more value to justify price increases, which can lead to a substantial growth in profit and better compensation for top trainers, all while enhancing customer retention and satisfaction. They conclude by encouraging entrepreneurs to make data-informed decisions to increase profitability and remain competitive in a saturated market.

• Speaker A introduces the topic of profit levers in business, expressing a strong interest in discussing financial strategies.
• The focus is on Patrick Campbell, owner of two SaaS companies, Price Intelligently and Profitwell.
• Price Intelligently specializes in analyzing data from SaaS companies to derive business insights.
• Speaker A aims to share insights from Patrick Campbell's data analysis relevant to service businesses.

"Happy Thursday, everybody. Hope you guys are having an amazing day and start or end to your work week. And if you're an entrepreneur, it's just the middle of anything because you're working all the time anyway, the strongest profit lever in business and how to use it."

Speaker A greets the audience and sets the stage for discussing profit levers in business, acknowledging the continuous work cycle of entrepreneurs.

• Price Intelligently reviews extensive data on SaaS companies.
• The analysis includes payment structures and various other metrics.
• Findings from the data are applicable to service businesses, not just SaaS models.

"So I've been in a deep, deep, deep dive reading books, and I've come into business love with a man named Patrick Campbell. He owns two companies, one called price intelligently and one called Profitwell."

Speaker A expresses admiration for Patrick Campbell's work and the depth of data analysis conducted by his companies.

• The scenario presents three options to double a business: increasing customers, reducing churn, or raising prices.
• Each option has different implications for profit and costs.
• The scenario is used to illustrate the impact of different growth strategies.

"And so anywho, many of you, or maybe some of you have heard of the genie in the bottle story, but basically, if you rub a lamp and you ask a genie, double my business. And he says, okay, there's three ways you can do it. One, we can double the amount of customers. Two, we can decrease your churn by half. Or three, we can double your prices, right?"

Speaker A outlines a hypothetical scenario used to explore different methods of growing a business and their effects on profits.

• Doubling customers generally leads to increased revenue but can also increase costs, potentially reducing profit margins.
• There is a need to consider the scalability of costs when increasing the customer base.

"So for those who don't know, when you double your customers, you pretty much double everything that's already there. And usually profit will go down a little bit because there's additional costs as you scale, right?"

Speaker A explains that increasing the number of customers can lead to higher overall costs, which may affect profitability.

• Decreasing churn improves the lifetime value of customers.
• This allows for higher customer acquisition costs, as each customer is more valuable.
• It can lead to the same profit with less marketing spend or the opportunity to invest more in marketing for growth.

"If you doubled or decreased the churn by half, so you doubled your lifetime value in duration, what would happen is you'd be able to spend twice as much in acquisition because each person is worth twice as much."

Speaker A discusses the benefits of reducing churn, highlighting the potential for increased marketing spend and customer acquisition.

• Doubling prices can lead to a significant increase in profitability if costs of fulfillment remain constant.
• This strategy has the potential for a sixfold increase in profits with a single pricing change.

"And so he found when he was looking at all the data from 11,000 SaaS companies, and so his company basically works on the processing side to help collect revenue that's lost for SaaS companies. And so he has a direct tie into how much revenue they're making."

Speaker A references Patrick Campbell's findings on the impact of doubling prices on profitability based on data from numerous SaaS companies.

• Campbell's companies work closely with revenue collection for SaaS companies, providing him with insights into their financials.
• His analysis is based on a substantial sample size of 11,000 companies, lending credibility to his findings.

"And so he found when he was looking at all the data from 11,000 SaaS companies, and so his company basically works on the processing side to help collect revenue that's lost for SaaS companies."

Speaker A highlights the extensive research conducted by Patrick Campbell, which informs his insights into the most effective profit levers for businesses.## Impact of Pricing on Profitability

• A 1% increase in price can have a fourfold impact on profitability compared to a 1% decrease in cost of acquisition or churn.
• The power of pricing is emphasized as a key lever for increasing profit within a business.
• For gyms, a profitable price point is identified at $167 per month, which equates to $39 per week.
• Adding additional services and value, such as accountability features, can help retain customers.

"And so if you do a 1% increase on any of these three metrics, either 1% decrease in cost of acquisition, 1% increase in price, or 1% decrease in churn, the response was, let's say one x for acquisition in terms of how much it would increase the profitability, two X for decreasing the churn, and four X for increasing the price by 1%."

