00:00 Alright, in this video we're going to talk about how to analyze ROI. So at this point you've gone through the track overall ROI training. 00:08 You've opened up this ROI metric sheet, this ROI tracker you filled in your metrics and now it's time to actually analyze these numbers. 00:16 So this sheet is divided into a front end versus a backend analysis and the reason we do this is because in business it's crucial to both consider the immediate and long term return on your marketing. 00:27 So most clinics and most small businesses in general, they ignore the long-term return on their marketing, usually because they don't know or consider the lifetime gross profit of new clients. 00:38 We cover this term by the way in this previous training. It's actually very synonymous, very similar to LTV, which is lifetime value. 00:45 You've most likely heard of that term, but essentially this is on average when you acquire a new client, how much gross profit are you generating from that client over the long-term. 00:54 So most businesses don't know this. It's not really their fault because it's difficult to track and people just generally tend to focus on the short term instead of the long term. 01:03 But as a result, a lot of clinic owners, they're going to terminate marketing initiatives that may not have been profitable in the short term, but in the long term, they could have been profitable. 01:12 So it's really important to know your numbers and think of the long term. This is a big factor that separates big successful businesses from smaller businesses. 01:21 The big businesses, they know their numbers. And so even if, like, for example, I'm going to cover this example later on, but Amazon on will actually lose a lot of money for months, even years in the front end because they know those customers are going to be profitable later on. 01:35 And as a result, they're able to undercut their competition and spend more to acquire clients than their competitors. So don't be that med spa in your hometown that is short-sighted and isn't willing to invest in marketing while your competitors know their numbers and are willing to invest. 01:50 They're just going to take up all the patients in your town and they're going to be you. So time to make informed marketing decisions. 01:56 Let's dive right in here. So how to measure the immediate return, otherwise the front end analysis. So this analysis is comprised of the following metrics. 02:05 You have your Trevor book revenue. We cover this in the previous training. It's how much revenue you generate in total through Trevor book for the month. 02:12 Your gross margin is the average profit margin on the services you deliver. So this is set to 60% by default, which is pretty conservative. 02:20 You can watch this video for instructions on how to calculate gross margins. We have something called the sales and package or the Taylor treatment plan and in this tool with this tool You can calculate the gross margins of individual packages And what you can do is you can average the gross margins 02:37 for all your packages and your services to get an average This is something that I would just start off simple and then slowly start to Calculate more things to get a more accurate number over time But again, it can be difficult to calculate your gross margin You also may have it in your main accounting 02:54 software or your CRM. If you have this number, that's great. You want to plug it into the sheet and you're plugging it in right here. 03:01 So under Gross Margin, you can change this figure to whatever you like. So we're going to set it 60 for this example. 03:08 You then have your Gross Margin, which is simply the Trevor Book Revenue multiplied Gross Profit, which is your Trevor Book Revenue multiplied by your Gross Margin. 03:17 So this is simply this figure your revenue multiplied by your margin is going to give you your gross Profit so that's how much money you keep after fulfilling your services So like subtracting the cost of fulfilling your services or your cost of goods sold then you have your net profit Which is your 03:34 is your profit after subtracting your? It's basically what money you have after subtracting your fulfillment and marketing fees So this is your net profit after you subtracted all your fees and from for a book and your fulfillment This is how much you keep and then we have your front 10 ROI, which is 03:52 the immediate return of your entire marketing Considering all fees, and it's simply your net profit divided by your total marketing fees So let's talk about front and ROI benchmarks under zero is okay It means you're losing money to acquire a new customer so I the reason I say okay is because a lot of 04:11 businesses is lose money when they acquire customers. So like I mentioned earlier, that Amazon example, they lose money for months and even years before they make money on a customer. 04:21 And that's why they're so big and so successful because they're willing to delay their gratification, if you will, in terms of profits. 04:27 So it's different as a small business because you're not as capitalized. You don't necessarily have as much money as Amazon. 04:33 So it really depends. You could be losing money on the front end. But if you have a lot of cash from the bank and know those people are gonna come back to spend more money. 04:42 You can potentially continue going on like this. But of course you want to increase this so you want to work on improving it and getting it to between zero and one which is good. 04:51 And at this point you're making a profit on the front end without considering the lifetime gross profit of new patients. 