The $5 million dream business that’s become a nightmare

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Once you build a large fire, the coals will stay warm for hours as you leisurely cook your favorite campfire meal. You can relax and enjoy the fire, tending to it periodically to maintain its heat. But it’s impossible to start a fire without kindling. Job one of campfire building is to gather kindling, small sticks and leaves that catch fire easily. You must gather a large amount of kindling, especially when you have only a few matches to start your fire. With just a few matches, you can’t afford to waste any flame. Kindling is easy to light and creates a large flame quickly. As the fire grows to a few inches tall, you continue to feed it kindling, but at the same time, you transition to larger sticks. As these sticks start to burn and your fire grows to be a foot tall, you add much thicker sticks. … Continued

Ascension: THE Source of Membership Profit

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I recently reviewed reports for a client’s membership programs. His company has annual revenues of $7 million. Like many owners of such businesses, he offers multiple levels of membership: a basic level that has about 500 members at $59.00 monthly and a higher level with about 150 members investing $249.00 a month. His average member value for basic is about $2,100.00 while members in the higher level of membership have a value of more than $31,000.00. Yes, that’s right, $31,000! Those members buy a lot more of the products and services his company offers. In fact, this IS where all the profit is coming from. He had no idea. The trouble is this higher membership level has been neglected. There have been few upgrade promotions, and there’s no automated ascension plan. Looking deeper, I noticed that five years ago, when membership in his higher level program exceeded 500, 2 percent … Continued

Measuring Your Member Relationship

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Most of the people I ask tell me they have a great relationship with their customers. Their customers get great results and love their products. No one wants to believe the opposite is true. Your member churn rate is a direct measurement of the relationship you have with your new members. If you have a high churn rate, you are fostering a weak relationship with your new members. Most membership marketers treat their fulfillment like a series of product purchases. It’s a simple exchange of product for money. When they think about improving member churn rate, they try to provide more product for the money. The amount of product and value you provide is like water; too much is just as bad as too little. You don’t want a flood, and you don’t want a drought. Fostering strong relationships with your new members, decreasing member churn and increasing member growth … Continued

The Ugly Truth about Planning

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I never thought my son would take a shop class. When Robert was in 8th grade his schedule was determined by the science and math classes he wanted to take, so he was forced to take an elective for 4th period. Although he would have preferred to take keyboard or some other music class, those weren’t offered at that time, so his only choices were shop and PE. Turns out he loved shop. In shop he got to use four different types of saws, a drill press and sanders. For the first four weeks of shop class, Robert’s teacher taught the students only how to draw. Before they cut anything, they have to draw what they plan to build from several different perspectives. For instance, if it’s a wooden tool caddy, a small box with a handle at the top, Robert had to draw pictures of what the caddy will … Continued

Multiply the Value of Your Business by Eight!

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What if you could increase the value of your business from $15 million to $120 million within a year? Heck, I know a lot of us would gladly take either value! But if you invested 10 years of your life into building a company, it would be a huge life transformation to get the second value, wouldn’t it? Can you imagine that kind of money? It’s a lot closer than you might think, with a vibrant membership. I have several clients with membership businesses in the $5 million to $7 million range in revenue. With a monthly churn rate (the number of dropped members in a month divided by the number of members at the beginning of the month) of 10-15 percent, those businesses are worth three to five times their annual revenue, about $15 million. A nice pay day. But with a member churn rate of 2 percent to … Continued

Double Your Membership at Half the Cost

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Imagine having double or even triple the number of members in your program at the end of next year. What would that mean to your business? Your income? Your future growth opportunities? This (and more) is entirely possible when you improve your member retention rates. I have a new client who has 689 members with an 11 percent churn rate. With 11 percent of his members dropping out each month, he will need to sign up 1,589 new members to double his membership in a year. This means he will need to welcome, fulfill and handle all the administrative work for 2,067 members to end the year with just 1,378 members. By lowering his monthly churn rate to a more reasonable 5 percent, he’ll need to recruit only 1,102 new members. If his cost of recruiting each new member is $100.00, this is a savings of $48,700.00. This is huge … Continued

The Most Common Membership Lie

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I just finished a conversation with a membership marketer. His monthly churn rate is 10 percent. This is the percentage of members who are canceling their memberships each month. When I reviewed the numbers with him, I helped him discover that 60 percent of his members are dropping out within four months. Yes, you read that correctly, 60 percent! And, he didn’t even realize it based on the reports he received. What’s important about this is that now he knows. Until he allowed Denise McKinlay on my team to produce membership reports for him, he thought his retention was fine. Just because you don’t know something doesn’t mean it’s fine. When I first spoke with this membership marketer, he told me he didn’t have a retention problem. He wanted a system to attract and recruit more members. I offered to produce reports so we could see how his current membership … Continued