This quote explains the relative impact of small changes in key business metrics on profitability, highlighting that a small increase in price can disproportionately increase profits.

• By adding one-on-one coaching and charging $200 per month, gyms can significantly increase their profit margin.
• The example provided shows a potential increase from $200 to $400 per month per customer by adding services, which could result in a sixfold increase in profits.
• The concept of a "hybrid" business model is introduced, combining existing services with additional offerings to add value and increase profits without changing the core business.

"And so at a very basic level, if you don't even think about online businesses or any of that stuff or any of the hybrid stuff that I've talked about, if you were to simply bolt on the one on one coaching component and charge $200 a month, which is the number that we're seeing, go all day long for existing customers to add in one on one coaching with food and helping them stay accountable with daily check ins and biweekly, which is twice a month in person check ins, where you can also sell supplements, then that is akin to doubling your price, right."

This quote discusses the strategy of adding valuable services to an existing business model to increase customer spending and profitability, using the example of a gym adding personalized coaching services.

• Providing more value is key to increasing profits, even if a business owner is happy with their current business model.
• The price is highlighted as the most significant factor in increasing a business's profits.
• The focus is on scaling the price in a way that does not incur significant additional costs.

"And the biggest lever to increasing the profit of the business is the price. And so what can we do that scales price wise that doesn't incur lots."

This quote emphasizes the importance of price as the primary factor in profit maximization and the challenge of scaling prices without incurring substantial costs.

• The host does not run ads or sell products, relying solely on the audience to spread the word about the podcast.
• The audience is asked to rate, review, and share the podcast to help other entrepreneurs.
• The act of leaving a review is presented as a small effort that can have a significant impact on others.

"You guys already know that I don't run any ads on this and I don't sell anything. And so the only ask that I can ever have of you guys is that you help me spread the word so we can help more entrepreneurs make more money, feed their families, make better products, and have better experiences for their employees and customers."

This quote is a call to action for listeners to support the podcast through reviews and sharing, underlining the non-commercial nature of the podcast and its goal to assist entrepreneurs.

• Upselling is presented as a strategy that can be used within a business to increase the average customer value without changing acquisition or marketing strategies.
• A hypothetical scenario is given where a third of customers accept an upsell, resulting in a $70 increase in average ticket per customer.

"And so you could not even change anything about your acquisition, not change anything about how you sell or how you market or any of that stuff, but only use it as an upsell or an ascension piece within your business and be able to Upsell X percentage of customers."

This quote introduces the concept of upselling as an internal growth strategy that can lead to increased revenue per customer, highlighting its potential impact without the need to alter existing marketing or sales processes.## Gym Profit Margins

• Average gym makes $35 per month in profit per customer from service side.
• This figure excludes additional revenue streams like supplement sales.

"The average gym right now makes about $35 per month in profit per customer, right? And that doesn't include supplement sales or anything like that, but simply just from their service site."

The quote provides a baseline figure for gym profits per customer, emphasizing that this is solely from service-related income and does not account for other potential income streams.

• Adding $70 per customer with a cost of fulfillment of $50 results in a net increase.
• After adjusting for the 33% usage rate, the profit increase per customer is $54.
• This change effectively multiplies the gym's profit per customer by 2.5 times.

"Then you're at $54 extra per client that you would now make across the board by implementing Bolton on top of your existing business."

This quote explains the additional profit per customer after implementing Bolton, highlighting the substantial increase in profit margin.

• Implementing Bolton does not fundamentally change the business model.
• It offers a significant profit increase by adding an additional revenue stream.
• The implementation takes about one month, after which it becomes a consistent upsell opportunity.

"And so if you want to two and a half x the profit of the gym that you are working with, that you have right now, simply bolting on this additional revenue stream without changing anything else in the business, will two and a half x how much you take home."

The quote suggests that by adding Bolton, gym owners can significantly increase their profits without altering their core business operations.

• To calculate average profit per customer, divide total profit by the number of customers.
• Example calculation provided for a gym taking home $6,000 from 155 customers.

"So let's say you took home $6,000 last month, right? And you have 155 customers. So if you took home $6,000 from 155 customers divided by 6000 by 155 means you'd be making $39 per customer in profit per month, right?"

This quote outlines the method for calculating the average profit per customer, providing a clear example to illustrate the process.

• Upselling to one-third of clients can substantially increase monthly profit.
• Upselling services at $200 a month with fulfillment costs of $50 or less is profitable.
• Excludes additional revenue from nutrition-based supplements due to potential limiting beliefs.

