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Clients 4.13

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Hey guys, this is SEO Floyd and in this video we are going to cover another method for pricing clients for your proposals. This method is going to be one variation of the lifetime value of a client. In this example I'm going to use an industry standard formula. I didn't create this guys. This has been around for probably since before I was born, this formula. It's a very good rule of thumb to use to estimate, especially if they have lots of recurring. In this example what we're going to do is we are going to use the formula average value of a sale times the number of repeated transactions times the average retention time in months or years. If this is an established business they are going to know this data. They're going to have this data. If they're not an established business then this is going to be more challenging and we're going to use another method.

For the sake of this example though let's assume that they have that data. The example that I want to use here, my good friend Deon made me think of this. He's a very successful martial arts school owner. This is what I thought about when I thought about him. This one I'm going to use a value of a martial arts school member. In this example let's say that someone goes and joins Deon's school and let's say that he charges them 150 dollars a month and that the average client stays for three years. Let's say that they go in and they get their black belt and then they decide to move on. Again, just for easy math we've got to plug something in here.

In this example we would take the average value of a sale which is 150 dollars, we would multiply it by the number of repeat transactions. In this case we're going to multiply it by 12 because we're doing by the month. Then we're going to multiply that by the average retention time in months or years. You can obviously see you can move this formula around, but for the basics, again, just for this example, it would be 150 dollars which is the average value of the sale times 12 months because we're going to do it per year times the number of years, three. We're saying that the average person who joins this martial arts school pays 150 a month and that they stay for three years.

Using this math you are going to receive 5,400 dollars in total revenue for this student over a three year period which is average. It's going to be 1,800 dollars per year. That means that this client is worth 1,800 dollars per year for them. Now that we have that number in our head we know that if we were to get them one new client per month with SEO, that that would be worth 1,800 dollars to them over the year. If we were to charge them anything less than 1,800 dollars they would be making a return on investment. Again, when you're looking at this average time retention matters a lot because a lot of businesses there's that time, retention time is going to be a lot longer. Your average person that chooses a dentist or a doctor or an accountant or people like that, they're not going to stay three year. The average lifetime retention rate's going to be much higher if the business does a good job. That number's going to be much higher.

Again, let's stick with this. If we use this per year value here then that means that the monthly value for that, and again, we're breaking it down pretty far with math. We would take 1,800 and we would divide it by 12. That means that again of course obviously we know that 150 is what they're paying, but I want to reiterate this. 150 dollars a month is what they're making off this client. Now that we know that we want to look at our pricing. Now I'm going to move over and let me move over into SEMRush. For this example, again, what I chose to do was, and the MMA term, it's mixed martial arts for you guys that don't know. It's in the martial arts niche. I gave a modifier to it, Dallas as usual because that's where I live.

As we look here we see again the cost per click is three dollars over that. What we're going to do is again, this is very similar to the last method. If you didn't get the last method you might want to go back and watch that because that explains this part a little bit more because I'm not going to go into it in great detail but let's just say for example that you had ranked them number one for MMA Dallas and Dallas MMA. The monthly volume for those combined here is 280 hits a month. If we were number one for both of these and we got all the traffic that's approximately 280 hits per month. If you're number one for easy math we'll say you get half. That's usually 45% to 50%ish. Half of 280 is 140. That means that you're going to get approximately 140 hits per month to this website if you get these number one, just this.

140, if we use a really, really crappy conversion rate then that's only going to be an average of 1.4 new clients per month. That's not going to do us really good for our proposal. I'll tell you, when you're pitching deals like this you really have to think about the niche. You really have to think about it. A 1% conversion rate is actually fairly standard for more of an e-commerce type site. But when you're looking at things like this, personal sites, it's actually much, much higher. You can guesstimate much, much, much higher. On something like this, if someone went and they typed in MMA Dallas or Dallas MMA chances are pretty good that they're actually wanting to go to a school and there's a good chance they're going to sign up.

Again, for easy math, I'm going to use 30%. We said before that we're going to get about 140 visitors for that. 140 visitors, again, for simple math, what are we looking at? 140 at 30%. We're looking at about 46 a month if we can convert that. It's 46 new clients a month for this guy, which that's ... that's quite a bit. 46 new clients. Again, am I saying that this is likely to happen? Probably not, but even if you were to cut that in half and assume a 15% conversion rate then you're still sitting at 20+ clients per month. Again, if we go back and we say that we're going to get them 20 clients per month and we know that the average value of a client per year is 1,800. The average value of a these clients over a year would be 1,800 times 20. 1,800 ... it'd be 36K.

Over a year, if our math is holding true, these new clients are going to bring in 36K in value over a year. But this is per month. If you're able to bring in 20 clients per month then that's 20 times 12. That means that each month you're bringing in 36K of revenue. Does that make sense? Each month you're going to be adding to this. I don't want you to use super inflated numbers. Let's go and cut this down for a second. Let's go ahead and make that ten clients per month. Ten clients per month at 1,800 dollar a year average value. That's 18,000 dollars a year., is what you're bringing in to them. Over 12 months you would multiply 18 times 12 and that's the value. Let's say that this were the case.

Let's say that through all your combined keywords, let's say you found 10 keywords, 15 keywords, 20 keywords and you were able to successfully get them ten new clients a month. Again, on a monthly value here, 10 times 150 would be 1,500 a month in revenue to them. That means that if they were a one time client you'd have to charge them less than 1,500, but this is recurring every month. The first month they're going to make 1,500 off of your SEO. The second month if you do the same thing then they're going to make 3,000 off your SEO. The third month they're going to make 4,500. You see how this works? It keeps going up and up and up and up.

Again, I hope I haven't confused you with this and I hope I haven't set any unrealistic expectations. The basic formula for this again is still going to hold true. Remember, if you don't remember anything else, remember the formula here. That's going to be it for this video. Again, I hope that I'm not confusing you guys with this math. It's not meant to confuse you. It's not meant to confuse your client, but you've got to have a rationale when you do your pricing structure. You've got to have something in place that they can look at to justify it. Again, thank you for watching and I'll see you in the next video.