Determining How Much to Pay

by Kristen Burgess
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Then you’re going to have to agree on a price. That’s another question I get “What’s a fair price?” I’m not going to give you an exact price here. I hesitate to name anything at all, but I know you want something.

Let me try and explain: I want you to get the picture that it’s okay to pay $20 / subscriber if you have a back end in place and those are good subscribers and you end up making $200 a piece on them. It’s okay to pay $20 / subscriber.

On the other hand, it’s not okay to pay 10¢ for a subscriber if all you’re going to be able to do is turn that 10¢ subscriber into 20¢ in revenue.

The number that you’re going to pay per click or per subscriber should be dictated based on your potential revenue from whatever it is you’re doing.

For example, if you are able to generate $20 per subscriber over the course of the year, you might be willing to pay $2 or $3 per subscriber up front to build your list.

What if you’re just starting out, and you have no idea about your back end? You don’t even have a product, you’re just trying to get 500 subscribers on your list so that you can send them some emails and find out what kind of product you should make…

Maybe you pay $2 / subscriber, so it’ll cost you $1k to get 500 subscribers, and you’re not going to make any money on these individuals right away. You’re going to have to create your product. It might take you 2 weeks to create your product the way that I teach to create a product. So you’ll get a percentage of those people to buy, and maybe you’ll break even on your ad. But you’re not going to have anything to sell them the first 2 weeks.

When you build that first part of the list, you simply have to look at it as an investment. Once you’ve done this 25 times, you should know over time how much you make on average per subscriber. Why don’t I give you a quick formula?

Let’s just say that you get 1k new subscribers every single month. And you generate $20k every single month. You’re averaging $20 / subscriber.

Another way to look at this would be to look at an actual basket of subscribers. Let’s say you get 1k subscribers. Then you track THOSE 1k subscribers separately from everybody else for a year, and those 1k subscribers generate $20k. That’s another way to do it.

I find that just using the monthly new subscribers, divided into the total number of revenue that you have, gives you a nice average.

Now, if one month you generate 100 subscribers because you don’t do much of anything, and the next month you spend $5k and get 2k subscribers, and the next month you only get 100 subscribers, then you have to take a rolling average of the number of subscribers each month and divide that into a rolling average of your revenue because your revenue is going to be driven by the number of new subscribers, but it’s not going to correlate month to month. The reason for this is because people don’t make all of their expenditures the first month they get on your list. I think that’s enough depth on that.

It’s just a quick process: how many subscribers are you getting, how much money are you making, that’s your $/subscriber. Once you know that, then you can think about how much can I pay per subscriber.

Normally when you buy your solo ad, you can negotiate to pay per subscriber. Paying per click is more common.

Obviously, per click becomes a little bit tricky, because you don’t know what your subscriber cost is going to be, especially for the first few solo ads that you run. Let’s just imagine that you have an opt-in page that has a 25% conversion rate. You want to be at $2 / subscriber. Then you’re going to have to get 4 visitors, or 4 clicks, to get one subscriber. So you’re going to want to pay 50¢/click to get to $2 / subscriber.

You may be talking with someone they’ll only sell you something that’s $1/click. You have to ask yourself, is this list going to be strong enough that I can monetize $4 / subscriber? Again, if it’s your first list, set $1k aside and just use that as your seed money, as your investment money, to build that first list of 500 or 1k individuals.

Your pricing is just going to be a negotiation.

Ad Swaps

When I gave the sample letter above, I asked if the list owner was interested in doing some kind of mailing – perhaps a solo ad or an ad swap.

Let’s talk about what an ad swap is.

An ad swap is a solo ad where you give them a reciprocating solo ad. Instead of paying Johnny $300 to mail your ad to his list, and then having him pay you $300 to mail his ad to your list, you just do a swap. He mails your list, and you mail his list.

Those are the steps to driving traffic with solo ads and finding your own solo ad providers.

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