"And so when you see those numbers and you know that you can get one third of your clients to upsell and take something at $200 a month extra in service, that cost you $50 or less to fulfill."

The quote discusses the potential for upselling as a strategy to increase profit, focusing on the service aspect and acknowledging the avoidance of nutrition supplement sales due to personal beliefs.

• Upselling enhances customer value and reduces churn.
• A one-on-one coaching approach helps maintain consistent relationships and lowers turnover.
• Scalable delivery with accountability and retention is crucial for a training business.

"And so they don't get lost in the masses of group training, which is typically what happens. And we have to recreate a one on one experience by having scalable delivery with the accountability and retention pieces that we have to build in normally to a training business."

This quote emphasizes the benefits of a personalized upsell approach in reducing client turnover and enhancing the overall customer experience.

• Instead of opening additional gyms, implementing Bolton can multiply profits with less liability.
• The most effective profit lever is increasing price through added value.

"But when you add in this one component, this one additional upsell, the amount of money that you can make in your business, literally two and a half x's."

The quote highlights the financial advantage of upselling over physical expansion, pointing out the efficiency of increasing profits through added services.

• Upsells cost one-quarter of the total cost compared to new customer acquisition.
• Revenue from upsells is potentially four times more profitable than acquiring new customers.

"Ascension, this is another great stat that he had, is that upsells cost one quarter the amount in total cost as acquisition."

This quote presents a statistical advantage of focusing on upselling existing customers over acquiring new ones, showing the cost-effectiveness of the upsell strategy.## Upsell Benefits in Business

• Upselling increases the lifetime value of a service without requiring additional physical space.
• It can reduce churn and simultaneously drive two growth levers by adding a single new service.
• The new service suggested is one-on-one accountability, which can be fulfilled remotely.

So it increases lifetime value of your service side, of your training side.

This quote emphasizes the value of upselling as it enhances the profitability of the existing service by extending its lifetime value.

So you literally increase the lifetime value of your service side by simply implementing this on top of this.

The speaker reiterates the benefit of increasing the service's lifetime value through the implementation of an additional service.

• Upselling allows for increased compensation for top-performing trainers.
• It provides the financial flexibility to pay deserving trainers more than the current budget allows.

If you have one or two strong stallions, awesome trainers, it allows you to pay them more.

This quote highlights how upselling creates an opportunity to reward high-performing trainers with better pay.

• An example is given with a hypothetical gym with 155 clients.
• Upselling one-third of the clients at $200 a month can generate significant additional revenue.
• Costs are calculated, and the resulting profit from the upsell is an extra $100,000 per year.

So you add an extra 100 grand a year to the business in profit by adding this, a single upsell, to your core model.

The speaker calculates the potential profit increase from the upsell, demonstrating the financial impact of the strategy.

• The upsell strategy does not require more trainers, training times, or space.
• It is presented as a simple yet effective addition to the business model.

You don't need more square footage, you don't need more training times, you don't need more trainers.

This quote outlines the operational benefits of the upsell, which does not demand an increase in resources or infrastructure.

• The speaker expresses enthusiasm for pricing strategies supported by data.
• Data is seen as a powerful tool to back up anecdotal evidence from various facilities.

I geek out on pricing and data, like when someone really just backs everything with data.

This quote reflects the speaker's passion for data-supported pricing strategies and the value they bring to business decisions.

• The speaker suggests that rational decision-making, often based on data, can lead to increased profits.
• Humans are noted to be emotional and often rely on testimonials rather than data when making business decisions.

But if you do choose to make rational decisions, which is usually how you make more money, then you should definitely implement this in your business.

The speaker advocates for rational, data-driven decision-making as a means to enhance profitability.

• Adding value and differentiated services is crucial to staying competitive.
• The speaker warns of a saturated market driving down prices and suggests adding value as a countermeasure.

So in order to escape that, we add more value and we add differentiated services on top of it so that we can recover something that might be lost on the price originally.

This quote advises on how to maintain competitiveness and profitability by enhancing and differentiating the service offerings in a saturated market.

• The speaker encourages sharing the information with others who might benefit.
• It is framed as a helpful discussion on pricing rather than a sales pitch.

Share it. Tag it. All that good stuff.

The speaker concludes by inviting listeners to engage with and disseminate the content discussed, emphasizing the importance of sharing valuable insights.