04:57 So this is the number that most people are obsessed about like how much money did I make this month through forever booked or through whatever marketing and how much money do those people spend immediately? 05:07 And that's exactly what this number is. So this is is positive, which means you're making money on the front end for each client you bring in. 05:17 And like you can see how these numbers get manipulated, right, if I made 10,000 in revenue, my gross margins were 60%, my gross profit 6,000 minus my marketing is $3,500 net profit. 05:31 And then for example, if you increase your gross margins to say 70, that's obviously going to increase, your numbers are gonna be better. 05:37 So zero to one is good, it means you're making a profit on the front end, you're essentially getting paid to acquire new customers. 05:43 And this is how you want to think about it. You don't want to think about getting a customer to make a sale. 05:49 You make a sale to get a customer because that customer is going to be valuable to you over the long term if you treat them well. 05:55 And that's how you're going to grow your business. And then finally, you have above one, which means you're more than doubling your marketing investment without considering the lifetime growth profit of new clients. 06:04 So it means that if you put in two dollars, you're making $4, subtracting all your fees, that's an amazing position to be in. 06:11 So you want to go through our sales training, we're gonna have more training on this on how to actually maximize your front end ROI. 06:17 This is really important because it's gonna make you cash flow positive. You wanna be cash flow positive on the front end, getting paid to acquiring your customers. 06:25 That's an amazing place to be in because all you need to do to grow your business, you just keep on spending more money because you're profitable on the front end, which is a great place to be in. 06:33 So now let's get to the long-term return of the back-end analysis. And the back-end analysis is comprised of the following metrics. 06:40 You have your new patients. So the number of new patients brought in to Forever Booked, new patient LTGP, we discussed this before. 06:46 We recommend setting this to $1,000 by default. You can just even Google or ChatGPT LTV of a med spa. And I believe they put it like minimum $2,000 and it goes all the way up to $5 or $10,000. 06:59 It really depends, right? The better you are at selling customers and keeping them the higher this number is going to go. 07:06 But set it to $1,000 as a conservative metric, and I'm going to have a training shortly on how to calculate this more accurately. 07:13 Then you have your cost to acquire a customer or a CAC, and it's calculated by your total marketing fees divided by new patients. 07:21 If you generate 10 new patients and you spend $1,000, it means you spend $100 to acquire each new patient. So that's going to show up right here, right? 07:30 Your CAC is simply the total marketing fees divided by your new patients to get your cost to acquire a new customer. 07:37 And then you have your LTGP to CAC ratio, which is the most important metric in this entire program. And this measures the long term success of your marketing. 07:47 It just calculated just like the name by dividing LTGP divided by CAC. So we look at it here. Our lifetime gross profit is 1,000. 07:57 our CAC is 500. So that means in the long term, we're spending $500 and that's turning into a thousand dollars on average over the lifetime of these new clients, subtracting the cost of fulfilling your services. 08:11 So this means yet you're doubling your money in your marketing investment over the long term. So this is super, super important. 08:18 This is the number that you should be paying attention to the most because it's going to measure the long term growth of your clinic. 08:24 And here are the If it's negative less than one, this is bad because it means that on average you're losing money over the lifetime of each client. 08:33 This is going to result in the contraction of your clinic profits over time. So if you continually spend $1,000 and that's turning into $8,000, that's not a very good deal, right? 08:43 No one wants to do that. You're eventually going to lose all your money. So you want to get it to good. 08:48 If it's in this situation, you want to work on obviously your sales, you want to work on just getting people to come back and really treating people well to increase their lifetime and gross profits with you. 08:59 You can also decrease your work on decreasing your fulfillment cost, decreasing your cost of consumers, etc. Then you have one to three, which is good. 09:07 This is on average you're making money over the new, over each new client over the lifetime. For example, if this is two, you're doubling every dollar that you put in to marketing, taking to account the LTGP of new patients that you're generating. 09:19 So you can see here, it's two, which means we're doubling Every time we put in $1, we're going to $2, we put in $500, we get in $1,000. 09:28 So that's good, but you really want to be striving for above three. That's great. It means you're tripling every dollar you invest into marketing over the long term. 09:37 And the key to business, all you really need to do is focus on getting this number as high as possible. 