A lot of people have huge confusion when it comes to investing the right way within the business. The business produces cash-flow and generates revenue but sometimes the growth is not being as fast as possible because the money doesn’t get invested in the right channels.
Whenever I have extra cash in my business I always know where to invest it. I invest it in lead generation. When you invest money in lead generation, they become like assets. However, just the leads will not be assets. They have to be nurtured and they should be automated.
Let’s say I have extra 10 lakhs in my business. I can keep it as cash in the account, but the cash will keep getting diluted if it sits there without earning any interest. I will also lose money due to inflation. I can consider investing in the stock market – but the question is: why should I invest in some other company? Why can’t I invest it in my own company so that it produces more returns in the future?
That investment is creating a funnel and then adding leads to the top of that funnel.
Let’s say I create a lead magnet and a funnel about freelancing. I will have an e-book, a free course, and a 25 part email sequence which will engage people for at least 50 days (considering I send one email every 2 days).
I can get 100,000 leads at 10 rupees each – and invest a total of 10 Lakhs into the ads. These 100,000 leads are going to get value from me through the lead magnet and stay engaged on my email list for 50 days. They will build a “virtual” relationship with me. They will also start following me around on the social media channels like YouTube, Facebook, Twitter, and so on.
Now that these leads are “friendly” and “warm” I can send a promotion to this email list. Let’s say I am promoting a “Digital Freelancing Mastery” course. And let’s say this course is priced at 6999 INR.
I just need 150 sales from 100,000 leads to get back my investment of 10 lakhs in lead generation. And the best part about the digital products that I sell is that I do not have many expenses from the sales of the courses. I have more than a 90% profit margin on it. So I can afford to spend most of it back on advertising.
150 sales out of 100,000 leads are just 0.15%. In fact, I can expect conversion of up to 1%. I could get 1,000 sales from 100,000 leads and that would bring me 70 Lakhs in sales. For an investment of 10 lakhs in ads. Wouldn’t that be cool? A 7x return on ad spend. We call it ROAS which means the return on ad spend.
ROAS is the metric that is used by digital marketers for their investments in ad spend. While every investor uses different metrics like stock market index, real estate index, and so on. We use ROAS. That’s our sacred metric.
If you master the art of getting a return on ad spend, you will have learned how to create profits from thin air.
One thing to note here is that the ROAS is usually high with digital products because the cost of replication of a digital product is usually low. If I sell 100 units of a course vs. 10,000 units of a course, it will not make much difference in the cost incurred. With physical products, only a small percentage of the sales revenue can be reinvested into ads because there is manufacturing cost, logistics, and labor costs.
Also Read: How to get traffic offline