IN THIS ISSUE
- If it’s your casino, you always play with house money
- Creating your own luck and getting better odds
- Build your own casino empire
- My absurd profit model
Every time I go into a casino, I pretty much lose or leave after barely breaking even.
Am I just unlucky?
Do I not know how to skew the odds?
Is it possible I’m always at the wrong casinos?
I think the answer is: all of the above.
If I could eliminate luck, skew the odds, and be in the right casino, the world would be mine.
So I’m going to build my own casino.
And then I’m going to build my own Las Vegas.
Luck Be a Lady
So I’m building out the Back End Agency concept that I talked about in the last newsletter.
I don’t need a website, but I built one anyway and you can see it here.
Yeah, I know, funny name.
But this is the part of the newsletter where I confront luck, so I’ve been considering who my ideal Client-Partners are; the type of Clients I understand the best and can help the most.
After 35+ years in software engineering, I know how those organizations work; technical knowledge workers, leadership levels, and the tools they use. That buying parade probably has coaching and software-as-a-service (SaaS) needs to name a couple off the top of my head.
After a few years in real estate investing, I know how the real estate industry generally works. Realtors and investors are easy to understand and their buying parade is somewhat predictable too.
So focusing on areas (and types of people) that I understand will reduce the amount of luck that I need to be successful.
If you’re playing along, what life experience can you exploit to increase your odds of success? Take a few moments and make your own list. I’m betting you’ll be surprised by how much of an advantage you have.
Blowing on the Dice
As a recap, the way a back-end agency works is as follows:
- Get a Client-Partner
- Offer their back-end products to past customers; getting hand-raisers
- Engage hand-raisers with qualifying questions and insights; moving them closer to purchasing
- Close those past customers that are ready to upgrade
- Collect commissions (profit!).
The qualifying phase is a period of iterative learning.
What are they objecting to? I think about it, develop my messaging, and test them.
I iterate and eventually, my messaging is dialed in. There’s only a handful of distinct customer avatars and their related objections. At a certain point, everything works reliably.
Understand, it works reliably for every sales launch for that customer thereafter.
I’ve blown on the dice and created my own luck.
But I’m just getting started.
My Own Casino
Realize what I’ve just done.
If the Client-Partner were synonymous with a game at a casino, I can roll up to that table and win every time.
If I leverage my learnings and find similar Client-Partners, they are just like more games at the casino. The messaging starts out nearly dialed in and winning happens quickly and easily.
This is the power of marketing intellectual property.
But if I can eventually win every game at the casino, this is starting to feel like my casino.
And the house’s money is my money to play with.
Building Las Vegas
If you can build one casino, you can build more!
The first virtual casino sells technical leadership coaching for lots of coaches.
For me, the next casinos might be focused on SaaS product sales or real estate coaching.
Like the first casino, it might take me a while to calibrate the messaging, but I’ll eventually get there. Then rinse and repeat.
And while my first casinos leveraged my own experience, eventually I’ll lose that advantage. At that point, I partner with people who do know those areas. And I profit share with them.
Which would you rather, 100% of $0 or 50% of thousands of dollars?
The answer is obvious.
I’m not sure how many casinos it takes, but at some point you’ve essentially built Las Vegas.
It seems worth doing, but maybe you want to see some numbers?
Living in the land of metaphors is great, but I went looking for a way to model my chances and the likely payoff.
There may be better articles but I found this article about positive expectancy.
As the article says, expectancy is defined as how much money on average I can expect to make (or lose) for every dollar I risk.
As a simple example, if I can win or lose $1 on a coin toss, the expectancy is $0.
You can read the article, but I just need to plug in my probability of winning, my bet (my investment), and what I believe I would win.
In the early days, it’s possible I have only a 25% chance of winning. My investment will be $4,000, but I have the chance to win $38,000. That gives me an expectancy of $162.50 for each dollar I invest.
That’s pretty good!
If I’m way off about my sales numbers, I only need to sell $12,000 to break even at those odds.
Realize I’m saying for every dollar, I get $162.50 in those early days when my marketing is not dialed in.
I mean, probably the numbers are not this good.
But my winning probability is going to be improving every day. Let’s say I get to 50%.
Then I’m up to $425 expectancy for each $1 invested.
The thing to remember is when I lose, I lose $4,000, but when I win it’s a disproportional $38,000. What this means is I can stand to lose often, but my wins will make up for it. But I don’t expect to.
If I abide by the formula and randomness, this is what the first twelve months look like:
|Month||Win or Loss||Cumulative Profit|
Due to randomness, I lose 8 out of 12 months. This seems unlikely to happen, but if it does, I net $120,000 over the course of the year.
If I continue to iterate and get to 65%, that cumulative total turns into $330,000.
I’m making more money and it’s getting easier?!
Returning to the metaphor, this is one game in one casino.
The numbers are absurd if I add more games and more casinos. Surely this model is flawed?
I guess we’ll find out.
I’m all in.
P.S. If you liked this newsletter, please consider leaving me a testimonial to help me spread the word.