09:44 The higher this number, the more profits you're going to make, and the more money you're going to be able to spend to acquire new clients. 09:50 If another Med Spa has an LTGP of only 500, they could be spending just as much on ads as you, the same market, but they're not making any profits over the long term because they don't know how to make those clients valuable. 10:04 They don't know how to treat them like gold, they don't know how to make them come back, they don't know how to upsell and cross sell them into other services, and so they're going to spend $500 just like you. 10:13 They may have the exact same marketing campaigns, the exact same ads, but they don't know how to make their customers valuable, so they're not going to be making any profits and they're not going to be able to continue spending that money. 10:23 You, however, if you have an LG GP of 1000 or let's say even 2000, you're quadrupling every dollar you put into marketing. 10:32 So you're going to be able to continue spending money on ads and then let's say ads get even more expensive, right? 10:37 Which they're always happening. Ads are always getting more expensive. Even if you now cost you $800 to acquire a new client, you're still going to be profitable over the long term. 10:46 And so while all these other clinics get squeezed by this increasing marketing fees, you're going to still be making a profit because you put in the work in the back end to make those customers more profitable to you or more viable to you. 11:00 So in marketing, it's not just about trying to get the cheapest ads with the cheapest leads possible. Obviously, that's important, but what really moves the needle is making those leads more viable to you than anyone else. 11:11 That is the game that you should be playing and that's what you want to be focusing on. So let's get to some frequently asked questions here. 11:17 You may be saying, how do I actually know when to increase ad spend? So you may be spending money on ads and to no one to actually increase your investment, you want to do that when you have a frontend ROI above zero and an LTGP to CAC ratio above one. 11:32 So this essentially means you're getting page to acquire new clients and these patients are profitable over the long term. You can still technically increase it if you're not profitable in the front end, but you just want to be careful that you don't run out of money. 11:44 So we have another training. If you continue, it's going to show you how to actually maximize your ROI. There's a bunch of strategies you can do. 11:51 But generally, the rule of thumb, as long as you're profitable over the long term and over the short term and the long term, you want to increase your ad spend. 11:59 The next question is, you may be saying front end ROI above zero seems like a super low return to be aiming for. 12:06 Shouldn't I be expecting five to 10 X returns? Talk to all clinics. They're like, oh my god, it'd be amazing. 12:11 I think I, if I could buy the 10X my, my money, but they really depends, right? Five the 10X returns are ideal, but the fact is that most business owners, they underestimate just how expensive it is to acquire new patients. 12:22 Since they don't track or pay attention to backend sales or lifetime value, the cost to require a customer seems too prohibitive and as a result, they underinvest in marketing. 12:31 So this is the exact example that I was showing you before. A clinic owner is going to see this $800 and think, oh my god, that's too much money when another business owner may know that that person's worth $3,000 to them, and so they're going to be willing to spend money on that 800. 12:46 And that's why some businesses are going to thrive while others don't. So this is the winning clinics. They take the longer term perspective. 12:56 They consider the lifetime value of new patient, and they know that an ROI of 1x on the front end will often turn into five to 10x within a year. 13:06 So they know that although their front end ROI may be low, their confidence that their LTGP is going to be higher and they're going to have a much higher like five extra turn over the year. 13:17 And the best businesses are just obsessed on the back end, obsessed about making those new clients as valuable to them as possible. 13:24 So those to take a long term perspective will eventually come out on top. And then finally, this Amazon example, which that I've already mentioned twice, the top examples Amazon.com. 13:32 They took losses for years before coming out as the undisputed leader in e-commerce. So unlike Amazon, most businesses or local businesses aren't funded by venture capital, they can't afford to take those losses, which is why I've broken this up to front end and back end because you need to focus on 13:49 the front end. And so you want to try to be at least profitable on the front end with marketing so you can say cash flow positive of while awaiting the backend sales from the new patients. 14:00 So that is the training on how to analyze your ROI. In this next video, this next training I'm gonna talk to you about how to increase it, which is a pretty big topic. 14:07 It's most going to be just referencing other trainings in our program because we already have a lot of resources on how to increase your ROI. 14:14 But once you understand this stuff, the next step is to start improving your numbers. So you can increase your LTGP to CAC ratio, which is right here, which is the most important metric in our program. 14:25 So thanks for watching and I'll see you on the next video.